The Manufacturing Value Chain Report: Customer Order Management

Jan. 1, 2004

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%
E-mail 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%
E-mail 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%
E-mail 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%

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