Executive Summary

The business world is currently under a high degree of dynamism as changes often alter operations within the sector. It is acknowledged that supply chains are some of the aspects of business that have kept changing for a long time in response to various developments such as emergence of new technologies or a rise in the level of competition. Behind that backdrop, the current paper considers how Supply Chain Management (SCM) and Customer Relationship Management (CRM) Systems differ from traditional approaches to business operations. The paper pays attention to how traditional management systems differ as compared to the above two approaches in reference to variations in a number of aspects such as efficiency, cost savings, as well as firm profitability.

The paper finds that the manner in which businesses relate to customers and supplies has shifted over time. For instance, nowadays organizations pay more attention to customer-orientation as compared to product-orientation. The issue of cost also emerges as an important aspect. It is established that despite the assumption that the CRM and the SCM are economic strategies, reported high rates of failure might reduce their effectiveness pertaining to cost. However, a failure does not negate the two approaches since their success largely depends on many factors.

It is held that increasing levels of competition and developments in technology have led to an increase in the effectiveness of current supply and customer relations approaches. In particular, chain systems have advanced beyond traditional boundary considerations since enterprises now explore different ways of cost reduction, including outsourcing important functions such as supply chain and customer relations management. The paper concludes that the adoption of modern SCM and CRM is aimed at reducing costs in order to increase business profitability. However, the implementation process must be done appropriately to enhance success.

Introduction

Supply chains and customer relations play an integral role in the business world. Entities recognize the need to align their supply chains and customer relations with overall business strategies since attainment of integrated or highly linked systems within the business set up is instrumental in the pursuit of organizational objectives. In the light of the above revelation, it is important to understand how supply chain management and customer relationship systems differ from traditional approaches.

Body

Supply Chain Management (SCM) is a form of integrated framework on planning, employing, and controlling movement of information, services, materials, and other components in the process of production (Wieland & Handfield, 2013). In other words, the SCM is about the transfer of raw materials to the point of origin through processing up to the production of the final product. The supply system is comprised of integrated processes, involving demand planning, order fulfillment, customer relationship collaboration, service/ product launch, operations planning, life cycle support, supplier relationship collaboration, reverse logistics, and related risks (Wieland & Handfield, 2013). The process requires participation of people although the process entails the use of technology, which can be carried out by a firm or in partnership with an external player.

In terms of orientation, the SCM is a strategic endeavor, which recognizes that the entity’s competitive strength does not only depend on products or services, but also on activities or operations involved in their delivery (Packowski, 2013). Customer support services are also important in the entire process. For a supply chain to be deemed efficient, it must enhance organization’s viability by facilitating achievement of a competitive advantage. Design and management of a supply chain are thus integral to the ability of an entity to compete successfully within the global marketplace.

In turn, Customer Relationship Management (CRM) involves all aspects bordering on interactions between a company and customers regardless of being service- or sales-related (Shang & Lu, 2012). Although the CRM is often used in describing business-customer relationships, the concept also relates to systems deployed by an organization in managing business contacts, contracts, clients, and sales leads (Shang & Lu, 2012).

In the today’s organizational field, the CRM is employed in the provision of data about customers and business in general (Soeini, Jafari, & Abdollahzadeh, 2012). It is noted that data are critical for operations of businesses, especially in regards to decision-making. Consequently, the CRM is deemed crucial as it relies on available data to generate solutions to problems. For instance, when using the system, it is possible to gauge customers’ wants and satisfactory customer service, enter and close deals, retain existing customers, and devise other measures geared towards endearing business activities to customers. In essence, the CRM is essential in the process of personalizing services for customers. In addition, the process facilitates what is commonly known as mass customization. This is possible through the use of tools like e-mail organizers, help-desk software, and other applications.

It is noted that advancements in technology have significantly altered the manner in which companies approach customer relations. As Soeini, Jafari, and Abdollahzadeh (2012) have found, the change has been necessitated by shifts in customer behavior. In addition, developments in the technological front have accorded organizations more avenues to reach customers than ever before. With emergence of the web and smartphones, companies have adopted electronic mechanisms as appropriate strategies for attaining effective communication. It is observed that the CRM relies heavily on technology although processes and strategies of the framework play a major role in data collection, management, and linking of information from customers to the objective of effective marketing.

One of the benefits of adopting the CRM is having data stored and accessible at one point (Shang & Lu, 2012). Before emergence of the CRM, customer data were spread across office documents such as mobile data, e-mails, paper cards, and Rolodex entries among others. Storing data from all departments/ sections (such as marketing, sales, HR, and customer service) of an organization allows the management and employees easy access whenever need arises. Hence, organizations are in a position to devise efficient and automated responses to improve overall performance. The other benefit attributable to adopting the CRM is an all-encompassing assessment of customer/ market knowledge and information. Through such understanding, business entities can integrate existing applications with important data.

According to Soeini et al. (2012), there is a shift from traditional ways of doing business as demonstrated under the CRM platform. In particular, businesses no longer focus on product-orientation, but rather are oriented on customers. Despite the assumption that the use of the CRM is among the most economical strategies, high rates of failure have been reported. Hence, the strategy poses a risk to organizations that embrace it in regards to the costs incurred. Besides, the possibility of a damaged relationship with customers is likely to impact the business negatively. However, some reasons behind the high rate of failure do not emanate from the strategy itself, but from the manner of its implementation. For instance, absence of a customer-oriented culture poses a concern regarding application of the strategy. In addition, if the business management is weak, possibilities of failure are immense.

Information Technology (IT) is a recent development that has revolutionized the way business is carried out. The IT factor plays a major role in the success of the CRM since it guides the infrastructural development process (Soeini, Jafari, & Abdollahzadeh, 2012). It is apparent that the IT has facilitated the extent to which customers engage service and product suppliers. The role of the IT consists in enhancement of a collaborative and analytical nature of the CRM system. One of the applications of the IT in the CRM process is automation of business tools and departments like the sales force.

Having IT-based processes such as the CRM also facilitates collection and storage of customer and supplier data, which is essential in the decision-making process (Soeini, Jafari, & Abdollahzadeh, 2012). Through analysis of the collected data, it is possible to discern patterns that serve as critical information when deciding on business activities. Based on the above findings, it is held that the CRM differs from the traditional supply chain system since the latter uses interactive approaches backed by IT advancements.

According to Shang and Lu (2012), the CRM involves implementation of technologies to integrate service delivery. It is also seen as a holistic strategy, which manages customer relations with a view to creating value. Shang and Lu (2012) support a position that the CRM is data-driven with the intention of maximizing positive customer relations. Based on their findings, CRM methods yield more positive results than traditional customer relations models.

Differences

One of the differences in the modes of supply chain management is viewed in terms of order execution. In the traditional set-up, distributors used to deliver orders one or two days after placement (Hanafizadeh & Ravasan, 2011). Alternatively, when a model is already in operation, sales persons would go around with stocks to deliver them at expected destinations. Suppliers would also load vans or trucks to take products to various points. Hence, in the traditional set-up, orders would be placed upon coming across product carriers. In the modern setting, manufacturers assign delivery slots to retailers. In practice, deliveries to stores must occur within the windows of delivery. A failure to meet the delivery slots attracts a penalty. Another option would be to take the last point in the queue.

Under traditional approaches to supply chain management, promotions are standardized (Hanafizadeh & Ravasan, 2011). Under modern approaches, retailers uniquely do promotions. Thus, it is possible to find customization or given forms of manipulation to suit different customers’ needs and expectations. Moreover, in the traditional set-up, when launching products, manufacturers would introduce new products. On the day of introducing products, it is noted that retailers can place orders immediately. In the modern setting, launching new products is more complicated. In practice, manufacturers consult retailers long before launching products.

The aspect of payment is also indicative of differences between traditional and modern-day supply chain managements. In the old system, payments are to be made upon delivery or on the day following the delivery (Hanafizadeh & Ravasan, 2011). In the current system, long-term credit is accepted besides the provision for different formats of invoices.

Despite the popular perception, the CRM goes beyond customer focus (Shang & Lu, 2012). For instance, the system also concentrates on generating important leads, increasing productivity, entering and closing a high number of deals, enhancing customer retention, and sharing information with significant business partners. Adoption of the strategy is also particularly useful in formulating lasing relations with users, customers, and suppliers. The biggest benefits attributable to CRM are realized when one moves away from sales to customer service and supply chain management.

Present supply chain systems have become more effective than traditional networks since organizations understand that competition is now stiffer than it was in the past (Packowski, 2013). The chain systems have moved beyond the ancient approaches because enterprise boundaries are no longer a marker of what is done in terms of supply chain operations. The position is held since one chain might involve a variety of companies, which is an aspect that did not exist in the past.

Following changes due to the forces of globalization and advancements in the IT, organizations such as Hewlett Packard and Dell have managed to operate successfully by using collaborative supply networks (Packowski, 2013). Under the collaborations, it is revealed that it is more efficient since organizations have different capacities and competitive edges, which they combine. Traditionally, businesses within a supply network focus on inputs, outputs, and processes without paying much attention to internal aspects of players involved. However, the new systems require that organizations understand ramifications of embracing a certain approach to sourcing products through a given chain. Thus, alignment of the SCM system that fits the organizational strategy is given adequate consideration.

From the outset of the 21st century, the business environment has been encountering a number of changes and challenges. Such alterations have affected development of supply chain networks. One of the effects of the changes has been the increase in the number of multinational corporations, strategic alliances, business partnerships, and joint ventures. Some approaches to the SCM now include adoption of lean manufacturing, as well as just-in-time and agile manufacturing (Packowski, 2013). Besides, a decline in the costs of communication has paved the way for changes in the manner in which members of a supply chain coordinate their activities.

The SCM is assumed to have undergone a number of phases in its transformation. One of the phases is integration, which coincided with emergence of electronic data interchange systems during the 1960s (Hanafizadeh & Ravasan, 2011). The phase developed until the 1990s when the Enterprise Resource Planning (ERP) platforms emerged. The era/phase continued to develop through the 21st century as expansion of the Internet took critical steps. During the phase, the SCM saw an increase in value addition and cost reduction through the process of integration. During the famously known era (the integration era), supply chains underwent several stages. At the first stage, material control, storage, production, and distribution were not linked or dependent upon each other. At the second stage, the above functions were integrated under a system such as the ERP. In the third stage, the supply chain inculcated aspects of vertical integration.

In the era of globalization, attention has shifted to global supplier associations characterized by increased opening of supply chains (Hanafizadeh & Ravasan, 2011). The globalization era is followed by the era of specialization. Since the 1990s, organizations have begun focusing on their core competencies as well as specializations. Disposal of non-core operations has become apparent as organizations have chosen to outsource such services. Hence, supply chains have opened beyond organizational boundaries.

Implementation of the ERP systems has often been expected to enhance business performance. However, this has not always been the case since many businesses fail to meet expectations. In particular, Seo (2013) found that the implementation process brought many disturbances within the organizational setup. Such disruptions lower chances of success of implementing the system. However, the study by Seo found that a proper implementation led to notable improvements in organizations.

According to a study by Hanafizadeh and Ravasan (2011), the ERP demonstrates designs used to process organizational transactions in an integrated manner that brings together production, customer response, and planning. The authors indicate that fragmentation of business processes was viewed as a setback in the supply chain process. Despite the possibility of attaining success by implementing an ERP system, many such projects fail because of poor implementation. The failure of the ERP is attributable to a number of factors. For instance, social and organizational factors instead of the technical ones are known to derail the chances of success of adopting an ERP system.

Conclusion

In a bid to remain competitive, businesses always explore mechanisms to improve their operations. Thus, aspects such as cost reduction, shortening of the time required to execute tasks, and increase of overall efficiency assume significance. After considering supply chains and customer relations, it is concluded that modern approaches are more effective owing to incorporation of new technologies that have led to a decline in costs such as those associated with communication and administrative tasks. However, business enterprises need to pay attention to implementation concerns, which might derail attainment of objectives relating to adoption of the new systems. The SCM and the CRM are likely to increase profitability of firms through cost reduction if implemented appropriately.

References

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Packowski, J. (2013). Lean supply chain planning: The new supply chain management paradigm for process industries to master today’s VUCA World. New York, NY: Productivity Press.

Seo, G. (2013). Challenges in implementing enterprise resource planning (ERP) system in large organizations: Similarities and differences between corporate and university environment. Cambridge, MA: MIT Sloan School of Management.

Shang, K. C., & Lu, C. S. (2012). Customer relationship management and firm performance: An empirical study of freight forwarder services. Journal of Marine Science and Technology, 20(1), 64-72.

Soeini, R. A., Jafari,B., & Abdollahzadeh, M. (2012). CRM performance measurement process. International Journal of Emerging Science, 2(1), 134-148.

Wieland, A., & Handfield, R. B. (2013). The socially responsible supply chain: An imperative for global corporations. Supply Chain Management Review, 17(5), 22-29.