Manufacturers: Consider CRM

You can't blame manufacturers for centering their IT strategy on systems that increase efficiency. Producing and shipping products proficiently is the foundation of their business, so recent IT projects have included ERP (enterprise resource planning) and MES (manufacturing execution system) software. But how can the customer- and supplier-facing side of the business be improved?

This question may be answered by implementing CRM (customer relationship management) software. Already established in the service industry and widely adopted by tier-one manufacturers, mid-market manufacturers are now exploring and adopting CRM. Instead of fixating on increasing efficiency, they're improving marketing, sales, and service.

CRM Must Fit With ERP
Of course, the first consideration when adopting new technology is price. The cost of CRM software - either as a stand-alone product or as part of an ERP system - for mid-market manufacturers ranges dramatically. Depending on the size of your company, the installation can range from $10s of thousands to $100s of thousands. CRM packages are available for specific vertical markets in both discrete and process manufacturing, and vendors will work with you to adapt the software to fit your business needs. It's a two-way street, though. "We can talk about your existing processes and show you what we believe to be the best processes," says Curt Lockton, general manager of high technology and industrial manufacturing at Siebel (San Mateo, CA), a provider of e-business application software. "We hold those two up to the light, understand where the gaps are, and have a conversation about that particular pain."

While the customization options of CRM are seemingly endless, one tenet has to remain intact: CRM must be integrated with your ERP system. For example, if your goal is to shorten your sales cycle, you will need to enable your outside sales force to provide accurate quotes for customers instantly. This will not be accomplished if salespeople do not have real-time access to your current price and inventory lists.

You have two basic options for integrating CRM with your ERP system. You can implement a software suite (ERP with a CRM module) or you can integrate "best of breed" products (stand-alone CRM software reaching into your ERP system). ERP vendors contend that having one integrated system allows one employee access to all vital data - past orders, inventory lists, warranty claims, contracts, accounts payable, etc. CRM vendors argue that their product is built on processes from the customer point of view while ERP is inherently built from the manufacturing point of view.

Why Does A Manufacturer Need CRM?
CRM was first introduced to the service industry to help consumer-oriented markets (e.g. telecommunications and utilities) keep track of thousands, if not millions, of customers. But manufacturers are different because they have fewer customers but a much higher transaction rate with them. "Manufacturers tend to sell to the same customer over and over again," says Bill Lilegdon, director of front office solutions management at Mapics (Alpharetta, GA), a developer of ERP, CRM, and supply chain software. "CRM's role in manufacturing is understanding all the activity that goes on with that customer and securing that relationship. Most new business comes from additional opportunities from existing customers. The crux of CRM is that it makes it easier to buy from you." He adds that the downturn in the economy - which resulted in an increased need to retain customers - sparked some manufacturers to adopt CRM earlier than anticipated.

Lockton cites an aerospace manufacturer who adopted a Siebel CRM package as a success story. The solution tracked service requests, compiled the data, and represented dissatisfied customers in red on a bar graph. The manufacturer was able to zero in on those customers and resolve their issues before the relationship deteriorated. As a result, the manufacturer's on-time closure rate improved from 45% to 83%, part sales to those customers increased about 70%, and the overall number of sales opportunities increased 40%, Lockton says. Furthermore, the rollout was accomplished in 30 days and the manufacturer achieved payback on its investment in less than one year.

The CRM tool most valuable to manufacturers is account management. "I think about CRM as the intersection of the manufacturing organization and the customer-facing organization," says Robb Eklund, vice president of CRM marketing for Oracle (Redwood City, CA), a supplier of business application software. "Customers shouldn't see any chasms between the departments or lack of coordination within the company." Glenn McPeak, product manager at ERP and CRM provider Exact Software (Delft, The Netherlands), agrees. "Any customer can call with an unlimited array of questions," he says. "Oftentimes they're asking how far along is their order in the production process. CRM makes you more proactive by connecting the front office with the manufacturing floor. You know what's going on with the customer and can make them aware up front if a product is shipping late."

Order management is another valuable CRM tool. "Manufacturers don't want to quote an order they can't fill," says Lilegdon. "A customer can say, 'I want what I ordered four months ago with these changes,' and you can access that information and complete the order immediately. It's all about being easy to buy from. If the quality and price are equal, it's then about the service you deliver."

Automated CRM can also help manufacturers create customized product marketing materials, helping them increase sales and decrease marketing expenses simultaneously. Oracle's Eklund calls this "marketing with intelligence" - promoting products and services to customers in real time in a personalized manner. "For example, let's say your customer purchases a product and you're coming out with an add-on or new feature for that product. You need to promote that to your existing customer base. Your sales and marketing team will have access to that order information through the CRM database," says Eklund. That targeted marketing approach can help reduce a manufacturer's printing expense, too. Instead of printing thousands of catalogs with your entire product line, you can publish smaller catalogs about product families and mail those to customers categorized by your CRM software.

Implementation Obstacles, CRM Trends
Besides price, the biggest hurdle manufacturers may encounter when considering CRM is changing internal procedures. "For example, the barrier on the sales side is going to be the data entry required by salespeople," says Lilegdon. "If sales perceives this as giving management a bigger stick to hit me with when I don't make my sales numbers, it's not going to work. They have to understand that the data they enter is going to help them retain customers and increase sales."

Exact Software's McPeak agrees, explaining that automated CRM requires internal discipline from all employees. "One reason you see people not using their tools is they're not deriving the value from it because of improper setup, improper training, and longstanding processes," he says. "Also, you need to have management involved to make sure the tools are used properly. They have to know that CRM systems don't benefit everyone equally, but they do benefit the corporation."

The biggest obstacle for CRM vendors is overcoming end user skepticism. "In the past, some CRM vendors overpromised benefits and underdelivered," says Oracle's Eklund. "Manufacturers need to ask, 'How can you be sure I'm going to be successful? Can you guarantee the outcome of my project?'" Lilegdon echoes those comments, saying, "I would stress pragmatism for CRM. It's not about soft returns such as 'customers will love you.' There are hard returns for CRM."

One of the next steps for CRM is self-service. Instead of making phone calls to the manufacturer, customers will have Internet access to order information. "A product manager doesn't want to have to pick up the phone to find basic information from a CSR (customer service rep)," McPeak says. "They want to click an icon, log in, and get the data. Also, an automated e-mail updating a pending order can include a status link. The customer can see the expected ship date and tracking numbers." Not only does this provide improved customer service, but also the manufacturer can achieve cost savings by not having as many employees answering customer inquiries.

Alas, some manufacturers are still focused solely on increasing efficiency, so they hesitate to adopt CRM. To them, Eklund says, "You're practicing CRM today even if you don't have CRM software. You have people who do sales, marketing, and take phone calls. CRM software delivers automation and new levels of efficiency to those processes."