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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

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

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

• 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.

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