The Global Supply Chain, Essay Example

Abstract

The supply chain is constantly faced with growing and new challenges. While these challenges may appear to be attributed to the movements in the business cycle as well as technological innovation, they have considerable implications on the profitability and utility derived from the global supply chain. Supply chain managers find it increasingly difficult to ensure a cost efficient and customer service-oriented supply chain. This research looks at the different supply chain operations issues identified in literature and research in the past decade. A networked and globalized market, brand loyalty, security and a fragmented supply chain were identified as the main issues in the global supply chain. This can be crucial in the development of strategies to create a more integrated supply chain.

Introduction

Even though, a global supply chain has assisted companies leverage lower costs in manufacturing, several challenges still exist. There are several obstacles that logistics manager face in the process of delivery. They have to ensure their products arrive on time, and they are delivered to the right client. Transport and logistic costs typically account for 5% to 6 % of a company’s revenue. It is the primary cost that often inflates the overall price of the product. Prudent transportation and logistics management help firms enhance their overall supply chain efficiency.

Whether your company uses air, rail, sea or land for logistics, stochastic variable will at one time come into play. These include fuel price fluctuations, longer lead times when dealing with global suppliers, and unfavorable weather conditions. Such situations make time and cost estimation related to TLM complicated. As a consequence, companies experience high inventory and expedite costs (Samson, 2011). Under typical conditions for logistics, departments will often use the same quantity that is supplied during a specified time. This occurs between shipments or transport of large bulks of newly manufactured products. This theory is evident in almost all areas of logistics, including merchandise sales and production.

Unfortunately, logistic managers find it challenging to predict expected demand for a given product. As a consequence, inventory is used to compensate for times when supply is lower than the supply. In order to reduce transportation expenses and ensure that the correct items reach the right location on time, transportation and logistics managers need to employ a centralized view in relation to the entire transportation schedules (Luo, 2012). Furthermore, the ability to analyze the impact of logistics and transportation on inventory fluctuation is vital.

Literature Review

There have been a number of studies that have been commission over the last two decades, seeking to provide insight into the intricacies of the logistics and transport sector in a number of nations. This has since expanded to include North and South America, Europe, Asia and Africa.

In 2014, a study commissioned by BVL International highlighted the main issues that logistics managers faced across all industries. Two specific issues came to light, Customer expectations and On-time delivery. Customers have very high expectations of the modern-day logistics and transport industry. The current industry is wrought with numerous uncertainties. The study found that customers in the modern-day industry can change orders within 10 days or less, at times one or two days, prior to dispatch.  Furthermore, the industry has realized an increase in demand for customized logistics and transport solutions. More than 20% of the respondents in the study highlighted an increase in customer expectations in the industry within the past three years (Handfield, Straube, Pfohl, & Wieland, 2013). During this time, the traditional measures have been found wanting when engaging in strategies to satisfy clients.

The study by BVL also highlights the impacts of a networked economy on the logistics and transportation industry. Logistics managers have had to adopt a different outlook towards the logistics and transportation industry. While initially players perceived themselves as independent, there has been an increasing use of collaborations. These collaborations are applied vertically and horizontally within the industry. As customer demands increase within the industry, logistics managers are forced to adopt a network thinking and engage in collaborations. However, in order for these collaborations to effectively work, synchronization and integration of systems and process in required. This integration usually comes at a cost, or may potentially affect the existing processes and systems already in place.

These results by the BVL are synonymous with the results reported by the Organization for Economic Co-operation and Development (OECD) in 2002. This report highlighted the fact that there is an increasing need for outsourcing in logistics within the market. With the growing complexities of a networked global market, companies are finding out difficult to realize productivity, profitability and sustainability operating as single entities (OECD, 2002). The research highlights the need to use third party logistics (TPL) in operations. TPL operators are usually highly specialized, have greater expertise. This allows for flexible logistics operations within the industry.

Globalization is a recent global phenomenon that has changes and influenced all facets of life, from trade and finance to governance and social welfare. Globalization has considerably influenced the logistics and transportation industry on all levels. It is responsible for the developed of a network logistic network that spans across different geographical areas, creating an interdependent and interrelated collections of regional markets. As markets continue to expand and include virgin markets, they also adopt the challenges and risks that are associate d with this emerging markets. Most of the emerging markets have a fundamental infrastructural problem, increasing the challenges associated with the cost of logistics and transport with poor infrastructure. Globalization has been identified by the BVL, OECD studies as having a multiplier effect on all other trends and challenges that Logistics and Transportation Management currently faces.

One of the major effects of globalizations is the increase in the amount of goods and commodities transported from one geographic location to another. This translates to the growth and expansion of the logistics, transport and supply network, i.e. the increase in capacity. As TLM seeks to meet consumer demands, there arises the need to increase capacity with transportation. Irrespective of the transportation mode employed, the increasing customer demands has created a problem with capacity during transportation (Ferrier Hodgson, 2014). As transporters look to increase logistics network, there is a challenge with increasing capacity on transportation units. Freight and road transport was found to be particularly prone to this challenge.

ICT has permeated the logistics and transportation industry on all levels. All processes currently have ICT integrated and as a core pillar.  A study conducted by the Ferrier Hodgson in 2014 highlighted some of the challenges that the transport and logistics sector in Australia experiences. One of the most significant challenges in the cost impact of technological advancements that have to adopt in order to remain competitive and relevant in a rapidly transforming market. The introduction of technology such as RFID technology have become integral in monitoring all procedures and processes (Ferrier Hodgson, 2014). However, such technology comes at a considerable costs. It requires upgrading and/or replacing existing systems. These increase in costs has become a problem for TLM as companies continue to drive towards the mitigation of costs and maximization of revenue and profits.

As environmental issues become more apparent and gain popularity, the logistics and transportation industry is placed on the spotlight. Research has found that logistics and transportation has been forced to adopt technologies and techniques that mitigate pollution and the carbon print that the industry has on the environment. This has also led to the increase in certain costs that are associated with green processes and procedures within the industry. The supply chain has become concerned about the environment, a factor that did not exists about a decade ago. By applying environmentally friendly techniques, green logistics aims at mitigating the carbon print its functions and operations have on the environment (McKinnon, 2014). Green Logistics is essential in ensuring sustainability and will become integral in the next decade.

In 2013, Price Waterhouse Coopers (PWC) released a study that highlighted the challenges that the modern-day supply chain faces on a daily basis. The research surveyed 500 executives and they highlighted four main areas they are concerned about on a daily basis. They include (1) profitability, (2) customer satisfaction, and (4) cost management (PriceWaterhouseCoopers, 2013, p. 4). The PWC study echoes the results from the 2014 BVL studies, customer satisfaction has become an integral aspect of the supply chain. Its importance cannot be understated as the 500 executive highlighted the increasing demands and need of the modern-day client. Keeping the customer satisfied determines the ability to realize customer loyalty.

However, this study highlighted one challenge that most studies fail to recognize, flexibility. According to the study, supply chain flexibility is gradually becoming a problem owing to the divergent nature of the modern-day customer. Supply chain operators and managers have to develop personalized offerings for each customer segment to realize customer satisfaction. However, this becomes a challenge when companies cannot realize flexibility as a result of constraints, mainly financial.

In 2015, Natalie Privet and David Gonzalez released a study that depicted a fragmented and generally inept pharmaceutical supply chain (Privett & Gonsalvez, 2014). While the study mainly focuses on the pharmaceutical industry, it highlights numerous challenges that are evident throughout the supply chain in most industries. The study highlights 10 main challenges that plagues the modern-day supply chain. Privet and Wagner’s entailed a sample of 22 individuals actively participating in one or more functional areas in supply chain management. The study highlights the following issues with the global health pharmaceutical delivery (GHPD) supply chains; (1) Lack of coordination, (2) Inventory management, (3) Absent demand information, (4) Human resource dependency, (5) Order management, (6) Shortage avoidance, (7) Expiration, (8) Warehouse management, (9) Temperature control, and (10) Shipment visibility (Privett & Gonsalvez, 2014).

The future trends associated with RFID technology is that the technology would be applied across all fields even in the purchasing of goods by clients. However, there are underlying issues that may arise with the technology;

The technology is prone to external attack in the form of software hacking. This can enable an intruder to change the information in a given RFID tag.

The technology has a fatal weaknesses. That is obstruction by metals and liquids limit its operability. (Reyes, 2011)

The GHPD supply chain study revealed that even though all ten issues may occur independent of each other, the lack of coordination was identified as the trigger the remaining issues, while further exacerbating them whenever they occur independently. The article highlights how the lack of coordination within GHPD supply chains is the root cause for the high level of pilferage recorded.

PRTM Management Consultants, a global management consultancy firm conducted a study that span 2010 to 2012, collecting information from senior management from 350 companies. The study involved companies from a wide range of industries in Asia, Europe and the Americas, concentrating on the efforts of recovering from the damage caused by the 2008 global recession (Geissbauer & D’heur, 2010). The report highlighted how the financial constraints that resulted from the global recession considerably affected the flexibility of the supply chains of most of the companies in the study. Very few companies were able to improve on supply chain flexibility. This is because supply chain flexibility is influenced by technological and capital factors. The scarcity of capital and the general inability to acquire new technology rendered most companies’ operations inflexible.

The complexity of the supply chain has also been identified as a critical issue in the supply chain management. Over 85% of the PRTM study participants highlighted the anticipated growth in complexity of their supply chains, a result of expansion of supply chains to the global market (Geissbauer & D’heur, 2010). As international trade and commerce improves with each passing day, supply chains open up businesses to global consumers from markets abroad. The growing complexity of the supply chain is also heighted as the cause of cost pressures throughout the supply chain. A more complex system is associated with potentially increased costs. This is the cause of the increase in price sensitivity of the market. Consumers are more responsive to price change, and as such are not loyal to any specific brand.

The Global Supply Chain Institute of the University of Tennessee, Knoxville released a report that highlighted trends in supply chain that are gradually transforming the landscape of the business world. The report highlights that prioritizing on customer service is a trend that has become synonymous with supply chain management the aspect of profitability often client comes into play. Prioritizing on service without determining customer profitability mat be costly for any business (Stank, et al., 2013).  The study also highlights that a largely unintegrated supply chain causes the characteristic inefficiencies and high costs associated with the supply chain. The relationship between players in the supply chain are mainly adversarial. This lack of collaboration is leading to duplication of work and functions within supply chains.

Chandra and Kachhal delve into the issues and challenges that face the healthcare supply chain. They identify a number challenges that mainly stem from the fragmented supplier base. With more than 26,000 medical suppliers in the market, it is considerably difficult to manage relationships between [players within the healthcare supply chain (Chandra & Kachhal, 2004). This is exacerbated by the fact that managing vendor relationships on an industry-wide level would be considerably costly. Supply chain inefficiencies are a huge challenge for the healthcare supply chain in the United States. The ordering process is currently not integrated owing to the fragmented supplier base, causing the process to be more costly than required.

Chandra and Kachhal also identify supply chain integration as a key issue in the supply chain management in the 21^stcentury. The supply chain is currently segment in a manner that is detrimental to the system as well as the parties involved. While information sharing is a trend that has been positively influencing integration, it is still a far off the required minimum for an efficient supply chain (Chandra & Kachhal, 2004). The fragmented nature of the supply chain creates situations where work is duplicated. This points to the general lack of collaborative operational planning.

Christopher M. states that the biggest challenge to the supply chain of the information age is the market is constantly changing and evolving towards the reduction of costs through reduction of inventory (Christopher, 2005). This reduction in inventory causes an increase in the amount of risk associated with inventory. The changing trend to lean and just-in-time practices. This is where the efficiency is given preference over effectiveness. Through the employment of the Just-in-time practice, the company becomes more dependent on suppliers. This kind of practice is feasible in a stable market condition. The volatile market conditions of the 21^st century make this practice not feasible and is prone to the volatility of demand increases. With the increase in the trend of the globalization of the manufacturing and assembly, most companies rely on off-shore manufacturing and sourcing (Christopher, 2005). This is motivated by cost. However, the cost is defined by the value of manufacturing and outsourcing. When the total cost of the supply chain are considered, then it causes higher risk levels that are triggered by greater buffer stocks, extended lead times and an increased level of obsolescence.

Muzumdar and Balachandaran postulate that the unpredictability of demand is characteristic of the 21^st century markets. This is caused by the high market turbulence levels. This volatility in demand is caused by shorter life cycles that are mostly driven by the change in technology (Muzumdar & Balachandran, 2001). This increases the risk of obsolescence for the customer service and sales department. This forces the department to constantly keep up-to-date with the latest technology. As a result the organization will experience increased obsolescence for the company. Companies will also realize centralized manufacturing and distribution and therefore the company may experience delays as transportation will consume more time due to the greater distances that have to be covered from on production site to another. The company’s customers will be affected by late delivery of orders and the probability of the obsolescence of the product from the company. The organization’s suppliers will be affected by longer lead-times of response and long planning horizons characterize the planning process and thus there is a longer transaction periods. Suppliers will also be segmented for specific raw materials rather than bulk buying from one supplier

With the onset of lean and just-in-time practices, the inventory management functional area of the supply chain is particularly vulnerable to potential risk (Muzumdar & Balachandran, 2001). This is because numerous sectors of industries aim to reduce costs by concentrating on the reduction of inventory. While these models function well in stable market conditions, they become less feasible when demand volatility increases. Companies are mainly forecast driven, where long lead-times of response and long planning horizons characterize the planning process. As a result, this functional area is vulnerable to the potential risk of the wild swings of demand.

In conclusion, research has depicted the logistics and transportation management in the 21^st century is particularly prone to the effects of market drivers. A highly fragmented supply chain has been identified as a high priority issue when it comes to supply chain management. While financial constraints have also been highlighted as critical inhibitors to supply chain efficiency, the lack of collaboration and coordination exacerbates all other challenges that supply chains face. The unpredictability of demand, coupled with a highly demanding market dictates the need for flexibility within the supply chain. Supply chain managers are finding it increasingly difficult to develop, improve and customize their products and services to meet their customers’ needs while facing financial constraints.

Discussion

The notable challenges that have been described in the section above can be attributed to the changes that the market is constantly undergoing. One of the most significant and core trigger of change is globalization. The globalization of the markets is creating a networked market that links initially geographically isolated markets. This networked structure imposes itself on the market as well as the organization. Most organizations are currently experiencing network forces, i.e. forces that affect the vertical as well as horizontal structure of the organization. This includes all stakeholders within a given industry or market.

Globalized Markets

The globalized market is one that is characterized by high customer expectations as a result of the high stakes involved in international trade. As marketing experts attempt to gain popularity and market for their products, they create consumer demand and expectations relative to the general utility that a consumer expects to derive from a given product or service. As customer expectations increase, this expectation is passed down to through the supply chain to the producer. Owing to the variety of personalities that exist, customer demands are bound to vary, each with a unique blend of requirements that they expect fulfilled. As such, the logistics service providers have no alternative but to meet customer demands or risk losing market share and reputation.

The supply chain is facing increased fragmentation with the implementation and widespread use of ecommerce. With little to no standards to create uniformity in the market, markets are becoming fragmented, each with its own preferred mode of ecommerce, each with different standards governing operations and transactions executed in ecommerce. Logistics has an increasingly difficult task of synchronizing the whole supply chain when it is fragmented as a resulted of different ecommerce blocks.

Brand Loyalty

Brand loyalty is not a reliable metric in the 21^st century market. Renowned as the information age, customers are only willing to pay for goods and/or services if and only if its quality is as good as they deem it worthy. Each customer has their own balance of quality, cost and utility that they use to measure viability of a given product or service. As such, customers are only willing to purchase goods or services that meet this criteria, or one that is closest to it.

Interdependent Networked Economy

The effect of a networked economy is the resultant intertwined and interdependent system. A network economy connect different players within the industry to create efficiencies that are critical in mitigating costs and lead times. Businesses become dependent on each other and the inefficiencies that affect one player affect the whole system in one way or another. The initial purely horizontal or vertical network model that employed a distant relationship between players cannot effectively work within a networked economic system. Such a system only thrives when synergies between the different sections of the system exist.

There needs to be minimal resistance in movement of information, goods, services, skill and technology throughout the system for there to be optimal efficiencies. The market is increasingly expectant of the bundling of product manufacturing and service delivery. Owing to the fact that one company cannot efficiently offer such bundled services to all customers, companies have to model new techniques of interacting with their clients, as well as suppliers.  Companies have to develop relationships with their customers to have clear visibility of the market and the trends and patterns that may exist within the market.

Security

Security is a new challenge that is characterized with the 21^st century. The supply chain is not only a conduit where valuable commodities are channeled from one geographic location to another, it is a potential risk hazard to the security and economy of any given economy. The global supply chain’s value increases with each passing day, making it a high priority target. This may be in the form of theft or any forms of destruction. When the supply chain is considerably affected, an economy can be crippled as a result of the inability to efficiently move essential goods and services from one geographic location to another. The ability to identify risks and their occurrence is highly influenced by an organizations ability to identify hazards and assess the risk associated with that hazard (Christopher, 2005). This is because the amount within which a hazard remains unsolved translates to incurred costs and losses to the organization. An organization’s ability to mitigate risks is subject to their ability to identify hazards before they occur. This compounds the challenge of cost pressures.

Sustainability

Carbon Emissions

Environmental stability is a challenge that affects all industries, especially the supply chain. Owing to the fact that the supply chain heavily relies on fossil fuel-powered transportation, it is socially responsible to remedy, mitigate and possibly eliminate their waste emissions. Businesses within the supply chain have to incur this costs in many ways. The most prominent is the Carbon Tax. The Gillard Government introduced the Carbon Tax, (Carbon Pricing Scheme) on 1^stJuly 2012. This scheme mandated that all business entities that emitted over 25,000 tonnes of carbon per year of CO₂greenhouse gases pay tax. The tax price per tonne of CO₂ is $10 (Virgin Australia, 2013, pp. 56,58). The introduction of this tax levy was unplanned for. This poses an inherent risk of the increase in expenditure without an equal increase in the price of tickets for passengers.

The expenditure on tax that is heighted in Virgin Airlines’ financial reports highlight the amount of tax that is paid as a result of its operation in the 2012-2013 financial year. There is the inherent risk of understating or overstating of this tax levy as it is difficult to determine the amount of CO₂ emissions by the company’s jets. This figure is made under assumptions and is mostly estimated according to the flight hours. The conditions of engines play an important role in determining the amount of CO₂ emission, a factor that is not considered in the estimation of this tax expenditure.

Energy Efficiency

Energy efficiency is a vital aspect of environmental sustainability. However, within the supply chain, energy efficiency is a considerably vital component of mitigating costs. Sustainability is vital component in the world of business, and as such, it should be integrated from the very genesis of any economic activity. Sustainability involves planning and in the implementation of daily operations with total consideration of how environmental factors influence long-term goals. This can be achieved through mounting energy cycles and flows and eliminating waste in ways that it conforms to the natural processes. The application of sustainable development and operation principles throughout the project, investors would be able to minimize operational and maintenance costs, at the same time observe Corporate Social Responsibility, which is a concept widely encouraged in the society today.

Cyclical Nature of the Transport Industry

The transport industry can be described as cyclical in nature owing to the fact that it is particularly sensitive to the ever-changing cycles of business. This is because the transport industry reacts according to the mannerisms of the general economy of a particular nation at a given time period. In simple terms, when the economy is buoyant, then the demand for transportation services is equally strong. There are numerous factors of the economy that make the transportation industry obtain its cyclical nature from the business or economic cycles. They include:

Seasonal Changes in Demands for Goods and/or Services

Owing to the fact that all industries depend on transportation as part of the value added process for every goods and/or service within the market, the demand for certain major goods and/or services significantly influences the demand for transportation services and as such give rise to the cyclical nature of the transport industry (Streissguth, 2011). One such commodity is tourism. Tourism is seasonal and as the demand for tourism fluctuates according to the seasonal tourism calendar, with notable peaks and low seasons. At the peak of the tourism calendar, transportation industries experience a boom in business with the opposite occurring at the low season.

Changes in the General Economy

The general economy influences the ability for individuals and businesses to utilize or demand transportation services. During the changes, the economic cycle, of the economy, the demand for transportation services changes accordingly. As such at the economic upturn, the transport industry experiences a boom and vice versa.

Changes in Prevailing Interest Rates

The prevailing interest rates usually affect the response of the transport industry to the cycles of the economy (Xie, 2011). When the prevailing interest rates increase, then the cost of transportation increases owing to the increase in the general costs of support service industries that are associated with transport. Such industries include the oil industry.

Recommendations

Technology

Technology is the critical component of increasing efficiencies within a system. Technology seeks to enhance an employee’s or worker’s ability by making work much simpler and faster. Through technology, the elements of human error can be mitigated or averted by using computerized systems in the production process for goods and/or services. This is essential for efficiency, the true measure of productivity. Technology helps an employee to produce more over a relatively short period of time, while reducing errors in the process. According to the information, technology is a requirement for productivity. Global and regional network have to develop techniques of acquiring and using the most affordable and efficient new technology available in the market. Even though new technology may face opposition due to internal resistance to change, it is crucial in enhancing efficiency which translates to reduced costs in the production process of goods and/or services. The costs of purchasing new technology it outweighed by the benefits of efficiency and reduced costs as a result of wastages.

In order to avoid or mitigate the negative effects of economic downturns, transportation companies can take certain steps that entail capacity. These steps include and are not limited to:

Leverage their existing assets to their greatest capacity

This is the appraisal of all the internal and external assets that the business holds and how these assets are being utilized (Walsh, 2011). By maximizing the impact of the company’s current investments, it can evade the costs associated with new transportation expenditures while fully utilizing the current company assets. The appraisal will include:

• Is the fleet being completely utilized?
• Are the orders being combined in the most profitable way?
• Are the freight loads full?

Developing collaborative supplier relationships

Utilizing web based technologies, the company can partner in a closer way with suppliers (Alberta, 2007). This is achieved through electronic sharing of information pertaining to purchase, order, shipping, tracking and delivery of goods. This is usually done in real time. This helps keep business even during economic downturns by creating supplier loyalty.

Develop Risk Management Strategies

The transport industry is rigged with numerous risks that are usually insured against. However, most companies do not consider economic risks as a considerable risk against business (Walsh, 2011). It is crucial that these risks are accounted for to cushion the company against economic downturns. This can be achieved by diversifying investment to association with supplier companies that produce goods that are not seasonal. Transportation of such goods may not generate much income as compared to the cyclical industries, but they will ensure the company maintains a considerably stable income during economic downturns.

Risk management is a vital facet of business operation and success. Complete and total elimination of risks is a task that cannot be fully realized. As a result, most business would conduct a risk analysis from time to time in order to determine the scope and depth of risks that the business may be exposed to in the course of conducting its daily operations. These analyses are meant to give management a clear understanding of the risks and how they can be mitigated to the lowest level possible.

The standards which are applied in the execution of the risk analysis vary and depends on the kind of approach chosen by the organization in question. They include:

• The organization’s technical infrastructure, software and hardware security capabilities
• The costs of security measures
• The organization’s size, complexity, and capabilities
• The probability and criticality of potential risks to electronic protected information(Christopher, 2005)

Data Analytics

Data analytics has become an integral part of business success. As the 21^st century has been heralded as the information age, information is a virtual currency. As such, information on consumer behaviors and habits can be useful when analyzed. All of the Fortune 500 companies employ data analytics to assess performance, increase sales and maximize profit (Pan, 2014).

Big Data Management (BDM)

Big Data is the process through which data grows exponentially to the point where conventional software and database techniques are not able to process and analyze it. This is where the data that is employed to execute business transactions accumulates to the point where a uniform storage and software to process this data is not available. Big data originates from every digital process that is executed at any given time. Every business transactions, or in information transmitted by a digital sensor contributes to the increase of information that is stored and used as a basis of future digital processes.

Master Data Management (MDM)

Master Data Management largely differs from Big Data based on the focus of each concept. Master data management looks to streamline the core information that is employed in the execution of transactions. However, big data focuses on the accumulation of digital information generated by digital processes. MDM is essentially a process of streamlining information and making it useful to businesses. This is where tools such as NOSQL, NORA and data mining tools are employed. Each tool is employed with a specific goal tools such as NOSQL is meant to analyze data from different or distributed systems. Data mining is geared towards retrieving data that is only essential to a given purpose or goal.

Supply Chain Management (SCM)

As companies move towards realizing full market efficiency operations are geared towards fulfilling customer expectations. Businesses have to develop supply chains that ate designed to fulfill the expectations held by clients and potential clients. Businesses can integrate customer driven improvement process into supply chain management by developing systems that enable clients to make decisions about their deliveries based on their own expectations (Lindstrand, Johanson, & Sharma, 2006). The modern day business offers clients the ability to personalize services they receive from businesses. This would significantly improve customer satisfaction and at the same time reduce unnecessary costs for the business.

Customer Relationship Management (CRM)

Customer relationship management can be crucial in enhancing the company’s activities, especially as pertains to their customers. CRM brings together organizational strategy, technology and information systems to provide their customers with better services. The main objective of CRM and CRM strategy is acquiring new clientele, retaining loyal clients and developing the relationships with its clients.

While CRM strategies had initially been focused on automating the processes that existed within the market, it has taken a different approach towards business process management orientation. The first stage is the purchase and implementation of single-function systems that support a given department to improve the customer’s experience and satisfaction (Netessine & Tang, 2009). The second stage entails cross-functional integration to development aimed at understanding the relationships with clients. The third stage is development of customer self-service through the use of the internet. The final stage is the designing of systems based on customer requirements while also providing clients access to this information.

Enterprise Resource Planning (ERP)

ERP and CRM are considerably intertwined as certain aspects of one are evident in the other. One of the most significant similarities is their use to increase profitability. However, while CRM focuses on the customer, the ERP is geared towards the businesses. In the modern-day business world ERP systems can be employed to improve customer service in three vital areas, (1) direct interaction at the point of sale, (2) delivering quality product at fair prices, (3) delivering it in a timely manner. ERP systems hold considerable potential in moving businesses towards customer satisfaction (Barkley & Saylor, 2001). The integration of the collection of data in ERP systems can be used to analyze the different processes

Conclusion

In conclusion, as businesses move towards customer driven processes improvement, supply chain management (SCM), customer relationship management (CRM) and enterprise resource planning (ERP) are crucial tools that can be integrated to facilitate this move. SCM, CRM and ERP are fundamentally configured to provide the business with essential tools to improve business operations. Businesses need to determine the extent to which their legacy systems allow them to realize customer satisfaction and profitability. Data analytics seeks to streamline standards within the market, providing efficient flow of information throughout the system

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