Chapter 8. How to strengthen B2B relationships?

Via supply chain management and customer relationships management companies can strengthen business-to-business relationships.

What is supply chain management?

If companies develop strong and integrated relationships with suppliers, then they can compete more effectively. This is possible because the integrated relationships will enable them to reduce costs and to respond to market demands.

The supply chain is defined as a collection of processes and companies, which are involved in the process from the raw materials’ suppliers, to the suppliers of intermediate components, to the final product and then to the consumer.

There are several parties between the suppliers and the customers. The flow of materials from suppliers to customers is called the supply network.

Companies rely on several key supplies to produce their good or service. To secure the supply of these components, companies seek for lasting B2B relationships with suppliers. They spend a lot of time and money in selecting their suppliers and business partners.

For B2B transactions it is necessary that companies communicate information with their business partners. Some companies keep such information private because this has strategic value.

Before the Internet and the Web, electronic data interchange (EDI) was used to communicate information. EDI is defined as computer-to-computer communication that follows certain standards and occurs without human intervention. There were telecommunication networks between suppliers and customers.

Only large organizations could use EDI. However, since the Internet also small and mid-sized companies can use EDI to communicate business information. Many organizations sued extranets to exchange data and to process transactions between customers and suppliers.

Often portals are used to interact with business partners. Portals are access points which enable business partners to access secured, proprietary information. This information can be distributed through an organization using an extranet. There are supplier portals and customer portals.

A supplier portal is a subset of an extranet of an organization which is created to automate business processes that happen before, during and after the transaction of sales. The transaction occurs between an organization and its suppliers. Supplier portals are used by companies that have many suppliers.

Customer portals automate the business processes that happen before, during and after the transaction of sales between a supplier and its customers.

Both portals have the goal to make a single company interact with its customers or suppliers. However, for small to medium-sized business it is not possible to set up such portals since they do not have the monetary resources.

These companies instead use B2B marketplaces. These marketplaces are maintained by a sperate vendor/entity and is not associated with a specific supplier or buyers. They bring many sellers and buyers together and therefore create great efficiencies for companies.

Often the marketplaces allow firms to trade with companies in their vertical market. A vertical market is a market that consists of companies that operate within a certain industry. There are also marketplaces that are not focused on a particular industry.

Companies can have very complex supply chain networks. To manage complex networks you need expertise, especially when there are unexpected events. It is important for companies to monitor their suppliers.

If the collaboration between firms within a supply network is not effective, then this can lead to problems for the company. Examples of problems are excessive inventories and inaccurate manufacturing plans. Because of the problems that can arise it is important to effectively manage the supply network.

When using a just-in-time (JIT) strategy, a company tries to optimize its ordering quantities such that the raw materials or components just arrive when they are needed for production. The order quantities are smaller and therefore the costs associated with storage and inventory are minimized. For this strategy, tight cooperation between the partners of the network is needed.

With vendor-managed inventory (VMI), the suppliers to a manufacturer manage the inventory of the manufacturer based on service levels that are negotiated. So, the manufacturer or retailer does not manage its own inventories. The supplier monitors the stock levels and the sales of the manufacturer.

If we look at social responsibility, effectively managing the supply network also has become an important aspect. Two issues that are related to this are sustainable business practices and product recalls.

Because of corporate social responsibility, people place more emphasis on sustainable business practices. A company has to deal with ethical treatment of workers and environmental practices. Some companies try to create a green image.

There are many players involved in a supply network. This creates hundreds of possibilities where it could go wrong. Sometimes a company is able to identify these problems but in other cases the issue remains unnoticed until the product reaches the consumer.

Supply chain management (SCM) systems can be used to improve the coordination of suppliers, distribution and the production of products or services. When using SCM a company is able to reduce its inventory costs and improve customer service, which leads to increased revenue.

SCM is used for optimizing business processes that span organizational boundaries. If the SCM system is tightly integrated with the ERP than this leads to great benefits for an organization.

For an SCM to be successful it must contain data that is goods and it must overcome distrust between partners in the supply network.  

The extent to which the supply chain of a company is focusing on minimizing procurement, transportation costs and production is called supply chain efficiency. Sometimes even sacrificing customer service. On the contrary we have supply chain effectiveness, which is the extent to which the supply chain of a company is focused on maximizing customer service. Here there is less focus on reducing production, procurement and transportation costs.

A company’s supply chain strategy must seek for a balance between supply chain efficiency and effectiveness. SCM systems allow you to make trade-offs between efficiency and effectiveness.

Supply chain planning is defined as the development of several resource plans to support the effective and efficient production of services and goods. The following four key processes are generally supported by SCP:

• Demand planning and forecasting
• Distribution planning
• Production scheduling
• Inventory and safety stock planning

The execution of SCP is called supply chain execution (SCE). SCE is the process of improving the collaboration between all members of the supply chain. The four members are suppliers, producers, distributers and customers.

There are three key elements of the supply chain that are involved in SCE:

• Product flow
  The movement of goods from supplier à production à distribution à consumer
• Information flow
  The movement of information along the supply chain
• Financial flow
  The movement of financial assets through the supply chain

Companies use radio frequency identification (RFID) to monitor their product flows. With RFID, electromagnetic energy is used to transmit information between reader and a processing device, or RFID tag. An RFID tag is used whenever a unique identification system is needed.

RFID is favorable compared to standard bar code technologies because it does not require line-of-sight reading and time-consuming hand scanning.  

To optimize information flows you could best use extensible markup language (XML). This is a standard for exchanging structured information via the Web. With XML you can create documents with customized tags.

XML can be customized and this has led to several variations of XML. An example of a variation is the extensible business reporting language (XBRL), which is used for publishing financial information. Such a language makes it easier for public and private companies to share information with each other.

Supply chain visibility is defined as the ability to both track products as they move in the supply chain and to foresee external events. If companies are able to see where their shipments are this gives them advantage.

You can use key performance indicators to monitor performance of the entire supply chain. This is called supply chain analytics.

How to manage customer relationships?

Companies must not only generate new business but also attract business from existing customers. In order to do this companies must keep their customer satisfied. In the relationship between companies and customers, customers have the power.

Because of the trends in social media, Big data, Internet etc., the way organizations interact with their customers has changed. The customers must not be seen as a passive audience but a company must have conversations with their customers. However, having conversations with customers is costly.

To reduce these costs, companies can try to increase first-call resolution. They have to address the issues of the customer during the first call.

The relationships between companies and customers are nowadays more complex than before. To develop a strategy for managing these relationships companies can use customer relationship management (CRM) systems.

Companies can obtain CRM applications in the form of packaged software that can be bought from vendors. If a company can implement CRM successfully, then it can generate greater customer satisfaction.

However, a company must make several changes in the enterprise to successfully implement CRM. This includes changes in:

• Customer service
• Employee training
• Data collection, sharing and analyzing
• Policies and business processes

There are three primary components that each comprehensive CRM system has:

• Operational CRM
  system to automate fundamental business processes for interacting with customers
• Analytical CRM
  System to analyze customer behavior and perceptions
• Collaborative CRM
  System to provide efficient and effective communication with customers

Operational CRM consists of the systems for interaction and service of customers. An operational CRM consists of several components:

• Sales force automation (SFA)
  This are the modules that support the daily sales activities. An SFA system is beneficially for sales managers, marketing managers and sales personnel.
• Customer service and support (CSS)
  This are the modules that are used to automate the service and information requests, product returns and complaints. To support the communication of the preferences of customers, organizations use customer engagement centers (CEC).
• Enterprise marketing management (EMM)
  This tool can help a company to execute the CRM strategy by improving promotion campaigns to reach consumers and attract them to the Web. Different channels, like Twitter and Facebook, are nowadays used by companies.

Analytical CRM is focused on analyzing customer perceptions and behavior. This analysis is done to obtain the business intelligence that is necessary to determine new opportunities and to provide good customer service.

If analytical CRM can be done effectively, then the company can better customize marketing campaigns. Technologies that are key for analytical CRM are business intelligence technologies like decision support and data mining. Analytical CRM can also be used to optimize prices by creating models of customer demand. These models look at factors like customer satisfaction but also at price and quality. To visualize the key performance metrics of CRM you can use digital dashboards.

Customers can share negative and positive information via social media. Organizations can monitor the conversations of consumers to improve customer satisfaction and maintain a positive brand image. If you monitor the conversations of customers you can identify what customers think about a product.

So, a company can use social media for CRM. This is called social CRM. Since social media is becoming more and more important, many companies have formal groups that monitor the social media behavior of customers. Social media monitoring consists of assessing what customers say about a company, product, brand or individual.

Collaborative CRM consists of systems that provide effective and efficient communication with the customer. It facilitates collaboration and information sharing between different departments of an organization. The goal is to increase loyalty and customer satisfaction.

Collaborative CRM can enhance communication in different ways, namely through:

• Greater customer focus
• Increased information integration.
• Lower communication barriers

CRM is used by companies to create and maintain relationships with customers. However, not everyone is positive about CRM. Some argue that it is unethical to invade customer privacy. Some people do not want that companies have that much personal information about them.

Bulletpoint

• If companies develop strong and integrated relationships with suppliers, then they can compete more effectively. This is possible because the integrated relationships will enable them to reduce costs and to respond to market demands.
• The supply chain is defined as a collection of processes and companies, which are involved in the process from the raw materials’ suppliers, to the suppliers of intermediate components, to the final product and then to the consumer.
• Companies rely on several key supplies to produce their good or service. To secure the supply of these components, companies seek for lasting B2B relationships with suppliers. They spend a lot of time and money in selecting their suppliers and business partners.
• For B2B transactions it is necessary that companies communicate information with their business partners. Some companies keep such information private because this has strategic value.
• Often portals are used to interact with business partners. Portals are access points which enable business partners to access secured, proprietary information. This information can be distributed through an organization using an extranet. There are supplier portals and customer portals.
• Companies can have very complex supply chain networks. To manage complex networks you need expertise, especially when there are unexpected events. It is important for companies to monitor their suppliers.
• When using a just-in-time (JIT) strategy, a company tries to optimize its ordering quantities such that the raw materials or components just arrive when they are needed for production. The order quantities are smaller and therefore the costs associated with storage and inventory are minimized. For this strategy, tight cooperation between the partners of the network is needed.
• With vendor-managed inventory (VMI), the suppliers to a manufacturer manage the inventory of the manufacturer based on service levels that are negotiated. So, the manufacturer or retailer does not manage its own inventories. The supplier monitors the stock levels and the sales of the manufacturer.
• If we look at social responsibility, effectively managing the supply network also has become an important aspect. Two issues that are related to this are sustainable business practices and product recalls.
• Supply chain management (SCM) systems can be used to improve the coordination of suppliers, distribution and the production of products or services. When using SCM a company is able to reduce its inventory costs and improve customer service, which leads to increased revenue.
• The extent to which the supply chain of a company is focusing on minimizing procurement, transportation costs and production is called supply chain efficiency. Sometimes even sacrificing customer service. On the contrary we have supply chain effectiveness, which is the extent to which the supply chain of a company is focused on maximizing customer service. Here there is less focus on reducing production, procurement and transportation costs.
• A company’s supply chain strategy must seek for a balance between supply chain efficiency and effectiveness. SCM systems allow you to make trade-offs between efficiency and effectiveness.
• The execution of SCP is called supply chain execution (SCE). SCE is the process of improving the collaboration between all members of the supply chain. The four members are suppliers, producers, distributers and customers.
• There are three key elements of the supply chain that are involved in SCE:
  • Product flow
    The movement of goods from supplier à production à distribution à consumer
  • Information flow
    The movement of information along the supply chain
  • Financial flow
    The movement of financial assets through the supply chain
• The relationships between companies and customers are nowadays more complex than before. To develop a strategy for managing these relationships companies can use customer relationship management (CRM) systems.
• If a company can implement CRM successfully, then it can generate greater customer satisfaction. However, a company must make several changes in the enterprise to successfully implement CRM. This includes changes in:
  • Customer service
  • Employee training
  • Data collection, sharing and analyzing
  • Policies and business processes
• There are three primary components that each comprehensive CRM system has:
  • Operational CRM
    system to automate fundamental business processes for interacting with customers
  • Analytical CRM
    System to analyze customer behavior and perceptions
  • Collaborative CRM
    System to provide efficient and effective communication with customers
• An operational CRM consists of several components:
  • Sales force automation (SFA)
    This are the modules that support the daily sales activities.
  • Customer service and support (CSS)
    This are the modules that are used to automate the service and information requests, product returns and complaints.
  • Enterprise marketing management (EMM)
    This tool can help a company to execute the CRM strategy by improving promotion campaigns to reach consumers and attract them to the Web.
• Collaborative CRM can enhance communication in different ways, namely through:
  • Greater customer focus
  • Increased information integration.
  • Lower communication barriers

Tentamentickets

• Know everything about customer relationship management (how it must be implemented, its components)