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8. Quality of company sales, technical and service representation.


However, learning from their experiences, the customers expect an offer to cater to
augment and formal variables of the product and to have a degree of customization at the
same time. This has made the task of exceeding customer expectation very difficult. In
present times, to satisfy a customer a company has to be “on its toes” at all times. It is



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366 Kansal & Arora


necessary for companies to make CRM and SCM work in synchronization, i.e., target both
a formal and augmented levels of the product cost effectively with a degree of customization
added to them. It is here that the challenge lies for the companies to utilize the tools and
the technologies available to integrate their processes enabling them to enhance their
customer satisfaction and retention.




Supply Chain Management and CRM:
An Interactivity Relationship
One hard fact of today™s cannibalistic market is that only the fittest can survive the
competition, i.e., a company which can acquire minimum variance between expected and
actual service will exist. However, to flourish actual service needs to exceed expected
service. For this approach we need to adopt an integrative approach to CRM and SCM.
Let™s revert to our Tipper tie example to illustrate this point.
Competition began heating up in late 1990, when overseas competitors entered the
United States. The competitors with their alternative packaging methods began enticing
Tipper Tie™s customers. Executives sought to protect their market share by developing
a strategy to respond earlier and more often to their customers.
Company recognizing the fact that it needed to provide easy access to up-to-date
customer data to its sales team, technicians and customer call center initiated a linking
system. Through this linking system its sales reps in the field and call center were
integrated into the same continually updated customer data view.
This helped Tipper Tie to trim the time sales reps had to spend listening to customer
complaints leaving them more time for selling. The reps were able to do their homework
prior to their sales calls by reading up on technical service problems the customer had
logged, machine repairs, parts sales histories and any gripes their call center had entered
into the company™s centralized system.
This increased efficiency in time and communication lead to decreased cost of generating
sales and increased sales revenues from its best customers.
Tipper Tie also implemented Siebel Systems™ standalone call center and sales-force CRM
modules. Since the system was installed Tipper Tie estimates that each sales rep has had
approximately 18 more days per year in face-time selling that they earlier were spending
on generating reports or dealing with peripheral issues. The company has also been able
to increase its sales territory without increasing its number of sales reps and has trimmed
a sales support IT jobs with the automated system in place (Deck Stewart, 2001).
Therefore, SCM and CRM, an interactivity approach would help not only improve
customer service but also lead to a decrease in cost. However, this approach would
require increased coordination and flexibility not only between various organizational
structure elements but also in customer and company relations. This would require
efficient communication so that the right information is available to the right person. This
information database would allow a company to develop a better understanding of



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Corporate Strategies in a Digital World 367


customer buying logics. All of this involves a sizeable shift in the companies™ strategies
to also employ technology as a tool to enhance the value generated from its operations
as against its earlier use to only further enhance the value of its operations.
Multiple variables work in conjunction to shape “customer buying logics” and a
consumer uses the standards as reference points to judge actual performance of a
company. Any possible bottleneck in understanding can lead to variance which would
in turn influence the customer satisfaction and delight level. Gattorna and Walters (1996)
describe different types of bottlenecks, which might lead to variance. These are:
• Gap between management perception and customer expectations will influence
product quality.
• Gap between management perception and organization system will impact on
product delivery.
• Gap between organization system and channel members would determine the actual
performance.
• Gap between actual commitment of channel members and promises made by the
company would determine the gap between promises made and delivered and thus
the goodwill of the company.


As illustrated in Figure 2, CRM helps reduce distance between customer and manage-
ment, which helps develop an understanding of customer expectations and therefore
increase product quality and customer satisfaction. However, for decreasing variance
companies require proper cooperation and commitment from employees and other
channel members. This would require management of relationships and resources along
the whole supply chain. Only then would a company be able to achieve an efficient
delivery process.
Therefore, an interactivity or integrated approach between SCM and CRM is essential
to achieve increased customer satisfaction. However, practically integration requires
phenomenal flexibility, which in turn can arise only from free flow of information. A few
decades ago this would not have been possible, but with today™s technology SCM and
CRM can be integrated to give SCM a customer orientation and CRM a supply process
orientation.
In this IT-based approach to integrating SCM and CRM a company employs a wide array
of computers, workstations and servers operating with collaboratively developed
software. It is a dynamic channel with little friction among the channel participants.
Efficient data handling and response to customer choice are more important and therefore
to increase flexibility multiple activities are outsourced.
Technology allows customers and suppliers to be seamlessly linked together, through-
out the world, exchanging information almost instantly. The velocity of relevant infor-
mation flow is so fast that, as a result, responding to the inevitable changes in expected
vs. actual customer demand will mandate demand-driven manufacturing and supporting
processes that provide for faster changes in the actual material flow to match demand.
Thereby, helping to reduce the bottlenecks faced by companies (as discussed earlier) in
a buyer™s market while catering to “customer buying logics.”


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permission of Idea Group Inc. is prohibited.
368 Kansal & Arora


Figure 2. Customer satisfaction, CRM and SCM: A relationship


DIG 2: Customer Satisfaction, CRM and SCM : A Relationship

Personal Past Corporate Image Promises made by Actual products
Needs Experiences Other Companies on offer




“CUSTOMER BUYING LOGICS”
Expectation Set


ACTUAL PRODUCT
(CORE, FORMAL AND AUGMENTED)
CRM


SCM




DELIVERY AND PROCESS Promises Made
(FOR THE PRODUCT) to Customers


CHANNEL MEMBERS STAFF UNDERSTANDING OF THE PROCESS
(AND COMMITMENT TO THE ELELMENTS OF FORMAL AND AUGMENTED PRODUCT
VARIABLES)


DEVELOPING SYSTEM
(WHAT AND HOW TO CATER TO AUGMENTED AND FORMAL PRODUCT VARIABLES)


MANAGEMENT PERCEPTION OF CUSTOMER
(WHAT CUSTOMER WANTS)




VARIANCE Expected > Actual Dissatisfaction
Expected = Actual Satisfaction
Expected < Actual Over satisfaction = Delight


Past Experience (inturn influence the Expectation set)

* Adapted from J.L. Gattorna, D.W. Walters, “Managing Supply Chain: A Strategic Perspective”,
McMillan Private. Ltd., London, 1996, pg 50.




*Adapted from Gattorna & Walters (1996)




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Corporate Strategies in a Digital World 369


Fast access to relevant supply chain information can pay off handsomely in lower costs,
less inventory, higher quality decision-making, shorter cycle times and better customer
service. One of the biggest cost savings is in the overhead activity associated with lots
of paperwork and its inherent redundancies. The non-value added time of manual
transaction processing could instead be focused on higher revenue creation activities
without proportional increases in expense. Thereby differentiating between companies,
which acquire, in the future, or are acquired.




Indian Scenario
Indian businesses, across almost all industries, have a common trait of multiple layers
or tiers of distribution between the brand and the consumers. Layers have thrived due
to an over-fragmentation of the social class of consumers, tactical location advantage,
or purely the liquidity power to hold stock.
There are three primary layers of intermediation:
1. Consignment & Freight Agents (CFA)
2. Distributor/Stockist/Wholesaler
3. Retailer/Dealer


This three-tier distribution channel system increases distance between manufacturer
and the customer. Therefore customers in India interact with channel members for
product delivery, service, problems, support or to give feedback. Thereby, increasing
distance between the manufacturer™s perception of customer logics. For example, in the
India market segment for luxury cars is defined as people who have a need to be driven
rather than drive. Yet all the car accessories controls are with the driver and not in the
back with the passenger. This gap, in turn, has a compound effect on bottlenecks outlined
by Gattorna.
Therefore, the bargaining power and control of channel members is more in India.
Moreover, each layer adds to the price burden of the product.
A company influences the expectation set of the customer by making certain product ad
delivery promises. However, lack of commitment, control and coordination from channel
members only leads to increase in variance and therefore making the price burden ever
more so evident to the customer.
Assume: Mr. Joshi plans to purchase a microwave oven. He has no specifics in his
expectation set. He conducts a market survey and collects information about the existing
brands. His expectation set is formed by the promises made by these brands. Influenced
by the communication, he buys a branded product. He was promised that a representative
would come to his house and install and demonstrate the use of the product. After
purchasing the product, Mr. Joshi contacts the dealer for a demonstration and he is told
that a person has to come from the company™s branch office and the dealer gives him the
number asking him to contact the company directly. While the company tells him that



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370 Kansal & Arora


they, as a policy, entertain the requests for demonstrations only from the dealers.
Resultant of this communication is a gap between promises made and delivered. Due to
which Mr. Joshi made sure that no one he knew ever brought the same product.
This is a normal experience in India. The problem emanates from the dealers™ short-term
objective of monetary gains and the customers™ lack of knowledge of their own power.
Customers in India have been introduced to the concept of “customer power” only
recently (after the liberalization of the Indian economy in the 1990s). They are still
learning how to use it and how to demand what they want from the manufacturers. This
has in turn made their expectation set very volatile. Therefore, SCM alone will not result
in an increase in market share. To satisfy a customer in India the manufacturer has to work
at reducing the gap between themselves and the customer and target the Gattorna
bottlenecks in totality. Thus it is not just the integration of the SCM and the CRM tools
but also the intelligent use of technology to minimize these bottlenecks that is crucial to
gaining competitive advantage.
An inspiring success story of this tool is in Public Sector, i.e., the Directorate of Supplies
and Disposal, Haryana Government, India. We have chosen a public department to
highlight the feasibility of this tool for developing countries. These Government
departments work in vertical structure due to which they have limited resources, are
plagued by operational inefficiencies, work delays, financial deficits, etc. Despite these
limitations, the Directorate of Suppliers and Disposals has been able to save Rs 60 crore
per annum in procurement. These savings are to be further complemented by reduction
in inventory costs, procurement time, paperwork, human resource, corruption and
unnecessary hassles.




Integration of CRM and SCM “ The
Use of Technological Tools: Case Study
The Directorate of Supplies & Disposals (DS&D), Haryana, is responsible for the
purchase of a large variety of items required by the various Government Departments
(customers of DS&D). It acts as an intermediary for the Government Departments and the
suppliers. This makes the distribution channel two or three-tier (depending on the
purchase to be made). The Directorate makes purchases of the order of Rs. 30000 million
per annum.
Functions of the Directorate are:
• To act as the purchasing agency for all the State Government Departments.
• To tender advice on matters connected to the purchase and disposal of stores to
State Government Departments, Public Sector Undertakings, etc.
• To arrange for disposal of surplus/unserviceable stores.
• To arrange for inspection of stores.




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Corporate Strategies in a Digital World 371


• To arrange for settlement of disputes between the suppliers and indenting depart-
ments.


The Present System (Highlighted in Figure 3)

Procurement of goods and services is done by:
• Ad-hoc purchases in which specific quantity and respective department mentions
quality.
• Tendering “ procurement exceeding Rs. 12,000 (twelve thousand) in value is
mandated to follow the tendering process. This is done so as to maintain transpar-
ency in the process and also ensure that the Government receives the best value
for the money. Tender invitations are published in leading newspapers and all
interested supplier or contractors who meet the eligibility criteria are free to submit
tenders.
• Rate Contracts “ Rate Contracts are used for common user items where demand is
repetitive, item values are less, generally required by more than one department and
specifications have been standardized. It is an agreement between the respective
department and the supplier for the supply of goods at mutually agreed prices &
specifications, valid for a specific time period - generally having no quantity
limitations.
• Purchase of material against rate contract arranged by Government of India “
Director General Supply and Disposals.
• Calling of quotations for proprietary items, which is made by only one company.
• Purchase from approved sources from the State as well as from the Central
Government Departments.


Following are the deficiencies of the current system. First, the present system is totally
manual and error prone. Second, at present 50 procurement officers manage the process.
Thereafter in excess of 10,000 suppliers and on an average 50 indents and two tender
inquiries per month containing 40-45 tenders inquiry cases. Therefore, the time lag
between placement of a requirement (with the DS&D), purchase, delivery and payment
is quite large. Moreover the department for whom the purchase is being made (consumer
department), is not allowed to change its specifications once they have been communi-
cated to DS&D. This is a major limitation of the present process. Due to the increased
time lag, the environment and expectations sets are prone to changes (expectations set -2). But
no provision has been made in the current process for such changes (decreased
flexibility).
Lastly, to make the procedure more complex DS&D is a department concerned with only
procurement. Therefore it has to make sure that there is no variance among the
specifications given by the consumer department (expectation set-1) and the product
received. The payment is released only after the consumer department has checked and



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372 Kansal & Arora


Figure 3. Present procurement process at DS&D


Indent A




Indent Approval




Enquiry Full Negotiation
Generation



Enquiry floated Purchase Order
in Vendors Proposal Approved



DS&D/ Receive Bids Purchase Order
Approved Release
Sources



Technical / Comm.
Scrutiny Status of
Supplies
Risk Purchase

Purchase Commit
for Meeting
Release of Security


A




re-checked the product with its expectations set-1. Even after that the supplier has to fill
in a ton of paperwork to acquire the payment. This decreases the satisfaction level among
the channel members. (decreased cooperation).
To top it all the present system has following deficiencies in terms of specific activity
centres:
• Inventory Management
• Incomplete records of the stock in hand.
• No proper records as to when the inventory is used.
• Improper confirmation of supplies received from vendor “ there is a risk of


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Corporate Strategies in a Digital World 373


whether the actual supplies have actually been received from the vendor (risk
purchase).
• Financial Management
• Financial planning does not exist and procurement is transactional not
strategic.
• Timely release of funds from finance does not take place at the point of
receiving supplies despite formal sanctions. This adversely affects supplier
and Department relations.
• Quantifying the Spending
• Commodity codes don™t exist.
• Supplier codes don™t exist.
• Item numbers are not used for purchases.
• Spending analysis is a highly manual process and very tedious process.

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