• January 1, 2006
  • By Marshall Lager, founder and managing principal, Third Idea Consulting; contributor, CRM magazine

MarketScope: Manufacturing: CRM's Next Makeover

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To the outsider, manufacturing seems like an impersonal business. But the industry stands to benefit heavily from advances in CRM technology and techniques, and analytics will be the mark of success. CRM adoption is picking up in this market, especially for sales channels and partners, according to Ray Wang, senior analyst of enterprise applications for Forrester Research. "They are looking at improved functionality in partner systems for cataloging, e-commerce, Web portals, and lead management." Order capture is gaining importance as products and services are sold side by side. Mobile field service and sales also present opportunities. But these advancements are just the start of a broader and deeper change in how business is done, according to Dale Hagemeyer, research director of the CRM practice at Gartner. In a recent Web conference, he defined four stages of CRM in manufacturing: transactional, analytic, optimized, and real time. The great majority of manufacturers, 75 percent, are still dealing with customers on a transactional level--separate and unrelated interactions. "Companies need to be thinking bigger than they were five years ago, when every touch point was transactional," Hagemeyer says. "They need to go from a world of transactions--calls coming in--to a world of understanding why those calls are coming in." Companies are starting to ask themselves what the transactions mean, and what trends and opportunities are arising from them. This second phase requires business intelligence and analytics applications. Canned reports form the bedrock of analytics, collating gathered data into a readable form in order to grasp business performance, Hagemeyer says. "Daily sales should be presented in canned reports. To get beyond that basic level of information you need OLAP [online analytical processing] and alerts." OLAP lets users combine and reconfigure data from a number of sources; dashboards give insight into present performance versus predefined rules, setting off alerts when the metrics stray too far. Optimization, the next stage, calls for processing customer data in tune with economic elasticity. "Optimization uses predictive modeling of point-of-sale data to determine your price points and product mix, for example," Hagemeyer says. Real time is acting on your analytics not only to predict, but also to make changes if your predictions are wrong. "Unfortunately, there isn't a totally end-to-end solution for manufacturing analytics yet. The best of breed bolt onto Siebel, SAP, SSA Global's Epiphany, or CAS." The blossoming of analytics places manufacturers at the cusp of an opportunity. "Now is the perfect time to move into optimization. The economy is coming back, and people are spending more," Hagemeyer concludes. "[Analytics and optimization] can provide a real competitive advantage to a manufacturer." Light as a feather: CRM is a dense business for one bedding manufacturer What's heavier, a ton of bricks or a ton of feathers? For Gwen Babcock, CIO for bedding manufacturer Pacific Coast Feather (PCF), the answer is feathers, to the tune of $320 million in annual revenue. PCF makes basic bedding--comforters, bed pillows, featherbeds, and mattress pads-- and sells to most major retail shops, catalogs, and home shopping venues. It's one of the largest down comforter suppliers in the world. Despite its firm presence in traditional channels, PCF found itself in an increasingly uncomfortable position. "We're in a very competitive industry, and the usually low profit margins were squeezed even lower by competition," Babcock says. The company explored alternate sales channels, including furniture stores, mattress stores, and a number of mom-and-pop outlets. Babcock discovered that the business model in those alternative channels was very different from the major retailers PCF was used to. "The new channels required a more personal touch," Babcock says. Those stores weren't set up for automated restocking, and did most of their ordering by phone or fax. The added time and effort was turning PCF's inside sales personnel into customer service reps, and costs ate into profits. "To keep costs down, we turned to the Web for a series of B2B channel portals, each with channel-specific and personalized content for the customer," Babcock says. "We integrated SAP Internet Sales with the SAP R3 back end we'd been using since 1995." With SAP's help, PCF has implemented a series of channel sites, the first of which went live in April 2004. Pacific Coast Feather has saved a chunk of time by turning to Web orders. Each manual order used to take inside sales agents five to 10 minutes. Multiply that by 5,500 orders per channel, and it's a problem. "Now the sales team can take a more proactive selling role," Babcock says. "They can bring in more revenue...and have much more job satisfaction." --M.L.
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