Customers pay, but tight suppliers pay off: academic

Everyone talks about the importance of customers, but Canadian professor Brent Gallupe says managing relationships with suppliers actually has more effect on the bottom line.

Gallupe, who is director of Knowledge-Based Enterprise Centre at Queen's University in Ontario, says most advantage will come from IT when organisations integrate knowledge management, relationship systems (comprising customer and supply chain management) and enterprise systems.

He uses human anatomy as an analogy.

"The heart is the enterprise system. Standard systems from SAP, Oracle, PeopleSoft etc are the foundation of the modern enterprise but they have to be integrated with the sensory systems — the relationship systems."

Relationship systems aren't just transaction-type CRM but those that track all interactions and tailor them to what customers need, he says.

Gallupe, in the country to speak to the Auckland University's Centre of Digital Enterprise, thinks of the supply chain as supplier relationship management in the same way as CRM is customer relationship management.

"Supplier relations are just as important because improvement in supplier relationships have more effect on bottom line than customer relationships."

Assuming your "heart" and "senses" are working okay, the challenge is then to overlay knowledge management practices and systems such as content management and collaboration on top.

"If modern organisations don't keep track of what they're learning from their enterprise and relationship systems they're doomed to do things over and over. Knowledge systems are the brain but all three have to work together. My concern is the heart and sensory organs are working but there's no brain moving it forward."

Gallupe says it's not enough to just use the reporting tools, business intelligence and data mining tools within enterprise and CRM systems. You have to capture the knowledge and work out what knowledge really makes a difference. Integrating the three systems is a two-phased approach, he says.

"Get your enterprise system right and then tie in your relationship and knowledge management systems. I hate to use the mantra 'integration', but the benefits really do come. But if you've got a bad enterprise system and it's not working I don't care how good your knowledge management system is, it won't work."

One of Gallupe's specialties is supply chain management and supplier relationships.

"Organisations should take a customer relationship approach to their suppliers. They should know their first-tier suppliers, second-tier, and who supplies their suppliers. They should find out what they can do to make those people happier."

This calls for a concentrated effort to manage supplier relationships, but Gallupe believes knowing more about them will make the supply chain more effective.

"Finding out their problems, inventories, production schedules so that there is a much freer flow of information within the supply chain."

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