Managing External & Internal Supply Chain

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ManagingManaging

External & InternalExternal & Internal

Supply ChainSupply Chain



Customer Relationship Management Customer Relationship Management

The CRM macro processThe CRM macro process consists of the processes thatconsists of the processes that

take place between an enterprise and its customerstake place between an enterprise and its customers

downstream in the supply chaindownstream in the supply chain..

The goal of the CRM macro process:The goal of the CRM macro process: -- is to generateis to generate

customer demand and facilitate transmission andcustomer demand and facilitate transmission and

tracking of orders.tracking of orders.

The disadvantage in this process:The disadvantage in this process: -- results in demandresults in demand

being lost and a poor customer experience becausebeing lost and a poor customer experience because

orders are not processed and executed effectively.orders are not processed and executed effectively.



The key processes under CRM are as follows:The key processes under CRM are as follows:

Marketing:Marketing:This processes involve decisions regardingThis processes involve decisions regarding

which customers to target,which customers to target,

how to target customers,how to target customers,

what products to offer,what products to offer,

how to price products, andhow to price products, and

how to manage the actual campaigns targeting customers.how to manage the actual campaigns targeting customers.

Sell:Sell:The sell processes focuses on making an actual sale to a customer The sell processes focuses on making an actual sale to a customer (compared to marketing where processes are more focused on(compared to marketing where processes are more focused onplanning whom to sell and what to sell).planning whom to sell and what to sell).

The sell processes includes providing the sales force the informationThe sell processes includes providing the sales force the informationthey need to make a sale and then executing the actual sale.they need to make a sale and then executing the actual sale.

Executing the sale may require the sales person (or the customer) toExecuting the sale may require the sales person (or the customer) tobuild and configure orders by choosing among a variety of optionsbuild and configure orders by choosing among a variety of optionsand features.and features.

The sell process also requires such functionality as the ability toThe sell process also requires such functionality as the ability toquote due dates and access information related to a customer order.quote due dates and access information related to a customer order.



Order Management:Order Management:

The process of managing the customer orders as theyThe process of managing the customer orders as they

flow through an enterprise is important for the customer flow through an enterprise is important for the customer

to track his order and for the enterprise to plan andto track his order and for the enterprise to plan and

execute order fulfillment.execute order fulfillment.

This process ties together demand from the customer This process ties together demand from the customer

with supply from the enterprise.with supply from the enterprise.

Call / Service center:Call / Service center: A call / service center is often the primary point of A call / service center is often the primary point of

contact between a company and its customers.contact between a company and its customers.

A call / service center helps customers place orders, A call / service center helps customers place orders,suggests products, solved problems, and providessuggests products, solved problems, and provides

information on order status.information on order status.



The aforementioned CRM processes are crucial to the supplyThe aforementioned CRM processes are crucial to the supplychain as they cover a vast amount of interaction between anchain as they cover a vast amount of interaction between anenterprise and its customers.enterprise and its customers.

The customer must be the starting point when trying to increaseThe customer must be the starting point when trying to increasethe supply chain surplus because all demand, and thereforethe supply chain surplus because all demand, and thereforerevenue, ultimately arises from them.revenue, ultimately arises from them.

Thus, the CRM macro process is the starting point when improvingThus, the CRM macro process is the starting point when improving

supply chain performance.supply chain performance.

It is also important to note that CRM processes must be integratedIt is also important to note that CRM processes must be integratedwith internal operations to optimize performance.with internal operations to optimize performance.

Too often companies operate with their customer Too often companies operate with their customer--focused unitsfocused unitsworking independently from their internal operations.working independently from their internal operations.

The need for integration between CRM and internal operationsThe need for integration between CRM and internal operationsemphasizes the importance of CRM to an effective supply chain.emphasizes the importance of CRM to an effective supply chain.



Supplier Relationship ManagementSupplier Relationship Management

The SRM includes thoseThe SRM includes those processes focused on theprocesses focused on the

interaction between an enterprise and its suppliers thatinteraction between an enterprise and its suppliers that

are upstream in the supply chainare upstream in the supply chain..

There is a very natural fit between SRM processes andThere is a very natural fit between SRM processes and

the ISCM (Internal Supply Chain Management)the ISCM (Internal Supply Chain Management)

processes as integrating supplier constraints is crucialprocesses as integrating supplier constraints is crucial

when creating internal plans.when creating internal plans.



The Major processes under SRM are as follows:The Major processes under SRM are as follows:

Design collaboration:Design collaboration:

The goal of this processes is to improve the design of productsThe goal of this processes is to improve the design of products

through such ideas as the joint selection of componentsthrough such ideas as the joint selection of componentsthat have positive supply chain characteristics such as ease of that have positive supply chain characteristics such as ease of manufacturability or commodity across several end products.manufacturability or commodity across several end products.

Other design collaboration activities include the sharing of engineering changeOther design collaboration activities include the sharing of engineering changeorders between a manufacturer and its suppliers.orders between a manufacturer and its suppliers.

This eliminates the costly delays that occur when several suppliers areThis eliminates the costly delays that occur when several suppliers are

concurrently designing components for the manufacturers product.concurrently designing components for the manufacturers product.Good collaboration at this stage can create huge value because about 80 % of Good collaboration at this stage can create huge value because about 80 % of product cost is determined at the design stage.product cost is determined at the design stage.

Source:Source:

The source process qualifies suppliers and helps in supplier selection, contractThe source process qualifies suppliers and helps in supplier selection, contractmanagement, and supplier evaluation.management, and supplier evaluation.

A key goal is to analyzeA key goal is to analyze the amount that an enterprise spends with eachthe amount that an enterprise spends with eachsupplier, often revealing valuable trends or areas for improvement.supplier, often revealing valuable trends or areas for improvement.

Suppliers are evaluatedSuppliers are evaluated along several key criteria including lead time,along several key criteria including lead time,reliability, quality and price, etc. which helps to improve the suppliersreliability, quality and price, etc. which helps to improve the suppliersperformance and aids in supplier selection.performance and aids in supplier selection.

Contract managementContract management is also an important part of sourcing, as many supplier is also an important part of sourcing, as many supplier

contracts have complex details that must be tracked.contracts have complex details that must be tracked.



Negotiate:Negotiate:This involves in many steps starting with a request for quote (RFQ).This involves in many steps starting with a request for quote (RFQ).The negotiation process may also include the design and executionThe negotiation process may also include the design and executionof auctions.of auctions.

The goal of this process is to negotiate an effective contract thatThe goal of this process is to negotiate an effective contract thatspecifies price and delivery parameters for a supplier in a way thatspecifies price and delivery parameters for a supplier in a way thatbest matches the enterprises needs.best matches the enterprises needs.

Buy:Buy:The buy process executes the actual procurement of material fromThe buy process executes the actual procurement of material fromsuppliers.suppliers.

This includes the creation, management and approval of purchaseThis includes the creation, management and approval of purchaseorders.orders.

Supply collaboration:Supply collaboration:

Once an agreement of supply is established between the enterpriseOnce an agreement of supply is established between the enterpriseand a supplier, supply chain performance can be improved byand a supplier, supply chain performance can be improved bycollaborating on forecasts, production plans, and inventory levels.collaborating on forecasts, production plans, and inventory levels.

The goal of collaboration is to ensure a common plan across theThe goal of collaboration is to ensure a common plan across thesupply chain.supply chain.

Significant improvement in Supply Chain performance can be achieved if SRMSignificant improvement in Supply Chain performance can be achieved if SRMprocesses are well integrated with appropriate CRM and ISCM.processes are well integrated with appropriate CRM and ISCM.



ISCM is focused on operations internal to the enterprise.ISCM is focused on operations internal to the enterprise.

ISCM includes all processes involved in planning for andISCM includes all processes involved in planning for and

fulfilling a customer order.fulfilling a customer order.

The various processes included in ISCM are as follows:The various processes included in ISCM are as follows:

Strategic planning:Strategic planning:

The goal of this process is to plan resource availability in the supplyThe goal of this process is to plan resource availability in the supply

chain network.chain network.

The decisions made includeThe decisions made include where to locate plants and warehouses,where to locate plants and warehouses,

what type of facilities to build, and what markets to serve from eachwhat type of facilities to build, and what markets to serve from each

facility.facility.

Although a few people make these decisions infrequently, the impact on Although a few people make these decisions infrequently, the impact on

supply chain performance can be quite large and is felt potentially for supply chain performance can be quite large and is felt potentially for

years.years.



Demand planning:Demand planning:This processes involves forecasting future customer demand.This processes involves forecasting future customer demand.

In addition to forecasts, demand planning also includes decisions toIn addition to forecasts, demand planning also includes decisions to

manage demand, such as promotions planning.manage demand, such as promotions planning.

Supply planning:Supply planning:

The supply planning process takes as an input the demand forecastsThe supply planning process takes as an input the demand forecasts

produced by demand planning and the resources made available byproduced by demand planning and the resources made available by

strategic planning, and then produces an optimal plan to meet thisstrategic planning, and then produces an optimal plan to meet this

demand.demand.

Fulfillment:Fulfillment:

Once a plan is in place to supply the demand, it must be executed.Once a plan is in place to supply the demand, it must be executed.

The fulfillment process links each order to a specific supply source andThe fulfillment process links each order to a specific supply source and

means of transportation.means of transportation.

Field service:Field service:

Finally after the product has been delivered to the customer, it eventually must beFinally after the product has been delivered to the customer, it eventually must be

serviced.serviced.

Service processes focus on setting inventory levels for spare parts as well asService processes focus on setting inventory levels for spare parts as well as

scheduling service calls.scheduling service calls.



Given that the ISCM macro process aims to fulfill demand thatGiven that the ISCM macro process aims to fulfill demand that

is generated by CRM processes, there needs to be strongis generated by CRM processes, there needs to be strong

integration between the ISCM and CRM macro processesintegration between the ISCM and CRM macro processes..

When forecasting demand, interaction with CRM is essential as theWhen forecasting demand, interaction with CRM is essential as the

CRM applications are touching the customer and have the most dataCRM applications are touching the customer and have the most data

and insight on customer behavior.and insight on customer behavior.

Similarly, theSimilarly, the ISCM processes should have strong integrationISCM processes should have strong integration

with the SRM macro processeswith the SRM macro processes..

Supply planning, fulfillment, and field service are all dependent onSupply planning, fulfillment, and field service are all dependent on

suppliers and therefore the SRM processes.suppliers and therefore the SRM processes.

It is little to use for your factory to have the production capacity to meetIt is little to use for your factory to have the production capacity to meet

demand if your supplier cannot supply the parts to make your products.demand if your supplier cannot supply the parts to make your products.

And so on. And so on.

Managing External & Internal Supply Chain

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