Panel: ERP Only a First Step on the Road to 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.
is business systems director of Moss Plastics Parts Ltd., a £30 million turnover company which manufactures approximately 20,000 different parts and sells plastic injection moldings. It is a wholly-owned subsidiary of Bunzel Plc who specialize in plastics and outsourcing services for plastic parts. Moss has 20,000 customers across Europe in a wide range of industries. It wishes to become a one-stop shop to meet all its customers' needs.
ASI Computers, founded in 1994, sells PCs to medium-sized corporates and public sector companies through a network of dealers. stan Buffrey, the managing director, also helped launch ASI's sister company, Nice PC. The company was set up in conjunction with Fujitsu Siemens to be a call centre to service the PC consumer business.
American Golf Discount is one of the largest golf retailers in Europe. Alister Cook is the finance director and oversaw the implementation of the company's new Navision ERP system 11 months ago. The company is implementing reporting facilities on an almost daily basis and Cook describes the company's IT endeavors as a "constantly moving feast".
UK companies have spent millions of pounds in ERP (enterprise resource planning) systems over the past 20 years. But after the pain and disruption of the initial investment, companies are realizing that implementing ERP is only the first building block on an IT journey that must be revisited soon after go-live in order to deliver real benefits.
For many companies, ERP did not deliver all they expected in the first place, but this doesn't stop them accepting that they need more IT to become more efficient or stop vendors piling on so-called extended ERP offerings.
However, it does seem that companies are weighing up their options more carefully the second time around and questioning whether e-business or customer relationship management (CRM) may or may not be the way forward for them in their attempts to extend their ERP systems.
Whatever the next step might be, all our panellists agree that implementing an ERP system is merely a first phase. Sarah Cobb, business systems director of Moss Plastics, says: "It was painful and it hasn't delivered all the benefits we would like, but we never really expected it to deliver everything. We know we will have to add continuously. However, we now have an integrated back-office system with a single database which can be rolled out across our 14 sites, giving visibility of our inventory."
For Alister Cook, financial director at American Golf Discount, e-commerce is not to be the company's second visit to its ERP system. It spent a small amount of money putting a Web store onto its existing site and started trading for a brief period. But Cook says: "We quickly realized that we'd have to put a lot of resources into making the site more efficient and user-friendly and would probably get a minimum return on investment.... We need to look at developing the logistical side of our business and develop more interfacing to the front end."
In contrast, Stan Buffrey, managing director of ASI Computers, is pleased with the e-business success in its consumer PC company, Nice PC. Set up in January 2000, Nice offers value for money PCs to the consumer for "under a grand", and is already taking 18 per cent of its orders via the Web. This early success is spurring Buffrey on to put ASI online in a two stage development which will see standard products being sold online by Christmas and make-to-order goods by next summer.
Buffrey says: "We had nothing to lose with Nice PC as it was a start-up and it was easier to put it on the Web than convert existing business."
Cobb is also looking to e-business as a second phase and following the installation of SSA's BPCS system in 1998 is now looking at what BPCS can and can't give the company in terms of CRM and e-commerce. Moss is looking to gain a competitive advantage by creating a commercial front end with a one-stop shop for customers. As it is a large catalog-based company with many customers it does not know its customer base as well as its smaller competitors, and the company wants to make all information relating to any dealings with a customer available to anyone across Moss.
"Putting in an ERP system wouldn't be enough because it's only a transaction-based system and we want to capture soft information which is so important in developing relationships with customers," Cobb says. "The Web extends the services we can offer and if we can reduce transaction costs and build up our customer services the pain and expense will be worth it."
Cobb admits that Moss' products are not glamorous and so is keen to make the Web site as attractive and easy-to-use as possible, linking the Web order inventory straight into the back office by early October. To promote the site, Moss will send out hard copy information and e-mails. ASI Computers also sends out requested literature to 70 per cent of new customers, and has calculated that 99.9 per cent of customers who contact ASI over the Web place an order on first contact.
American Golf, following its Web foray, is developing a more advanced management reporting suite of tools out of its Navision back-office system which will result in valuable front-end reports on such trends as buying times, regional selling trends, and margin variants. It is enhancing its front-end software with business intelligence vendor Seagate Software's Crystal Reports, and plans to enhance the information tools at the back with more management tools and more functionality.
Cook agrees that it is only just starting to manipulate customer data in the first stage of collating information but by next year it expects to start to use the data to make its marketing more target-specific. "If we can get some consistency within our business by studying our margin trends and product groups we should ultimately improve the margin that we are making," says Cook.
Cook is unperturbed that more money has had to be spent on IT to make the processes more efficient less than one year after the ERP system's installation. He says the company is actually going to enjoy going through the process again: "When you understand where data is coming from, and what's happening to it, and learn that you should have done things in a more logical way - that is enjoyable. You know you will see gains from this."
Buffrey is also pleased with his company's efforts in the CRM arena as he believes that extending its ERP system will give it opportunities to branch out into more added value areas. ASI has even extended customer service into the back end by implementing a product tracking service that allows a customer to check the status of an order simply by entering a serial number.
Navision's Web Shop facility, meanwhile, will give a major accountholder the opportunity to have a home page that allows them to look at what stock ASI is holding on their behalf and how they could order this through their dealer. "[The end user] will be allowed to look at the stock of the model that is being built for them," Buffrey says.
Once this stage is in place Buffrey believes it creates its own momentum in facilitating better customer management.
Beyond helping the customer, ASI's next stage is to put its dealers in the front office so that instead of phoning a sales desk to get prices, the facility will be on its Website. Dealers will be able to request a price quotation over the Web which will alert the back-office sales staff, so they will be able to work out an appropriate price immediately. Buffrey believes this will cut a 24-hour process down to within an hour over the Internet. Orders from the dealer will also come over the Net and drop into the works order-processing system that falls automatically into Navision, the back-office system.
Moss is at a similar stage to ASI, having already implemented the first stages of CRM. It developed a more user-friendly order entry system in May in its call center which is connected to the BPCS back-office system. Prior to implementing ERP, Moss used a heavily customized order entry system, but wanted to maintain business rules such as minimum order value with the BPCS architecture. These rules are now inputted into the new system and connected to the BPCS system. Cobb says: "We are now striving towards having all the logic at the front end so we can control our business rules. As we consolidate and improve our business processes we want to be able to quickly change those rules."
The new system also incorporates Web order entry, an add-on to BPCS. Cobb is already developing an online "intelligent catalogue", which will enable customers to answer a structured series of questions about the particular application they might want a Moss part for, acting as a product selector for customers based on their needs.
Putting suppliers on the Web will be another development stage, as will credit card trading, so that anyone can place an order without being an account customer.
Moss is serious about its spending on IT and is investing £11 million over three years in the development and consolidation of its processes. Installing ERP has reduced some of its facilities, systems and transaction processing costs, but by entering the CRM arena it expects to reduce the cost of doing business further by using information within the company more effectively. Cobb says: "It is not just about getting more orders in; it is about people being able to get product information whenever they like, and ultimately it will create a new revenue stream for us."
Buffrey is also spending a considerable amount of money on new developments, yet the company's stage one process of selling standard products on the Web will only account for 20 per cent of its business. Buffrey knows ASI will not receive a great payback from this and it's when the company enters its second stage, where 80 per cent of its orders are built-to-order, that he expects the real payback. He says: "We have to do it and if we don't, in the longer term it will have a detrimental effect on our future. It may not be vital that we do this today but in the coming years it will be vital for us to stimulate growth in the business - otherwise we will stagnate."