InformationWeek

February 8, 1999

Inside the IT Value Chain

Links Mean Value

Competitive Edge

Customer Service Has Its Costs

Value Chain Benefits Still To Come

Slow Revolution In E-Commerce

Get Creative In Sharing Knowledge

Business Value Of Communications

Tighten Links In Value Chains

Executive Reports:
Cost-Effective Customer Service

Businesses rethink their supply chains to get closer to customers

By Stephanie Stahl

ustomers once expected low prices and good service.Today, they demand low prices and outstanding service. But finding the right technologies to let you get closer to your customer while remaining competitive isn't so simple. Such challenges force companies to rethink their supply chains and redefine customer ties.

Just how far are companies willing to go to provide more information and more access to customers and suppliers in their value chains?For Federal Express Corp., automated shipments and online status queries from customers save its couriers a tremendous amount of time and extra paper handling. "As Internet usage has exploded the online population, we have a natural means of reaching more and more customers this way," says Rob Carter, chief technologist at FDX Corp., FedEx's parent company.

On the other hand, the music industry has never been particularly close to customers. "Our understanding of the consumer has always been one step removed," says Scott Dinsdale, CIO for BMG Entertainment North America. The music retailer has provided the direct link to the customer. But BMG is finding it necessary to change its relationship with customers, and has created several new Web sites to close the gap. One site aggregates information about all BMG's artists. The site helps BMG better understand and influence buying behaviors. Information BMG gathers could, for example, influence the timing of a new release.

Bob Rubin

Such direct contact with customers has caused BMG's relationship with its retail customers to fundamentally change. In some cases, it has caused channel conflicts that BMG has to manage on a regular basis. But while it may sound like a classic case of disintermediation, the traditional retailers are less concerned about BMG's direct links to customers than they are about new entrants to the market, such as CDnow and Amazon.com, whose core business is driven by Web technology.

For Elf Atochem North America Inc., which sells agricultural chemicals, electronic business lets the company make sure it's giving customers the information they want in the way the want it. Providing material data sheets on the Internet and accepting orders online or through E-mail make it easier to get closer to customers and to add value. "It allows us to take commodities and treat them like specialties by adding a service component," says Elf Atochem CIO Bob Rubin.

But Elf Atochem struggles with the idea of eliminating distributors. In some cases, it may help the company get closer to its customers. In other instances, cutting distributors in areas in which the company isn't as efficient is not practical. The key is finding the right balance that will make the company "lean and friendly," Rubin says. "There is a tremendous emphasis on ensuring that such decisions will have an actual bottom-line return."

Stephanie Stahl is executive editor of InformationWeek.

Illustration by Matsu
Photo of Rubin by Bill Cramer