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Business in an Instant
The six primary benefits of becoming a real-time enterprise.
For the rest of the February 2003 issue of CRM magazine please click here
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The real-time enterprise (RTE) has a value proposition so strong that it should come as no surprise that more and more companies are working to become RTEs. Six elements comprise the value proposition of the RTE: 1] Reduced costs: These include significantly reduced IT infrastructure/ integration costs; an average 20 percent reduction in cost-per-transaction; and on average a 15 percent reduction in inventory costs. For example, one customer of U.S. Steel Corp's Straightline Source subsidiary, which provides real-time, online information visibility to manage supply and to reduce inventory management costs aimed at optimizing steel procurement, realized a 15 percent decrease in inventory levels, a 10 percent decrease in procurement costs, and a 90 percent cut in communications time. 2] Operational excellence: This includes accepting orders in real-time and ensuring product availability; optimizing order management and fulfillment; and linking real-time activities with demand planning. For example, during the first year of DaimlerChysler's Mopar Parts Group RTE system the company increased its average four-day fill rate from 96.5 percent to 98.5 percent. This resulted in a $20 million savings in reduced safety stock and a $10 million savings in excess transport charges. 3] Enhanced productivity: A productivity increase of 10 to 20 percent per employee, per year (i.e., four to eight hours per week for an average 40-hour work week) is the norm, since personnel no longer run around tracking down needed information. With discipline and incentives, increased productivity leads to increased revenues. For example, at Tyco Adhesives' Franklin, KY, distribution center, within the first month of implementing its RTE system it realized a more than 100 percent productivity increase, from 2,350 line items to today's average of 5,800 line items picked and shipped on a good day. Inventory accuracy also increased, from 98 percent to more than 99 percent. 4] Better decision making: This results from having more timely information, and being able to act faster on this information. For instance, at PJM, which manages the electric grid for the mid-Atlantic states in real-time while coordinating supply from more than 650 power generation companies, as a result of better decision-making customers purchasing electricity in Pennsylvania pay prices that are on average 4.5 percent below the national average. There have been no rolling blackouts on the grid in the years since deregulation began.
5] Customer delight/loyalty: Customers appreciate responsiveness regarding order information, financial information, and support issues, etc. Dell Computer Corp.'s real-time order and fulfillment system has resulted in customer satisfaction in excess of 97 percent, and has helped to propel the manufacturer to the number one slot in the computer industry. 6] Sustainable, competitive leadership: When properly implemented, it is not unusual for RTEs to achieve oligopoly or even monopoly positioning within their industry. At Cleveland-based KeyCorp, one of the nation's largest bank-based financial services companies (with assets of approximately $84 billion), RTE has helped it to achieve strategic direction in offering integrated financial services nationwide and enabling customers to have all their financial services needs fulfilled in real time. Becoming an RTE has enabled KeyCorp to provide new products and functionality 12 to 18 months sooner than most competitors, and to achieve higher Internet banking penetration into retail banking clients than competitors. Like KeyCorp., by becoming an RTE a company can create and sustain a leadership position within its industry that leaves its competition wondering how to catch up. Isn't now the time to create your real-time enterprise? Barton Goldenberg is president and founder of ISM Inc., a CRM consulting firm based in Bethesda, MD. He is the author of CRM Automation (Prentice Hall, 2002), and publisher of The Guide to CRM Automation. Contact him at bgoldenberg@ismguide.com
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