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Leveraging the Real Value of Data and Process Workflow Integration with a True CRM/SCM Solution

by Claus Grüenewald | SAPinsider

October 1, 2002

by Claus Grüenewald, SAP AG SAPinsider - 2002 (Volume 3), October (Issue 4)

Every sales-minded organization instinctively understands that they must cater to their customers' demands and expectations. And few would argue with the notion that an organization's customer relationship management (CRM) activities can be greatly enhanced when tied in with supply chain management (SCM) activities. With your SCM solution tightly integrated with the commitment processes of your CRM solution, for example, you can marshal the considerable resources of an extended supply chain, then turn around in real time and commit to a customer exactly what you are prepared to deliver, and when. SCM and CRM are logical extensions of one another. It just makes good sense to integrate capacity planning, provisioning, and distribution with CRM operations like sales force automation, Internet sales, service quotes, contact management, and opportunity management - not just across your own enterprise, but among those of your customers and suppliers, who in turn may link to those of their customers and suppliers, and so on.

What happens when you forge closer, more efficient and effective relationships among supply chain participants? In an era where we're seeing supply chain compete against supply chain rather than company against company, what happens when you close ranks in this way along your value chain? You become a more formidable player. A competitor looking to copy or improve upon what you deliver - whether in terms of quality, functionality, price, or delivery time - would have to replicate (or beat) not just what you do, but what your supply chain does. That's a huge barrier to entry.

Of course, a tight-knit supply chain doesn't form merely a good defensive posture; it creates an incredibly powerful offensive stance, too. Elevate cross-enterprise operational effectiveness and you elevate profit levels, speed of delivery, and so on. Moreover, it enables you to do things that were previously not possible.

Made-to-order products offer a great example. One of our high-tech customers realized that by integrating their ordering and manufacturing systems, they could assemble and ship their products in a matter of days, keeping finished goods inventory near zero and squeezing out the most profit in a highly price-competitive industry. Rapidly changing technology in the PC industry means that every computer is potentially obsolete the day it is built. Building computers when they are ordered eliminates the possibility of holding outdated computers in inventory.

This is not a fictionalized scenario. Integration of mySAP SCM and mySAP CRM solutions is enabling companies to translate fluctuations in the demand chain and in market conditions into high-value optimization measures along their supply chain. In the example I just alluded to, this SAP customer is not building computers until they are ordered, enabling the company to eliminate the risk of holding outdated computers in inventory. The company also achieves a competitive advantage - because they have 20 days of inventory and their competition has 70, when a major chip manufacturer develops a brand new processor, their new and updated computer can be on the market 50 days sooner.

CRM + SCM: A Sum Greater Than the Individual Parts


To see how your organization can better respond to ever-changing market conditions, my first recommendation would be to check out...

SAP's Value Calculator

as well as...

SAP's Business Case Builder

Both tools will help you to evaluate your potential for maximizing revenue opportunities, minimizing costs and time delays, and ultimately improving your customer service.

The concept of selling is not only about finding prospects, managing them through a sales cycle, and closing the deal. It is also a financial management process - giving the retailers money to run discounts, local advertising, and a set of displays.

Consider Trade Promotion Management, one of the hottest CRM applications in consumer goods these days. It includes trade promotion planning and analysis, execution at the retail level, trade funds management, and deductions management. The key to achieving an adaptive supply chain network is that trade promotion management does not operate in a vacuum, since it impacts and requires links with everything from finance, marketing, and product planning to production and supply chain management.

Figure 1 Connected SCM/CRM Scenarios with Solutions

What you see in Figure 1 is that SAP's Trade Promotion Management solution, like the rest of SAP's set of demand-oriented applications, is fully integrated with all these functions. For Trade Promotion Management, this integration affords marketing personnel and supply chain planners visibility over what promotions are being run, whether the pricing matches brand guidelines, and what materials are being used or requested most.

Vendor-Managed Inventory (VMI) is another demand chain management function that yields much greater benefit from linkages between demand information and supply chain efficiency. SAP customers report that they are better able to make the right tradeoffs between costs and desired levels of customer satisfaction.

Extended Order Management (OMX) enables companies to intelligently commit delivery dates in real time and fulfill orders from all channels on time through optimized manufacturing, warehousing, and transportation processes. This includes real-time, global available-to-promise checks to locate finished products and components.

The checks take into account product characteristics and market constraints; order management, including the creation of quotations, sales orders, and bills; and transportation management, including transportation planning and vehicle scheduling, execution, and tracking of individual shipments. SAP's Extended Order Management supports such processes through a single, common data model to ensure the consistency of the data and the transferred objects.

Supply chains that proactively support Service Management and customer support are more complex than traditional product supply chains. Consider that the parts needed by your service and customer support teams might be kept in service vehicles, in depots, and at customer locations. Quantities are small, and demand varies considerably. Depending on the industry, some of these parts can cost more than several hundred thousand dollars and might be used only once throughout the years. Such parts consume cash from a financial standpoint, but are important from a customer service perspective.

This requires companies to develop an integrated service management and customer support capability that combines inventory management, specialized forecasting software, automatic identification technology, and mobile computing to bring a predictability to this just-in-case scenario that can save inventory costs and manage service parts effectively.

It All Adds Up to Adaptive Supply Chains

Through tight integration between mySAP CRM and mySAP SCM, companies can support call center operations, field service delivery, and inventory management - all on a single coordinated system. Sales data, such as product configuration and customer data, are immediately available for the service engineer so that field service representatives can go out with the right spare parts and an accurate technical description of the end product.

ROI scenarios like these are what's driving the adoption of adaptive supply chain networks. Traditional supply chain solutions are not able to deliver the integration necessary to extend visibility and control over the full length of your value chain. Nor can they readily work with best-of-breed solutions to minimize the total cost of ownership issues or leverage the real value of data and process workflow integration. Adaptive supply chains, by their very nature, can.

Tight integration of demand chain and supply chain activities will become the "norm" sooner than you think. It has to be, if for no other reason than effective CRM activities place greater demands on supply chain activities. In a world where customers have more buying power, the importance of giving them what they want, when they want it, cannot be overstated.

Claus Grünewald has worked with SAP since 1996 in the development department for planning solutions. Mr. Grünewald has been involved in mySAP SCM since the conceptual start of the Advanced Planner and Optimizer (SAP APO) and is currently heading global mySAP Supply Chain Management Business Development in the R&D organization in Walldorf, Germany.

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