asb summer university: erp & supply chain management

Group (C) Project Presentation

Andrew, Newton & Peter

Wednesday 1st August 2007

ASB SUMMER UNIVERSITY:ERP & SUPPLY CHAIN MANAGEMENT

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Group (C) Project Objectives:

Using SCM theory(ies), identify the strengths, weaknesses, opportunities and threats of Danisco’s recent implementation of an enterprise-wide customer segmentation model.

The learnings should be a clear understanding of the processes Danisco went through and how these processes positively or negatively impacted the policy deployment and process management.

The outcomes should be a concise set of recommendations as how Danisco could use this experience to improve future policy implementations.


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Presentation Structure:

Introduction & Background [Andrew]:

• General introduction to Danisco

• Discussion of CRM & customer segmentation from a Danisco perspective

Review [Peter]:

• Segmentation model

• Discussion of the policy implementation

Analysis [Newton]:

• Summary

• Conclusions and recommendations


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Introduction & Background

What is Danisco?

What is Danisco’s business model?

What is ERP and SCM within Danisco?

What is customer segmentation?

Why should Danisco implement a customer segmentation model?

What are Group C’s sources?


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What is Danisco?

A global production company,

Producing sugar and food ingredients that are used into both food and non-food sectors,

Production at more than 50 sites globally and headquarters in Copenhagen

Almost 10,000 employees and a presence in 50 countries

Revenue in 2006/07 approx. DKK20 billion, or USD350 million,

Quoted on the Danish stock market and is one of the 20 largest Danish companies, although small/medium in a global perspective,

Business split into 4 product areas, divisions…….


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Organisational Structure:

DANISCO

SUGAR

Previously core business, but declining due to

European sugar reforms

TEXTURANTS & SWEETENERSGenerally mature

industries with only modest growth

BIO-INGREDIENTS

Fast growing, technologyintensive sector

CORPORATEFUNCTIONS

FLAVOUR

Recently soldproduct division

REGIONAL SALESFORCE &

INNOVATION


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What are some of Danisco’s business model elements?

Mission: ….to accommodate consumer demand for healthy, safe and tasty food and to provide value-adding sustainable bio-based solutions to industry

Branding: high quality products with strong technology platform and customer support structure – slogan ‘first you add knowledge……’

Recent developments: new CEO with renewed focus on EBIT margins and RONOA….. and therefore cost control across all aspects of the business

ERP: SAP implemented in Danish parent company 2002 and template roll-out to be completed during 2007

SCM: although an enterprise-wide ERP system the supply chain is still somewhat ‘departmentalised’ some elements integrated but not all


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CRM within Danisco:

Danisco has purchased the add-on CRM module to SAP,

CRM module is essentially a large database of customer data, with some resource planning (workflow) & analysis functions,

The objective of the module is to achieve customer satisfaction with the most efficient deployment of resources possible,

These resources (services) could be sales manager visits, innovation projects, new application testing, new letters, product launches etc,

But CRM is the analytical tool, not the solution how to best use resources………


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Customer segmentation within Danisco:

Customer segmentation however is a concept that can be used to rationalise how customers services are deployed, this requires developing a set of rules or ‘criteria’ that then determines the appropriate service level,

Prior to 2006 the service customers received could vary greatly between product divisions and regions,

Therefore in 2006 an enterprise-wide segmentation model was developed and implemented, with the objective to:

“…..provide a superior decision making tool on best use of resources for delivery of profitable growth across Danisco”

In other words to:

Create guidelines for resource allocation by defining ‘service levels’ to the different customer segments,

Enable market intelligence – by understanding better potential growth opportunities, and

Facilitate agreement on shared services in the regions, divisions and innovation


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The new segmentation model

The new model places customers based on:

A score that signifies the current profit contribution made by the customer

A score that signifies the expected profit contribution made by the customer

“The objective is to provide a superior decision making tool on best use of resources for delivery of profitable growth, intelligent maintenance and constant review”


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Expected profit classificaction

Points Classification

>= 24 A

20 – 23 B

16 – 19 C

<= 15 D

Tot. Potential access. salesScoring: 1-6 pts

Tot.Potential access. profitScoring: 1-6 pts

Potential Cross SellingScoring: 1-6 pts

Premium BuyerScoring: 1-3 pts

Strategic importanceScoring: 1-3 pts

Loyalty to DaniscoScoring: 1-3 pts

Input in CRM bySales Manager



Calculation inCRM

Calculation inCRM

= necessary input from sales managers

Points Classification

>= 24 A

20 – 23 B

16 – 19 C

<= 15 D

Tot. Potential access. salesScoring: 1-6 pts

Tot.Potential access. profitScoring: 1-6 pts

Potential Cross SellingScoring: 1-6 pts

Premium BuyerScoring: 1-3 pts

Strategic importanceScoring: 1-3 pts

Loyalty to DaniscoScoring: 1-3 pts




Calculation inCRM

Calculation inCRM

= necessary input from sales managers


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The new segmentation model

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cont

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Current contribution


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Problems with the implementation

In spite of a great effort, things did not go as planned

• There were a growing resistance towards the new system• The scoring-system was built on unreliable data and on the

subjective opinion of the manager.• In some areas service levels are still being regionally defined


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Growing resistance

When facing changes we react in different ways:

• Cognitive resistance• Cognitive resistance shows when the employee does not understand

why the changes he is being subjected to is needed.• Emotional resistance

• When dealing with emotional resistance, the resistance is not necessary against the change itself, but more against the way the changes are being made.

• Personal resistance • Personal resistance shows where there are deep cultural differences

between the employees and management. It results in hostility towards management.


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Growing resistance

The resistance at danisco is mainly built on cognitive and emotional resistance

• the cognitive resistance shows where the employees have not been properly informed about how and why the changes are needed. Danisco needs to carefully explain these things to their employees so there will be a greater understanding and appreciation to why the changes are needed.

• in order to minimize the emotional resistance management need to involve the employees when making changes instead of pulling it down over their heads. Doing this will also enable the employees to voice their opinion about what works and what does not work.


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Unreliable data

• Another problem with the new CRM module is the actual segmentation model. The model is built around profit per costumer, However the system that calculates profit per costumer is also under development. It cannot calculate profit per costumer accurately, meaning that the data/information the segmentation is based on is unreliable.

• Also most of the points the costumer can get is based on the managers subjective opinion


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Policy deployment

New Supply Chain

New Capabilities

Favorable Outcomes

Unfavorable Outcomes

Further Optim

ization Opportunity

Principles of SCM

Environment

Stakeholders

System Integration/ Optimization/Synchronization

The Overall Performance of the SC

Catch Ball Deployment

Purposeful SC and Long-term Vision

Continuous

Improvem

ent/Reengineering Planning and Execution Processes


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Catch-ball deployment

Catch ball content

Catch ball processes

Segmentation strategy

CRM module

Operational level

Catch Ball

Catch Ball


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SUMMARY - SWOT ANALYSIS:

Strengths Weaknesses

•Identification of customer-driven demand for an improved service, proposed solution was based upon a long-term vision and a known SC principle.

•General support at all levels for the underlying need and proposed solution (concept).

•Underlying data was unreliable (gross profit data) or subjective (future expectations) which negatively impacted the credibility of the proposed solution.

•Implementation was very much at a strategic and tactical level, but often not reaching the operational, which in this case was fundamental to the model.


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Important factors to consider before implement CRM systems

Decide what you want from a CRM system.• S.M.A.R.T. objectives (Specific, Measurable, Achievable, Realistic,

Time-bound)

Consider if the current employees will embrace or resist a CRM system.• NT + OO = EOO• Where NT = New Technology; OO = Old Organisation

and EOO = Expensive Old Organisation.

Consider if the current available data across departments etc can be pooled together and made into information.

Get referrals from users of each system under consideration.

Develop and implement a training program.

Review of CRM module………..


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Implementing CRM system is a process

Deming’s PDCA Cycle

Plan

Act Do

Check


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Implementation strategy

Radical change

Minor change

Core environment

Great level of vulnerability

High level of conflict

Low degree of vulnerability

Moderate level of conflict

Low degree of vulnerability

Low level of conflict

Moderate level of vulnerability

Low level of conflict

Source: Buchanan, D & D. Boddy (1992)


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CONCLUSIONS – SWOT ANALYSIS:

Strengths Weaknesses

•Identification of customer-driven demand for an improved service, proposed solution was based upon a long-term vision and a known SC principle.

•General support at all levels for the underlying need and proposed solution (concept).

•Underlying data was unreliable (gross profit data) or subjective (future expectations) which negatively impacted the credibility of the proposed solution.

•Implementation was very much at a strategic and tactical level, but often not reaching the operational, which in this case was fundamental to the model.

Opportunities Threats

•Focus on giving the segmentation model more credibility (and therefore acceptance) by focusing on the underlying information quality.•Greater involvement of employees at the operational level to ensure the system (model) is used and maintained to its full potential.

•The longer the segmentation model operates sub-optimally the greater the difficulty of improving implementation.•That the desired level of data quality cannot be realized.


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RECOMMENDATIONS:

The CRM system should be based on reliable source of data

Greater involvement of employees at the operational level

Incremental implementation of the CRM system, instead of Big Bang


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Q & A

asb summer university: erp & supply chain management

Documents

processes danisco

customer satisfaction

segmentation modeldiscussion

addon crm module

policy deployment

resources services

new ceo

general introduction