Connect Demand with Supply

The CIO's next big challenge will be figuring out how to bridge the company's sometimes conflicting CRM and SCM objectives

For almost two hours, the project leader supervising IT's supply chain initiative for a consumer packaged goods company presented superbly. The architecture made sense; her vendors were aligned; supplier IT shops appeared on board, and the business case was consistent with IT's investment. Coding and rollout were on plan. Tough questions had been anticipated with well-researched answers. The CIO was impressed. So was I.

The company's CRM project leader then gave his status report. He also was excellent. His group had done a good job benchmarking both CRM aspirations and implementations at other companies. Their findings suggested clever, cost-effective ways to segment and service the company's customers. He predicted this would delay CRM deployment by 90 days. But so what: The business case was compelling. Creatively tweaking the off-the-shelf software and customer support training offered real business impact. The CIO was impressed. So was I. Good people, good ideas, good expectations management. We got a lot done.

Only after dinner did it hit me: There was literally no connection between the two presentations. Zero. The supply chain management (SCM) and the CRM presentations lived in parallel universes of business value. Customers played no part in the design and deployment of the supply chain discussions; the supply chain was utterly irrelevant to the proposed CRM implementation. This fact went unnoticed and/or unremarked on over the course of a full-day meeting. Odd.

By happenstance, I talked the next day with a CIO who was overseeing a difficult CRM rollout along with his company's marketing department. So I casually asked how he planned to link the new system to the supply chain. "We're not," he said.

A supply chain vice president at a Fortune 1000 company had a similar response: zero plans to connect marketing's CRM system to his finely tuned SCM network. He seemed surprised by the question. "You have to manage suppliers differently from how you manage customers," he said.

That's inarguable. Yet, the ERP companies (notably SAP) have ostensibly built their futures around the argument that ERP is the happy marriage of CRM+SCM+financials. Billions are being bet on this proposition, but I don't believe it. After all, the sensibility that requires a company to re-engineer all of its processes around software is not the same sensibility that allows customers to freely collaborate with customer service. (I don't mean to pick on SAP; Siebel also has had a tough time translating its "sales-force automation" value proposition into fluent CRM).

Then again, there's Dell. One of the top two personal computer companies, Dell has a "build-to-order" business model that clearly integrates both supply and demand chains. That model has worked astonishingly well for Dell, its customers and its key suppliers. In fact, Dell could not do what it does if it designed and managed its supply chains and CRM as separate technical entities. The "build-to-order" business value proposition demands an architecture that inherently integrates customers and suppliers. Yes, Dell has a "supply chain", but it coevolves in the context of explicit customer demand.

I'm not suggesting that the Dell implementation is the way for companies to go. We have to contrast the successful Dell model with the also successful Wal-Mart model. There's not a company on this planet that - day in and day out - does a better job of profitably managing more SKUs than the world's largest retailer. Wal-Mart understands and lives SCM in ways that are still not fully appreciated by either its analysts or competitors. Spend a few hours at a Wal-Mart distribution centre, and you'll be in awe.

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