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Module 3

Customer & Supplier Relationship Management

“A customer is

the most important visitor on our premises” - Mahatma Gandhi

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Customer is buying ‘value’

• Suppliers

• Customers

• within the value chain of a business unit

• across business unit value chain within the firm

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TQM provides a systematic method for

1. Ensuring customer satisfaction

2. Managing processes

3. Continuously improving

4. Working together

5. Encouraging personal initiative

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Customer-Focused Organization

• Understand current and future customer requirements

• Meet customer requirements

• Strive to exceed customer requirements

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FUNDAMENTAL CONCEPTS OF EXCELLENCE

– CII EXIM Bank Model based on EFQM Model

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Basic Principles of Customer-Supplier Relationships

• The fundamental recognition and appreciation of the importance of customers and suppliers as essential to the core of a business, and the inter-dependence.

• Development of longer term relationship that is mutually beneficial.

• Establishing relationships based on goodwill and trust.

• Continuously endeavouring to enhance the relationship through active engagement.

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Vision & Mission statements –Customer Focused

• Proctor & Gamble:

• “Our Purpose unifies us in a common cause and growth strategy of improving more consumers’ lives in small but meaningful ways each day. It inspires P&G people to make a positive contribution every day”.

• ITC:

• “We are always customer focused and will deliver what the customer needs in terms of value, quality and satisfaction”.

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Product Centric to Customer Centric:

• Sellers’ market Vs Buyers’market

• Diminishing ‘Cost Plus’ models

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• CRM is a comprehensive way to manage, through a set of processes and technologies,

the relationship with customers - including potential customers – that is sustainable and mutually beneficial, focusing on adding value to Customer than just providing a product or service.

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Customer Order Fulfilment Process• Order fulfillment strategy - P:D ratio, where P is the

production lead-time, i.e. how long it takes to manufacture a product, and D is the demand lead-time, i.e. how long Customers are willing to wait for the order to be completed.

• Make-to-Stock (MTS) - (D=0)

• Make-to-Order (MTO) - (D>P)

• Engineer-to-Order (ETO) - (D>>P)

• Assemble-to-Order (ATO) - (D<P)

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Order fulfilment process• Product Inquiry

• Quotation

• Order Configuration

• Order Booking

• Order Acknowledgment / Confirmation

• Order amendment

• Order processing

• Order Execution / Sourcing / Planning

• Billing

• Shipment

• Delivery

• Settlement

• Returns by customers

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CRM PROCESS

• Customer Acquisition

• Customer Retention

• Lifelong Customer

• Customer Focused Business

• 4 P’s of Marketing in CRM: Product, Price, Placement and Promotion.

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Dimensions of Product Quality

• Performance• Features• Reliability• Conformance• Durability• Serviceability• Aesthetics• Safety• Product warranty• Other perceptions

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CREATING & MANAGING SUPPLIER RELATIONSHIPS

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Third Party Logistics Providers (3PL)¨ “… is the function by which the owner of goods

outsources various elements of the supply chain to one 3PL company that can perform the management function of the clients inbound freight, customs, warehousing, order fulfillment, distribution, and outbound freight to the clients customers.”

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Advantages¨ Focus on Core Competencies

– Saves company’s limited resources to concentrate on what it does best.

• Ryder Dedicated logistics and GM’s Saturn – Ryder fully takes care of

Saturn’s logistics needs; Saturn concentrates on manufacturing.

¨ Best Practices

– Organizations may not always follow best practices. Outsourcing logistics

to third party logistics allows companies to implement best practices. This

allows organization to achieve best performance.

¨ Enhanced technological capabilities and flexibility

– Use of information technology has enhanced the efficiency of logistics

operations. TPL often invest in these technologies to provide competitive

services.

¨ Investment

– Organizations can save considerable amount of investment that may be

required in building logistics assets, networks and facilities like

warehouses. Companies can outsource these requirements by outsourcing

logistics and invest in developing their core processes.

¨ Economies of scale

– 3PL who own assets would have considerable size, large customer base,

and considerable resources, which in turn mean economies of scale.

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Disadvantages¨ Cost

– Outsourced logistics may cost more than running in-house operations.

¨ Customer orientation of 3PL– How customer oriented or flexible is the 3PL is important.

These intangible benefits need to be carefully evaluated. ¨ Asset owning v/s non-asset owning 3PL

– Whether 3PL owns assets or does not own assets should be considered in decision-making.

– 3PL who own assets would have considerable size, large customer base, and considerable resources, which in term mean economies of scale. On the other hand they may tend to favor their own divisions and may not be flexible enough.

– Non-asset owning 3PL’s may not own assets but they would tend be more flexible, allowing them to tailor services to suit the client needs.

3PL Services:1. Transportation Management

– 3PL’s fleet (or alliance partners) offer optimized network to serve their customers.

– Shipment Management System (SMS) allows 3PL’s to plan load management, routing, and equipment and driver management, network freight analysis.

– SMS can be effectively integrated with Warehouse Management Software (WMS), to provide integrated logistics solutions concepts like multi-stop workload or less than truckload are often used to serve their customers better.

– Multi-vendor consolidation reduces overall costs. Full truckload economies can be used to combine freight from different vendor to common destinations.

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2. Warehouse management: – 3PL’s run and manage warehouses using Warehouse

Management Systems, radio frequency scanning, and bar code labeling

– 3PL’s manage and track the movement of goods from initial receipt to outbound shipment. Real time, periodic and accurate information can be provided to manage inventory and demand better.

– Additional services like advanced shipment notifications can be generated to inform the retail partners in the supply chain.

3. Packaging– 3PL’s often have ability to do final product packaging

in their warehouse, thus eliminating the need to ship product to off site packaging companies. This in turn means reduced product handling, reduced cycle time and reduced costs.

– 3PL’s can offer variety of packaging services like custom pallets, display shippers, inserts and coupons, labeling and printing, repackaging / conversion and also wrapping and bundling.

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Fourth Party Logistics (4PLs):¨ 4PLs provide comprehensive SCM solutions

– Can assess, design, build, and run integrated comprehensive supply chain solutions.

– Implement “best of breed” approach to provide services and technology to a client.

– Leverage the capabilities for 3PLs, technology services providers and business process managers to deliver a comprehensive supply chain solution through a centralized point of contact.”

– Integrate clients supply chain activities with their own capabilities, providing one-stop solutions.