CRM is defined as an integrated sales, marketing, and service strategy that precludes lone showmanship and depends on coordinated

actions. The goals of this business framework are as follows:

Use existing relationships to grow revenue. Composite a comprehensive view of the customer the maximize his or her relationship with the company through up-selling and cross-selling. Enhance profitability by identifying attracting, and retaining the best customers. Use integrated information for excellent service. Use customer information to better serve his or her needs. Its about saving time and easing frustration for customers. For instance, they shouldnt have to repeat information to various departments over and over again. Customers should surprised by how well you know them. Introduce more repeatable sales processes and procedures. With the proliferation of customer contact channels, many more employees are involved in sales. In order to enjoy continued success, companies must improve consistency in account management and selling. Create new value and instill loyalty. It can be your point of difference, your competitive advantages, to become a company known to prospects and customers for the ability to respond to needs and accommodate requests, a company well deserving of their patronage, a company to which they will become loyal. Implement a more proactive solution strategy. Use a customer-focused business solution that works across the entire enterprise. Instead of just gathering data and eventually using it, eliminate issues before they reach the crisis stage. Move from reactive data collection to proactive consumer relations that resolve problems on the first call.

Source: Customer Relationship Management Organization resistance to CRM is unfortunate, but almost inevitable. The organizational issues that companies must tackle to implement CRM include the following:

CRM may reduce an individual business units contribution, even though the whole company benefits. Current incentive systems work against CRM because they reward only part of the customers relationship with the company. Therefore, a sales manager who is evaluated on individual product sales has no vested interest in ensuring that the service organization is meeting the needs of the customer. Most companies today lack financial incentive programs that promote CRM.

CRM requires making a careful transition from an existing silo-centric infrastructure to an integrated customer-centric infrastructure. Over the years, however, large enterprises have built, bought, or inherited a wide variety of customer management applications. Some of this software is proprietary and will be difficult to share across departments.

Organizations with global operations must manage customer interactions in different languages, time zones, currencies, and regulatory environments. In this environment, providing consistent, customized service is difficult to accomplish using traditional technology.

Inventory Management
In any business or organization, all functions are interlinked and connected to each other and are often overlapping. Some key aspects like supply chain management, logistics and inventory form the backbone of the business delivery function. Therefore these functions are extremely important to marketing managers as well as finance controllers. Inventory management is a very important function that determines the health of the supply chain as well as the impacts the financial health of the balance sheet. Every organization constantly strives to maintain optimum inventory to be able to meet its requirements and avoid over or under inventory that can impact the financial figures. Inventory is always dynamic. Inventory management requires constant and careful evaluation of external and internal factors and control through planning and review. Most of the organizations have a separate department or job function called inventory planners who continuously monitor, control and review inventory and interface with production, procurement and finance departments.

Defining Inventory
Inventory is an idle stock of physical goods that contain economic value, and are held in various forms by an organization in its custody awaiting packing, processing, transformation, use or sale in a future point of time.

Any organization which is into production, trading, sale and service of a product will necessarily hold stock of various physical resources to aid in future consumption and sale. While inventory is a necessary evil of any such business, it may be noted that the organizations hold inventories for various reasons, which include speculative purposes, functional purposes, physical necessities etc. From the above definition the following points stand out with reference to inventory:

All organizations engaged in production or sale of products hold inventory in one form or other. Inventory can be in complete state or incomplete state. Inventory is held to facilitate future consumption, sale or further processing/value addition. All inventoried resources have economic value and can be considered as assets of the organization.

Different Types of Inventory

Inventory of materials occurs at various stages and departments of an organization. A manufacturing organization holds inventory of raw materials and consumables required for production. It also holds inventory of semi-finished goods at various stages in the plant with various departments. Finished goods inventory is held at plant, FG Stores, distribution centers etc. Further both raw materials and finished goods those that are in transit at various locations also form a part of inventory depending upon who owns the inventory at the particular juncture. Finished goods inventory is held by the organization at various stocking points or with dealers and stockiest until it reaches the market and end customers. Besides Raw materials and finished goods, organizations also hold inventories of spare parts to service the products. Defective products, defective parts and scrap also forms a part of inventory as long as these items are inventoried in the books of the company and have economic value.

Need for Inventory Management - Why do Companies hold Inventories ?

Inventory is a necessary evil that every organization would have to maintain for various purposes. Optimum inventory management is the goal of every inventory planner. Over inventory or under inventory both cause financial impact and health of the business as well as effect business opportunities. Inventory holding is resorted to by organizations as hedge against various external and internal factors, as precaution, as opportunity, as a need and for speculative purposes.

Reasons why organizations maintain Raw Material Inventory

Most of the organizations have raw material inventory warehouses attached to the production facilities where raw materials, consumables and packing materials are stored and issue for production on JIT basis. The reasons for holding inventories can vary from case to case basis.

1. Meet variation in Production Demand

Production plan changes in response to the sales, estimates, orders and stocking patterns. Accordingly the demand for raw material supply for production varies with the product plan in terms of specific SKU as well as batch quantities. Holding inventories at a nearby warehouse helps issue the required quantity and item to production just in time.

2. Cater to Cyclical and Seasonal Demand

Market demand and supplies are seasonal depending upon various factors like seasons; festivals etc and past sales data help companies to anticipate a huge surge of demand in the market well in advance. Accordingly they stock up raw materials and hold inventories to be able to increase production and rush supplies to the market to meet the increased demand.

3. Economies of Scale in Procurement

Buying raw materials in larger lot and holding inventory is found to be cheaper for the company than buying frequent small lots. In such cases one buys in bulk and holds inventories at the plant warehouse.

4. Take advantage of Price Increase and Quantity Discounts

If there is a price increase expected few months down the line due to changes in demand and supply in the national or international market, impact of taxes and budgets etc, the companys tend to buy raw materials in advance and hold stocks as a hedge against increased costs. Companies resort to buying in bulk and holding raw material inventories to take advantage of the quantity discounts offered by the supplier. In such cases the savings on account of the discount enjoyed would be substantially higher that of inventory carrying cost.

5. Reduce Transit Cost and Transit Times

In case of raw materials being imported from a foreign country or from a far away vendor within the country, one can save a lot in terms of transportation cost buy buying in bulk and transporting as a container load or a full truck load. Part shipments can be costlier. In terms of transit time too, transit time for full container shipment or a full truck load is direct and faster unlike part shipment load where the freight forwarder waits for other loads to fill the container which can take several weeks. There could be a lot of factors resulting in shipping delays and transportation too, which can hamper the supply chain forcing companies to hold safety stock of raw material inventories.

6. Long Lead and High demand items need to be held in Inventory

Often raw material supplies from vendors have long lead running into several months. Coupled with this if the particular item is in high demand and short supply one can expect disruption of supplies. In such cases it is safer to hold inventories and have control.

Types of Inventories - Independent and Dependant Demand Inventories

Inventory Management deals essentially with balancing the inventory levels. Inventory is categorized into two types based on the demand pattern, which creates the need for inventory. The two types of demand are Independent Demand and Dependant Demand for inventories.

Independent Demand
An inventory of an item is said to be falling into the category of independent demand when the demand for such an item is not dependant upon the demand for another item. Finished goods Items, which are ordered by External Customers or manufactured for stock and sale, are called independent demand items. Independent demands for inventories are based on confirmed Customer orders, forecasts, estimates and past historical data.

Dependant Demand
If the demand for inventory of an item is dependant upon another item, such demands are categorized as dependant demand. Raw materials and component inventories are dependant upon the demand for Finished Goods and hence can be called as Dependant demand inventories.

Take the example of a Car. The car as finished goods is an held produced and held in inventory as independent demand item, while the raw materials and components used in the manufacture of the Finished Goods - Car derives its demand from the demand for the Car and hence is characterized as dependant demand inventory. This differentiation is necessary because the inventory management systems and process are different for both categories. While Finished Goods inventories which is characterized by Independent demand, are managed with sales order process and supply chain management processes and are based on sales forecasts, the dependant demand for raw materials and components to manufacture the finished goods is managed through MRP -Material Resources Planning or ERP -Enterprise Resource Planning using models such as Just In Time, Kanban and other concepts. MRP as well as ERP planning depends upon the sales forecast released for finished goods as the starting point for further action. Managing Raw Material Inventories is far more complicated than managing Finished Goods Inventory. This involves analyzing and co-coordinating delivery capacity, lead times and delivery schedules of all raw material suppliers, coupled with the logistical processes and transit timelines involved in transportation and warehousing of raw materials before they are ready to be supplied to the production shop floor. Raw material management also involves periodic review of the inventory holding, inventory counting and audits, followed by detailed analysis of the reports leading to financial and management decisions. Inventory planners who are responsible for planning, managing and controlling Raw Material inventories have to answer two fundamental questions, which can also be termed as two basic inventory decisions.

a. Inventory planners need to decide how much of Quantity of each Item is to be ordered from Raw Material Suppliers or from other Production Departments within the Organization. b. When should the orders be placed ?
Answering the above two questions will call for a lot of back end work and analysis involving inventory classifications and EOQ determination coupled with Cost analysis. These decisions are always taken in co ordination with procurement, logistics and finance departments.

Inventory Planning - Basic Concepts

Every organization that is engaged in production, sale or trading of Products holds inventory in one or the other form. While production and manufacturing organizations hold raw material inventories, finished goods and spare parts inventories, trading companies might hold only

finished goods inventories depending upon the business model. When in case of raw material inventory management function is essentially dealing with two major functions. First function deals with inventory planning and the second being inventory tracking. As inventory planners, their main job consists in analyzing demand and deciding when to order and how much to order new inventories. Traditional inventory management approach consists of two models namely:

EOQ - Economic Order Quantity Continuous Ordering Periodic Ordering

1. EOQ: Economic Order Quantity method determines the optimal order quantity that will minimize the total inventory cost. EOQ is a basic model and further models developed based on this model include production Quantity Model and Quantity Discount Model. 2. Continuous Order Model: works on fixed order quantity basis where a trigger for fixed quantity replenishment is released whenever the inventory level reaches predetermined safety level and triggers re ordering. 3. Periodic System Model: This model works on the basis of placing order after a fixed period of time.

Good Inventory Management Practices

Good inventory Management practices in the company help by adding value in terms of having control over and maintaining lean inventory. Inventory should not be too much or too less. Both the situations are bad for the company. However often we see that inventory is not focused upon by the management and hence lot of inefficiencies build up over a period of time without the knowledge of the management. It is only when we start a cost reduction drive that the inventory goof ups and skeletons come out of the cupboard and results in revamping the entire operations. However those companies, which have always focused on inventory as a principle function and recognized that the inventory effects their sales, as well as the books of accounts and profits, have managed to introduce and improve inventory management processes. Many business models work on lean inventory principle or JIT inventory along with other models like VMI etc. Inventory management to a large extent is dependant upon the supply chain efficiency as well as operations. Inventory management is a management cum operations function. It requires operational processes to be followed and maintained on the floor and in inventory management systems. Coupled with operations, it entails continuous study; analysis and decision making to control and manage inventory levels.

We have covered below briefly few of the points which when followed, can go a long way in ensuring that the inventory is lean and clean.

1. Review Inventory periodically and revise stocking patterns and norms

Inventory is dependant upon the demand as well as the supply chain delivery time. Often companies follow one stocking policy for all items. For example, all A, B & C categories may be stocking inventory of 15 days, which may not be the right thing that is required. While some items may have a longer lead-time thus affecting the inventory holding, the demand pattern and the hit frequency in terms of past data may show up differently for each of the inventory items. Therefore one standard norm does not suit all and can lead to over stocking of inventory as well as in efficiencies in the system.

2. Get into detailed inventory planning - One size does not fit all
Understand the inventory types and the specific characteristics of the items you are carrying. Then build the inventory stocking parameters taking into account the unique characteristics of the particular inventory. From amongst your inventory list, you will find that all types of materials are not of the same value. Some might be very expensive and need to be carried in stock for a longer period, while another item might have a shorter lead-time and may be fast moving. Quite a few items often have shelf life and hence require separate norms and focus to manage such items. Getting into the detailed understanding will help you identify the inventory-stocking norm required to manage these characteristics to ensure optimum efficiency. The solution quite often may not be to carry stocks, rather it may involve setting up the customer service standard for such items and specifying a delivery time depending upon the frequency of demand. Quite a few items often have shelf life and hence require separate norms and focus to manage such items.

3. Study demand pattern, movement patterns and cycles to build suitable inventory norms for different categories of inventory
Companies which are into retail segments and dealing with huge inventories in terms of number of parts as well as value will necessarily need to ensure they practice review of inventory list and clean up operations on ongoing basis. Popularly known as catalogue management, inventory norms review should be carried out based on detailed study of the sales data, demand pattern, sales cycles etc. Understanding of the business and sales cycles specific to the product category helps one manage inventories better. For example, in case of retail garments, with every season certain skus become redundant no matter how their demand was in the previous months. This helps identify those stocks which are required to be managed at a micro level and

identify the high value and fast moving items that need to be always on the radar to avoid stock outs. It does not help for example to carry standard stocks of all items including low value items as well as high value items. If the low value items are locally available and the lead-time is less, one can cut down on the inventory and change the buying pattern. Similarly high value items too can be managed by cutting down the delivery lead times and in turn reducing inventory. It helps to periodically study the past data and extrapolate the same to identify slow moving and obsolete items. The dead stocks should be flushed out and active catalogue items should be made available.