Integrating customer relationship management and supply chain management 499
However, the importance of time extends
beyond this; simply put, the shorter the time it
takes to do things, the more flexible we can be
in our response.
One of the main reasons why companies
rely on forecasting and hence on inventory is
because they have long lead-times to source,
manufacture and deliver. The longer the
response time, the greater the reliance upon the
forecast, hence the more inventory that is
required. Conversely, the shorter the response
time, the less the reliance on the forecast and
the less the need to cover uncertainty with
inventory. At the same time, shorter lead-times
mean we can offer greater variety. If in one
factory it takes several hours to change from
making one product to another (set-up time)
but a competitor’s factory can make the same
change in seconds, then very clearly the com-
petitor can offer greater variety to customers.
When we talk about lead-times we mean
not only the time it takes to make something,
but also the time it takes to gather material
from suppliers, to process customer orders and
to deliver the product to the customer. By
focusing upon lead-time reduction the firm can
achieve a substantial improvement in customer
service.
Benetton, the Italian fashion manufacturer,
has achieved its strong position worldwide not
just through its innovative styles and its strong
brand, but through the speed with which it can
respond to changes in the market. Even though
trends in styles and colours will differ from one
corner of the globe to another and even though
fashion life cycles are short and fickle, Benetton
can usually match the market requirement
through its advanced logistics systems. By
capturing information at the point of sale and
swiftly transferring details of what is selling
back to the point of production, whole weeks
are taken out of the total response time.
Combined with the flexibility in manu-
facturing for which Benetton are renowned and
with state-of-the-art, computerized, global dis-
tribution systems, this gives Benetton the abil-
ity to get a product into the retail store within
weeks of the order being placed. Traditionally,
in that industry, it will take months to meet a
replenishment order, if indeed it can be ach-
ieved at all.
Focusing on time reduction also has the
benefit of making the company less reliant
upon forecasts. If the lead-time for response to
customer requirements is, say, 10 weeks, then
clearly we have to forecast 10 weeks ahead and
carry 10 weeks of inventory. If that lead-time
can be reduced to five weeks, then the forecast
horizon is halved, reducing the forecast error,
and the need for inventory is also substantially
reduced. The closer lead-times of response get
towards zero, then the greater the ability of the
organization to meet CRM requirements at less
cost, yet paradoxically, with the ability to be
much more flexible in meeting the demands of
the marketplace.Developing market-driven CRM and SCM strategies
It is a fundamental tenet of market-oriented
companies that they seek to focus all their
actions towards the goal of customer satisfac-
tion. To support this goal, it is imperative that
the CRM and SCM strategies of the organization
be designed to support its marketing strategy.
The successful creation of market-driven
strategies must inevitably begin with a clear
understanding of the service needs of the
market. To be more precise, it requires a
definition of the value preferencesthat discrim-
inate one market segment from another. A
superior value proposition, a key component of
the value creation process shown earlier in
Figure 19.5, aims to tailor as closely as possible
appropriate value packages to all the key value
segments.
The starting point, as always, is the market
understanding process referred to earlier.
Research into customers’ service and value
preferences is an essential foundation for devel-
oping innovative and competitive logistics