Sunday, February 13, 2011

Customer Relationship Management (CRM) as an Important Business Process in Supply Chain Management (SCM)

As mentioned in my previous post on Feb. 12th, 2011 (Wu, 2010) described some of the ways CRM has/is becoming a critical part of organizational and/or strategic planning, as competitive pressures increase and customers continue to defect from large and small organizations alike. Expanding on some of these same principles (Lambert, 2010) also examined some of the reasons why some organizations succeed while others continue to fail at managing this business process, especially in regards to Supply Chain Management (SCM). In fact, (Lambert, 2010) explains that CRM and SCM provide four important linkages (See Figure 1.3) within and throughout the supply chain, which all result in increased profitability of one or multiple customers over any given time.

(Figure is Omitted from this post but available at Figure 1.3. CRM and Supplier Relationship Management

As noted in Figure 1.3, the success or failure of a CRM process is growth and/or profitability and if harnessed correctly then CRM software could provide managers within a company the ability to gather more data from more customers, while providing customized products and/or services that should increase customer relationships and loyalty. On the other hand, (Lambert, 2010) also explains that there are also four main reason that CRM implementation could fail or decrease growth and/or profitability. The first is implementing a CRM system before a clear strategy is created. The second is implementing a CRM system before preparing and/or embracing the organization for such an advancement. The third is assuming that a CRM system is the answer (i.e. the more is better approach) and finally not understanding how to build relationships correctly or with the wrong clients. As far as creating a strategy for CRM implementation success (Lambert, 2010) identified five strategic sub-processes that are extremely valuable.

(1) Review corporate and marketing strategies- The CRM team should consistently review the corporate and/or marketing strategies to make sure that the company now and later continues to target the correct markets.
(2) Identify criteria for segmenting customers- This sub-process of CRM should help identify the criterion that is used to segment different customers in different markets.
(3) Provide a clear set of guidelines for product and/or service agreements- In this sub-process the CRM team should develop a set of guidelines that identify the revenue and/or costs associated with certain product or services.
(4) Develop a set of frameworks or metrics- This sub-process involves identifying the main areas of interest in regards to specific customers on the company’s profitability.
(5) Develop a set of guidelines to share- The CRM team should use this sub-process to develop specific processes that are being ignored, which could create win-win solutions for both the company and customer if solved.
In addition, to the five sub-processes (Lambert, 2010) also discusses seven operational sub-processes that closely relate to the first five discussed strategic processes, however Lambert adds (1) the need to continue monitoring customer accounts internally for any abnormal trends and (2) the additional need to measure performance by generating profitability reports for both internal and external analysis.

If an organization prepares properly by following some if not all of these strategic and operational steps described by Lambert in a CRM system implementation, then the chances of growing profits, relationships, and effectiveness in a Business-to-Business (B2B) or Business-to-Customer (B2C) setting are greatly increased. However, the ultimate measure of success in a CRM implementation across the enterprise and throughout the supply chain is the financial growth of the entire network as CRM systems should be a more effective way to migrate everyone to the most successful and efficient structures.

As discussed by (Lambert, 2010) there are many reasons that CRM implementation succeeds as well as many reasons why CRM implementation fails. Although the main people responsible for a success (i.e. information technology, sales, marketing, etc), there is no reason to suggest or believe that other organizational leaders in finance, logistics, research, administration, etc should not contribute to a successful launch or re-invention. As with any successful process, usually it is not only one person responsible for success but also the entire team as a whole. If more companies embrace this frame of thinking, then more companies will likely benefit from a CRM implementation or any technological advancement that an organization is considering in order to build, grow, and cultivate relationships that will last a lifetime. Relying on technology alone is not enough and those who embrace this frame of thinking will ultimately end up looking at the project in the end as what went wrong. Therefore, in order to avoid that thinking later, remember to strategically plan the work and work the plan. This is what I am doing now, as I continue to research and analyze the best and most efficient ways or systems such as CRM that organizations can utilize in order to create better Return on Investment (ROI), enhanced business performance, or additional long-term growth as I prepare to enter the applied research phase of my Doctoral work. This is my second report on CRM analysis, which is in agreement with the findings of (Wu, 2010), thus making this another important piece of my Dissertation, and as always I warmly welcome any comments, questions, or suggestions

Lambert, D., M. (2010). Customer relationship management as a business process. The Journal of Business & Industrial Marketing, 25(1), 4.
Wu, Y. (2010). Applying the strategic approach to assess customer relationship management. International Journal of Organizational Innovation (Online), 2(3), 186.

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