Will Supply Chain or Finance Drive Your CRM?

A version of this article first appeared in Computers & Finance, a magazine published 10 times a year in London by TBC Research. Through its comprehensive portfolio of magazines, events and research, TBC Research is dedicated to helping senior business professionals make more informed technology decisions.

Which is the most important job? Global head of finance, a position requiring front-line strategic input, heavyweight analytical skills, numerous fiscal and governance duties and the ability to say no in 32 different languages? Or head of logistics, a role combining superb operational and firefighting skills with mathematical agility, strong powers of persuasion, high-level IT skills and the ability to drive a 32-ton truck?

Usually, the answer is finance. Thanks to its unique relationship with investors and its ability to provide multiple interpretations of the same numbers, in most organizations the head of finance forms an inner sanctum with the chief executive, chairman and any customer-facing director lucky enough to have made it to the status of "heavyweight". Outside of the top distribution operations, meanwhile, logistics and the supply chain team have tended to be looked down upon, with the assumption that good finance directors must be free to think, analyze and strategize.

None of which is very logical, but then again, the boardroom rarely reflects the strategic importance of different functions. For example, in theory, the job of the marketing department is to determine what customers actually want, deduce which product or service to provide them, and then encourage them to buy it - which should account for a hefty chunk of the whole business cycle. But in reality, many marketing professionals struggle to understand customer demand, tend to react rather than drive, and consequently are viewed as junior partners in the boardroom pecking order. Logistics departments do, marketing departments spend.

Like everything else in this digital age, however, all of this is set to change. By making personalized data available on a scale never before possible, Internet analytics is bringing one-to-one marketing ever closer to reality. In a world of instant and universal data access, the focus of the supply chain is evolving from the movement of goods to the movement of data. And that data, drawn from internal systems, lies at the heart of good customer relationship management (CRM).

An effective supply chain provides access to data on parts and product availability, status of orders and shipping details - all the information that a salesperson needs to ensure the product or service they're selling can actually be delivered within the timescales promised. Customers themselves become empowered, able to access up-to-date information about their business relationships, order for themselves, even configure their own goods. The buying experience is transformed, and (assuming it all actually works properly), so are the levels of customer satisfaction.

Users need to take this kind of enterprise-wide perspective on CRM, looking at customer management not just in the context of front-office activities such as sales, marketing and frontline customer service, but in terms of the contribution each part of the organization can make. While you need to keep long-term strategic needs in mind, the short-term reality is that most companies are nowhere near being ready to act on them. In IT terms customer management is still immature, and in cultural terms there are big issues to be resolved in implementing front-office systems. As a result, most companies have been advised to opt for piece-by-piece implementations that give quick wins, consigning the enterprise-wide stuff to what's euphemistically termed the next generation.

Now, however, it seems that next generation may be close at hand. The barriers between front and back office have been steadily falling, evidence of which can be found in the solid back-end practices and solutions developed and implemented since the e-fulfillment shortcomings of Christmas 1999. There is also anecdotal evidence that at senior management level, businesses are thinking of the bigger picture. Enterprise software vendor PeopleSoft adapted its marketing message in October to play up the links between its front-end systems and its supply chain management (SCM) software. According to CEO Craig Conway, its latest statistics show that 75 per cent of users which invested in its CRM applications also bought some kind of SCM capability, a clear indication that businesses are thinking in new ways.

For organizations preparing to tackle this next stage of CRM development, there's only one other outstanding issue. PeopleSoft argues that CRM/SCM integration is the critical first step in front-to-back office integration, because the supply chain is responsible for meeting customer demand, thereby ensuring customer satisfaction and improving customer retention. An alternative argument says that CRM/financial integration is more critical, using disciplines such as activity-based management to determine customer profitability and effective customer targeting.

The answer, of course, varies from organization to organization, and ultimately both are essential. But in the short term, the question for your company remains the same. Which is most important, finance or logistics?