8/2/2019 Assignment 3 - IsCM

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Assignment 3

International Supply Chain Management

Submitted to: Submitted by:

Capt. Sanjiv Rishi Tanmay Tiwari

Roll no - 194

8/2/2019 Assignment 3 - IsCM

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Q.) How integration of customer relation management and order management adds to

economic value to the product?

Customer Relationship Management (CRM) is a term for methodologies, technologies and

ecommerce capabilities used by companies to manage customer relationships. The traditional

database marketing captures customer information including demographic and psychographic

data that helps the marketer to develop suitable target marketing strategy, to forecast demand,

to determine type and quality of service required by customers and to build strategy formarket entry, diversification and expansion. This macro marketing view has led to look at

database for building strategic links for the benefit of the organization and customer in the

face of rising costs and competition.

The impact of CRM economic value addition takes place in two manners, by increasing net

profit and by adjusting capital charge.

Customer Relationship Management (CRM) has its origin in the basic paradigm of marketing

i.e. to satisfy customers with the best possible alternative in the market through a relational

exchange process. Customer relationship management goes beyond the transactional

exchange and enables the marketer to estimate the customers sentiments and buying

intentions so that the customer can be provided with products and services before he startsdemanding about it.

This is possible through the integration of four important components i.e. people, process,

technology and data

To increase net profit, firstly, we have to look after four things, i.e., strengthening

relationships with profitable customer, selling higher margin products, improve share of

customer and improve mix (e.g. align services and cost to serve). This will increase the sales

directly. On the other hand improving plant productivity will decrease the cost goods sold.

The integrated result of these will be increase in gross margin. But checking the total expenses

is also important, which can be done through improving targeted marketing efforts, byimproving trade spending, eliminating or reducing services provided low profit customers,

optimizing physical network and facilities, leveraging new and alternative distribution

channels, reducing customer service and order management cost, reducing human resources

cost by improving effectiveness, reducing general overhead management and administrative

cost.

Increase in gross margin and cutting total expenses increases profit from operations. But

though there is any increase in taxes, it will ultimately result in increase in net profit.

Now, to adjust capital charge, firstly, the inventory cost has to be decreased by improved

demand planning, reducing safety stock and mass customization of inventory. Again,

reduction in accounts receivable will reduce other current assets. So the total current asset will

go down. And to reduce the fixed asset, improvement of asset utilization and rationalization,

improve product development and asset investment and improve investment planning and

deployment. As a result, total asset will go down. So the adjustment will be decided by

percentage change in cost of capital. This will increase the economic value added.

Another impact affecting economic value added is by order fulfillment. Obtaining repeat

business, increasing share of market and/or customer and by retaining and strengthening

relationships with profitable customers, increases sales. On the other side impact on

component cost through efficient network design can reduce cost of goods sold. So again

gross margin increases. To increase profit from operation, total expenses have to be

decreased. And that is done by, increasing orders shipped, reducing damage and tracing,reducing services provided to the less profitable customers, reducing handling cost, reducing

general overhead, management and administrative cost, reducing outbound freight