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NetSuite, Inc.

Without order management integrated into a company’s front-office systems, customer serviceand sales will not fully realize their potential.

When the 12-year-old business VimCo decided it was time to expand its retail base beyond its Idaho roots, the company knew it would have to come to grips with the lack of visibility in its order management, manufacturing and sales operations once and for all.

Manufacturers of the wooden shelving brand called Peg-lok, VimCo sells to many of the nation’s largest retail stores. Its manufacturing, sales and supply chain operations encompass facilities on both the East and West Coasts and in Europe as well as some 60 service representatives spread across the United States.

“We had an issue getting information out to people,” says Scott Gollick, president of the company. “We would have the necessary data in Boise, but would have difficulty rolling it out in real time on a daily basis to our people across the country.” The end result, he says, was that retailers and resellers were flying blind as they assessed their capacity and demand needs. “They wouldn’t know if an order was coming in to a particular store, what the items were on that order, and how many. And tracking product movement is key if you want to be able to replenish orders on a real-time basis.”

VimCo solved this pain point and is now able to monitor and stock products on a day-to-day schedule – and sales have increased by 20 percent. Cash flow has improved, too, since the company was better able to manage its expenditures. As a final benefit, customer service has improved. “Now anybody can field customer service calls and direct them to the correct area,” Gollick says. Before, data was too segmented for such a seamless response. How did VimCo find the solution?

A New Genre Of Technology

Welcome to the next generation of CRM, a genre of technology that will base its business model on the immutable fact that without order management integrated into a company’s front-office systems, customer service and sales will not deliver to their complete potential.

In the spirit of full disclosure, VimCo is a NetSuite client. But its ultimate path to success – implementing a fully integrated CRM backend application – is a universal and vendor-agnostic lesson. Hopefully, one day it will be a best practice. Unfortunately, today it is not.

CRM Should Not Stand Alone

For too many companies, CRM operations and applications are de facto stand-alone projects that have little or no integration with order capture. Shockingly, there’s one major flaw in today’s CRM systems; none of them natively capture any data about the customer! The key defining transaction with a customer – their order – is captured in a separate system, and CRM software vendors have left it up to you to figure a way out of this mess. The result is a failed CRM operation.

Hard to believe? Think it through logically. There are three components to a standard CRM application: sales, marketing and service. In each of these functional areas, a company has to jump out of the CRM system to get crucial customer data (see Figure 1).

For example, in a typical sales process, a lead is turned into a prospect who then commits to buying your product or service. Unfortunately, in today’s sales systems, this is where the process stops, as the sales rep leaves the CRM system to place the order in a separate system (usually a back-office system). Irony of ironies – the one thing you can’t do in today’s sales system is sell something!

Marketing suffers from the same fatal flaw. For example, while it is nice to know your cost per lead, it is crucial to know which leads actually have turned into sales. But to calculate that, you have to know what the customer has bought.

With service, the connection to the order is obvious: How can you answer a customer’s question if you don’t have the details about his order in front of you?

Order Management: The Customer Is What’s Missing

The bottom line is that the order defines your relationship with the customer – what you sold him, what you can sell to him in the future, what his terms were, how it was shipped, and what taxes needed to be paid. If the order is not captured natively in the CRM system, get ready for you and your customers to be disappointed in your implementation (see Figure 2).

The Problem With Integration

What most companies do is rely on integration to seed the CRM system with the essential order management data. But herein is the crux of the problem: Rarely is the correct or complete data inputted into other systems. For example, a clerk inputting data into the accounting system is not interested in a lead source and will not include that data in the system, if indeed there is even a field for it. Once it is obvious to the CRM side of the house that that data is missing, it can be re-inputted. Now, though, multiple records exist for the same client.

This problem only gets worse when a company’s Web site is factored into the equation. Nowadays both business-to-consumer and businessto- business interactions are based in some part around a company’s Web site, be it renewing a contract or making a sale. We can even configure and buy cars online. As such transactions become ever more popular, the problems inherent in faulty integration will become even more apparent to the end user. Simply put, she expects to see one, and only one, record of her online and offline transactions. Anything less erodes confidence.

Another problem is the fragmented state of many companies’ order management systems, which makes integration into the front office all that more difficult. “Without a doubt, the fragmented order management system landscape in many companies leads to inefficiency and a poor overall customer experience,” says Louis Columbus, a senior analyst at AMR Research. He says that some 90 percent of all companies have multiple order management systems, with the average company maintaining 5.2 order capture applications and 4.3 order fulfillment systems. “In many organizations there are good reasons for having multiple systems; however, for most it limits corporate performance,” Columbus says.

Pushing The Envelope

This disconnect also hinders forward-looking business planning. Consider the recent Chicago-based startup, Big Toys Express, which sells items such as giant climbers, backyard sandboxes, ride-on toy cars – big toys, in other words. Its business plan centers on opening retail stores on a city-by-city basis as growth dictates, while establishing a national presence via a Web site.

“Selling online was a key requirement for our business plan,” says Jody Murdough, co-founder along with his brother. “That required an application that could integrate into our back end to better manage our inventory and billing and customer relationship management, instead of just having a static online presence.”

In short, Big Toys Express wanted to provide an Amazon.com-like experience for customers. It eventually chose NetSuite, but again, its story illustrates a greater point. Because online sales are coming from all corners of the country, Big Toys Express can forecast demand for certain items in its few physical stores. “When we see there has been an increase in sales of a certain item from our Web site over a three-day period, for example, we know this will translate into greater demand for that product in our physical stores, and we alert our suppliers accordingly,” Murdough says.

Obviously, integration after the fact is not, has never been, and will never be the answer to these problems. While the reality of heterogeneous IT environments will never go away, it is clear that companies must focus their CRM implementations around integrated business processes that reduce data fragmentation. In the next generation of CRM, order management will be included within the CRM application itself, allowing native capture of customer data. Visionary companies will take this philosophy a step further and pull together CRM, ERP, and e-commerce operations in a single platform. Regardless which path you choose, the days of stand-alone CRM are few.