Picking Your Partners
Two seemingly diabolical forces are vexing manufacturers these days: an inability to raise prices and customers demanding cheaper products, faster service and more functional support from suppliers. In this grip, margins erode. The old-school practice of seeing customers only by the sales or unit volume of business they give -- and not how profitable that business is -- would give way, one would think, to considering total cost of customer.
However, the Value-Chain Survey shows few respondents are classifying customers by profitability, while nearly a third don't classify them at all. This runs counter to the respondents top objectives: 78% identified increased profitability as No. 1, while increased revenue and unit volume ranked 46% and 18% respectively.
See the full report: The Manufacturing Value Chain Report: The Ties That Bind
Classifying Customers
| Sales dollar volume | 59.9% |
| Don't classify | 30% |
| Unit volume | 6.5% |
| Profitability | 3.6% |
Selective CRM
Call it "smart CRM." It seems manufacturers that responded to the Value-Chain Survey have discovered what works and what doesn't when it comes to Customer Relationship Management. Trying to sell the customer a scarf (cross-selling) or a crown (up-selling) when he asks for a hat seems not to work. But selling woolen hats to customers in Wisconsin and sun visors to those in Florida (purchases recommended based on customer requirements) seems to work. The lesson: Make your customer, not your product line, the focus of the interaction.
CRM Practices And Customer Retention Rates
| Practice | Extensive Use | Some Use | Not Using |
| Automated Cross-Selling | 3.7% | 18.5% | 77.8% |
| Automated Up-Selling | 1.9% | 21.2% | 76.9% |
| Purchase Recommended Based on Customer Requirements | 31.5% | 31.5% | 37% |
| Purchasing Circles | 3.7% | 16.7% | 79.6% |
| Customer Self-Service | 7.5% | 43.4% | 49.1% |
Old Reliables
Faxes, postal mail and phones remain the top methods by which manufacturers receive their orders. EDI will take some of those transactions in three years, respondents report, but the "old reliables" will still have a place. Indeed, conventional EDI use will grow alongside its Web-enabled brother, although at a slower rate.
Receiving Customer Orders 3 Years Ago
. . . Fax, postal mail and the telephone were by far the most popular order-taking methods.
| Web-enabled | 1.7% |
| Wireless | 0% |
| Conventional EDI | 12.6% |
| Direct connection | 1.3% |
| 3.6% | |
| Fax and mail | 68.1% |
| Telephone | 53.6% |
Today
. . . E-mail and EDI have become more widely used, but phone, fax and postal mail still dominate.
| Web-enabled | 8.3% |
| Wireless | 0% |
| Conventional EDI | 16.1% |
| Direct connection | 2.6% |
| 11.7% | |
| Fax and mail | 59.7% |
| Telephone | 44.1% |
3 Years From Now
. . . Traditional methods still will be around, but use of conventional and Web-based EDI will grow.
| Web-enabled | 27.5% |
| Wireless | 1.6% |
| Conventional EDI | 23.5% |
| Direct connection | 7.6% |
| 26.4% | |
| Fax and mail | 42.2% |
| Telephone | 33% |
| Key Performance Indicators | Bottom 25% | Median | Top 25% |
| Percentage of total annual sales orders that require no manual intervention | 0.0% | 0.0% | 30.0% |
| Total annual sales orders placed with your site delivered on time | 85.0% | 93.0% | 97.5% |
| Percentage of your total annual sales orders not fulfilled due to stockouts | 5.0% | 2.0% | 0.0% |
| Customer retention rate over the past three years | 80.0% | 90.0% | 95.8% |
