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The Recession and Buyer-Seller (B2B) Relationships

Marketing and Supply Chain went through a paradigm shift in 1987 when Dwyer,Schurr and Oh published their article Developing Buyer-Seller Relationships. Since then many scholars have used the marriage analogy to understand long term B2B relationships, business markets (SRM)and even consumer markets (CRM ) . Every link of the supply chain is a B2B relationship and it needs to be stable like a solid marriage, so that the next link in the value chain gets reliable product or service.

NBC reports that divorce is down 49% in DC due to the recession as it is simply not affordable by both parties !Similarly I guess B2B relations tend to continue in a recession as it is too expensive and risky to look for new partners both on the buy side and sell side of the business.

On a lighter vein B2B marketers and Supply Chain Managers need to smile with the country song it's cheaper to keep her.

Supply Chains and Distribution Channels (B2B) really don't talk to each other

The recent IBM Study points out that visibility and risk are important concerns of supply chain managers. The summary of the report  suggests that companies seem to be more in touch with their suppliers than their customers when it comes to aligning supply with demand. More bluntly the buy side and the sell side have little clue about what's developing on either side of the firm's value chain.

The stark differences in orientation,training and lack of communication between the market end of a company (the B2B end or distribution end) and its back end supply chain function is intriguing. There was a time when these functions were combined together as a "commercial" function which went out of fashion in the late eighties and business school academia,consulting companies and companies themselves pigeon holed sales, marketing and distribution in one bunch and the the supply chain,materials,logistics and procurement as another bunch of functions. If the CEO did'nt actively promote the communication and co-operation between these functions - you landed up with things like the mortgage mess. Those coming up with derivatives never really needed to understand the different types of mortgages that were actually being given out.

ERP systems and particularly Web 2.0 applications will hopefully help better co-ordination in organizations and till they  kick in - some old fashioned "talking" between the marketing and supply functions should help keep the value chain straight.

CRM on iPhone

The new iPhone 3G is great, although being tied down to one carrier (AT&T) might be constraining for some as are the extra charges for Internet access. However, it is really a great device particularly for those who need to get onto the web while on the go. And now CRM vendors like Salesforce.com and biggies in the ERP business Oracle and SAP are getting into top gear to provide access via the iPhone 3G. Check out the scoop on all of this in the article here.

Driving the CRM application to the iPhone or Blackberry will certainly improve adoption of CRM software. More so, in these challenging economic times when new business is difficult to get and existing customers might have needs that businesses might find less costly to service.

Small business,gas prices and the Internet

Luckily for bigger organizations Internet adoption had come before the -$4/gallon gas prices. Since last year I was hearing about major organizations cutting empty office space because most people did knowledge work and preferred to work from home and come in for meetings. Yesterday the small Gloucester Township, New Jersey was reported to be considering closing municipal offices on Fridays to save 35000 $ in heating and cooling costs. I guess Gloucester City can manage most service activities from its website or at least get more applications on-line. Both citizens,employees and the town administrators would be happy so long as the town tax for next year is contained !

Small businesses, like your neighborhood plumber,on the other hand are extremely hard hit.Most rely on traditional advertising including painted vans (that move with gas) to spread their marketing message. A majority do not have websites and those that do -have no real system to keep track of inquires or sales leads and just can't afford fancy customized back-end databases to provide customer service. However, this very large engine of  the American economy is realizing the potential of saving gas and costs  through transferring some of  its business functions on-line. A day may not be far when your plumber gives you a recorded message to fill up a web form with your job details or check progress on-line on an ongoing project!

Booming choices in CRM,SCM,ERP- executing "benefit of the benefit"

When I walked through the exhibitor booths at the ISM conference, I was struck by the rather large number of software vendors who were trying to explain how their software would "solve" the problems of procurement,bidding,contract,supplier relationship and add "visibility" to the supply chain. Many of these solutions could speak to your legacy systems and most of them were web based and did not involve buying software and all the challenges that are involved in getting a system started. This was a sudden but clear change from earlier exhibitions I have been attending where "mega" ERP companies would be intimidating visitors by the daunting task and budgets involved in actually getting these systems to work and realizing the benefits that the system promised.

And now I saw that there is one more CRM system launched. This one is from Sage Software and is aimed at the small and medium enterprise and does many ERP functions as well.

The question is : where does all this lead the manager of a large enterprise or the owner of a small one in these tight economic times ? Adoption of these systems should be much easier than the early ERP systems but a clear and compelling articulation, for every customer that adopts these systems, would help the customer in quickly capturing the cost savings or revenue growth that these systems promise. Does this happen during the sales cycle for the system? It probably does  in the presentation slides of the software sales teams - but the challenge for the buyer is to capture the "benefit of the benefit" during the sales and buy process of the software and try to articulate  it to the  functional goals of the "owner" department. The luxury of the disconnect between why you acquire a system and what you can do with it might be somewhat reduced this way.

Is your CEO more willing to meet customers than suppliers?

For quite some time I have been trying to figure out the practical differences between supplier  and customer relationship orientations in B2B relationships. In other words, the differences between upstream and downstream relationships that a firm must have.

Firms are becoming more and more alert to having good supplier relationships having realized that they need to have great suppliers who are part of the team. But the focus is always downstream to the market. Consider how easy it is to get your CEO to go meet a customer than go meet a supplier....

Why is this so? Because organizations are market facing and without customers who pay the bills you can't pay your suppliers !

It is for this reason there is much more IT efforts on the front end of the customer face with Customer Relationship Management (CRM) and Sales Force Automation (SFA) softwares  rather than the slower growing Supplier Relationship Management (SRM) modules in ERP systems. The Supply Management department is generally on top of critical supplier relationships because a supply gap can be catastrophic, career wise for the supply or procurement professional. While the same logic applies to the Marketing department, the CEO lends a helping hand because the specter of competition for good customers seem much more real than good suppliers.

How Relationship Marketing is Changing Procurement Management

Sometimes its just a quick remark that clarifies difficult issues and that happened with me yesterday when a very competent procurement professional mentioned that their company did not do much procurement activities i.e. bidding,negotiation because they preferred to stay with the same supplier. So, there was not much growth in procurement as a career...

This set me thinking because it marks a major shift in management practice because companies are realizing that just as it is more profitable to have good customer relationship management downstream - its probably more effective to have good supplier relationship management upstream the value chain. Just as you need to "fire" or "sack" your bad customers you need to do the same with your bad suppliers but for the good ones you have - good relationship management seems to be paramount.

So procurement managers need to extend skills beyond "negotiation" just as sales managers need to extend skills beyond simply trying to "close" the sale....paradigms have shifted!

Apple iPod early adopters receive iPology

Less than two months ago this blog discussed the spectacular iPhone launch. Today the early adopters who had signed up for the $599 iPhone are furious. Apple decided to reduce the price to $299 to enhance adoption by mainstream consumers, in time for the holiday season. According to Steve Jobs the price cut will make the iPhone more affordable.

Understandably, the price cut has left the original early adopters of the iPhone, angry. Naturally, if you stood in line for hours and forked up $2000 for the yearly contract and then realized that the marketer had cut prices by 33% in less than 60 days - you'd feel shortchanged.

Luckily, Steve Jobs and Apple have responded and are giving a $100 credit. What was Apple thinking? Early adopters are crucial for any market and more so for the revolutionary products like the iPhone. Early adopters are those who are recognized as folks who "are first to try something new" and "order a new dish or go to new restaurants" and generally take the risks and kinks that come with being the first to try something new. Most consumers just wait it out till things stabilize and some (the laggards) do not adopt the innovation at all. Without early adopters there would be no innovation which could really reach the market. I am glad that Apple realized it's folly and Apple enthusiasts are happy again. The iPology worked ! Classic service recovery by Apple on this one.

Apple iPhone launches tomorrow and the supply chain is tops

The iPhone launches tomorrow (Friday 29th at 6 pm) and there are excited shoppers lining up in front of the Manhattan Apple store today i.e. as of Thursday morning. Amazing!

The phone is not cheap and you need to sign up for a 2 year contract with AT&T which means a commitment of $2000.  The iPhone fans are unfazed and are more than happy to come up with the money so long as they get the phone. Apple plans to sell 10 million phones in the first year and according to this report the supply chain is streamlined this time.

Meanwhile industry at every part of the value chain is scrambling. Consider the telecom service provider industry where AT&T (including the merged Cingular)  has clearly got its biggest marketing coup as  the exclusive telecom provider to the  iPhone .You need to sign up only with AT&T to use the iPhone. I would imagine that subscribers with other great carriers like Verizon are leaving in droves- just for the iPhone. On Demand  CRM provider Etelos is differentiating itself by providing service through the iPhone. Wonder what the now "dull" PDA folks will do- they have got to do something -fast !

Figuring out supplier-customer relationships

I enjoyed the article by Dr. John Gattorna in the Supply Chain Digest based on his book Living Supply Chains. John Gattorna obviously has years of experience and therefore is rightly incredulous as to why organizations both on the selling side and on the buying side, don't take care of their good suppliers and good customers. Dr. Gattorna offers some good actionable recommendations that basically urges both buyers and sellers in B2B to stay true to their best customers and suppliers both in words and in deeds.

The question is - why do organizations on the selling side keep "wasting" resources on difficult customers and vice versa. The relationship marketing literature gives us a clue from the sociology of marriage(I keep writing about this in my own papers  and  Dwyer,Schurr and Oh ,1987 - Journal of Marketing is the neatest summary). Somehow it is always more "exciting" to to get "new" customers or at least waste resources on "difficult" customers like dealing with several difficult mistresses. When it comes to getting your marriage to work, you need to follow simple (but boring ?) things from the Reader's Digest and if you prefer television - you can follow Dr. Phil !

I guess both marketing departments and procurement /supply management departments don't just "get it". Dr. John Gattorna's advise should help.