Get Modern: Maintain Customer Value Across the Value Chain

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Don’t you long for the good old days? When we idyllically assumed that value resided in the actual products and services we offered up? Remember the days when the customer-facing divisions like sales, marketing and support were the only customer-related concerns you had and things like inventory management, accounting, delivery and logistics were just something to increasingly automate?

Remember when technology systems didn’t have to work together?

Well, Bunky, those days are over. What you nostalgically remember harkens back somewhere between the Cretaceous and Paleolithic eras.

We are engaged in a new epoch centered on customers. One that says companies need to:

  1. Recognize that value resides in the customer, not the product and services
  2. Recognize that customers are looking to be collaborators with the company in the creation of a personalized experience

To get to this required level of customer nirvana takes an unprecedented integrated enterprise value chain. No longer can a single company provide the level of customer experience each customer needs. Do you do your own shipping? (No fair, if you work for FedEx or UPS.) I didn’t think so. Yet, if there is a shipping snafu with a customer, who gets blamed?

You are dealing with vendors and suppliers as strategic partners who have their own systems. And you can’t throw away the systems you paid a mint for in that Cretaceous/Paleolithic period. Your CFO—who authorized all those bucks—and most of your employees—who are used to those systems—will get righteous on your head.

What do you do?

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Think Tank: “How do you maintain the value chain?” >>

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First, understand what’s involved. You are involving not only your sales, marketing and support operations but also your inventory management, parts planning, logistics and delivery and your accounting and human resources—and all those other internal operational systems that were previously isolated from your customers. You’re also at least accounting for systems from each of your partners. Daunting, isn’t it?

Second, understand what’s at stake. You have customers. They have to have a great experience with you to become your advocates and a good one to remain customers. But if this value chain isn’t working seamlessly, you’re in danger of losing your customers over disconnects like:

  1. Poor customer information (insufficient amount and poor quality of data, wrong information available in wrong forms to wrong people)
  2. Unavailable or miss-shipped product (forecasting problems with you and partners, inventory not available, delivery failures)
  3. Internal operations isolated from customer value (customer-unfriendly—but "efficient" —operational processes, poor human resources planning such as agent scheduling)

Short cuts
One company I know of in the consumer electronics business didn’t heed the idea of an integrated value chain and focused on just driving its sales volume up. Management implemented a sales force automation technology. But this product producer didn’t include the supply chain folks in the planning or strategic thinking, so when sales rose 26 percent in nine months, there was no supply chain prepared to handle the increase. Back orders slowed to longer than 90 days in many cases. In two years, the company’s sales "victory" forced it out of business.

How do you prevent this? In a word: integration.

You must integrate your supply chain, demand chain, partner/supplier chain and internal operations so that there are sets of common standards and a service-oriented architecture. The SOA must tie web services with business rules for seamless real-time activity. If, for example, you needed a piece of data, you’d get in a dashboard instantly, rather than waiting overnight for the batch data processing. The resources used would be just those for the piece of data you needed.

To do that, you must integrate business processes that often engage multiple departments. The best example is the transactional processes around the well-known Order to Cash. Consider this list of activities and where each resides:

  • Marketing campaign gets interest of potential customers (CRM)
  • Sale is made (CRM)
  • Order is entered (CRM, ERP)
  • Order is created, packaged (Supply Chain)
  • Order is invoiced, paid for (ERP)
  • Order is fulfilled (Supply Chain, CRM)
  • After-sale service (CRM, Supply Chain)
  • After-sale up-sell or cross-sell (CRM)

It’s not so simple and it engages the entire value chain—just for this one area. So how do you integrate processes and technologies when you’ve invested significantly over the years in what are now legacy systems?

Composite applications. A hot item in today’s technology world, they work best with service-oriented architectures but can pretty much work with any web-services-based framework. They reuse the logic that exists in your legacy applications to create a new application from your legacy systems. If you want to see your Order to Cash transactions for any particular customer or sets of customers, you can use any interface you want and have all the data according to "need to know"—even if your sales system is Siebel, your order management is through Oracle, your inventory management is through SAP and your support system is Remedy. Your investment is protected. Your existing business logic and technology functionality and interfaces are usable. And you look like a champ. (Take a look at Above All, if this is a route you want to take.)

There are other solutions. Using on-demand systems like salesforce.com or NetSuite is another route. NetSuite, with its release of Version 11, added technology that makes the web-based applications perform as if they are on the desktop, making adoption all the easier. (The capability to do this is via something called AJAX, which I won’t go into here. Google it.) These on-demand systems can provide fully integrated value-chain functionality, but you do have to make an investment.

What are the advantages? Here’s a sample list:

  • Forecasting demand leads to adjusting marketing programs.
  • Customer demand drives supply allocations.
  • Product configuration is constrained to available inventory.
  • The process is optimized.
  • Supplies are brokered to appropriate channel partners.
  • Order fulfillment is handled across an extended enterprise (cross-enterprise).
  • Customer complaints are optimally scheduled, according to criteria such as SLA requirements or customer lifetime value.
  • It sets the stage for new best practices, such as Collaborative Planning, Forecasting & Replenishment (CPFR), cooperative planning between all suppliers and brand holder to improve inventory management and delivery time to customer.

So, you have options when it comes to capturing and harnessing that customer value with an integrated value chain. Take advantage of your good fortune to be living in the 21st century, but be sure you have a 21st century integrated value chain to take advantage of it.

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