Tuesday, March 25, 2008

Report: CRM at Dow Chemical

March14, 2007

Executive Summary

1. Introduction to Dow Chemical

The Dow Chemical Company (hereafter referrer to Dow) is a US-based chemical company with net sales of $46.3 billion and with more than 40 000 employees (source: Annual Report 2005). It offers more than 7000 innovative products and services to business customers in more than 180 countries. Plastics, performance plastics, performance chemicals and chemicals account for more than 50% of the company’s total sales value. Dow’ customers are business customers who use Dow’s products as raw materials or parts of their finished products. In other words, Dow serves as a supplier for its customers. As those products require lots of technical support, Dow needs to build and nurture strategic relationship with its customers around the world.

In chemical industry, helping customers gain competitive advantages in their targeted markets and growing with customers’ growth is the key to exist. Dow has nurtured strong relationship with customers by managing contents (technical support and services) and hence has achieved sustainable growth in both home and international markets. CRM is, therefore, a key competitive advantage for the company to be a lealer in B2B e-commerce in the chemical industry.

2. Situation Analysis

The chemical industry in early 1990s

· The early 1990s was the era of plastics and performance of plastics with promising growth all over the world.

· As long as plastic industry developed, customers required ever-increasing associated technical support and services in order to use plastics products. Therefore, customer relationship was vital in the industry.

· The industry was expanding fast in the U.S. and well as in international markets

· Customers expected chemical producers to help them develop their new products in which they would use producers’ products as raw materials or as part of their finished products.

· Chemical producers or distributors were expected to educate customers how to use their products.

· Competition was rising from Europe and Asia as many chemical companies were trying to develop plastics and super-performance plastics to fulfill increasing demand for plastics products and specialty chemicals.

Future trends in chemical industry

· Low operating costs would be a competitive advantage.

· Costs of acquiring new customers would be much higher as producers need to educate customers and pass customers’ screening process to choose best chemical suppliers.

· Customers would require better technical support and services and lower prices as competition would increase.

· Customer retention would, therefore, be of vital importance in the industry.

· The evolution of the internet would allow companies to manage better customer relationship and lower operating costs via e-business.

Given this situation, Dow revised its business strategy in order to take advantages of the future trends, stay relevant to changing business environment and fulfill customers’ changing needs and wants. Dow implemented CRM as a part of the strategy to better serve customers and strengthen relationship with them.

3. First CRM strategy

Dow first bought a Siebel CRM software package in 1995 to start its CRM strategy. The company deployed CRM strategy to its entire global sales force in 1996.

Components of 1st CRM system

Functional strategy and specific business

Siebel software package for CRM (enterprise-wide solution)

Used for customer-facing front-end functions:

- Sales administration

- Order processing

- Customer services and support

- Marketing

Why this strategy failed?

· Dow installed CRM software in the entire organization but its global sales force was not well prepared to use it.

· It was difficult to incorporate business processes in this system.

Lessons from this failure:

· We need to make our people understand the system and prepare them for using it.

· We need to align business processes with IT operations before using the system.

· We need to train CRM users and make sure that they have required skills before starting to use the software.

4. Second CRM Strategy

Dow implemented 2nd CRM strategy in 2001 in the entire organization. This time, Dow has learned from the failure of the 1st CRM strategy and prepared the entire organization for using CRM system which is still based on Siebel system and integrated new functions such as mySAP ERP, mySAP SCM for supplier chain management, mySAP APO for advanced planning and optimization.

Components of 2nd CRM system

Functional strategy and specific business

Siebel software for CRM

- Basic software for CRM that Dow first bought

- Used for front-end functions as described above

Centralized data warehouse

- Partner relationship management

- Customer relationship management


New technology interface points that include MyAccount@Dow, Dow.com, which is the online interface for e-purchase and e-procurement.

- B2B e-business online interface

- Web interaction with customers

- E-biz sales administration

- Enquiry response

- Online technical support & services

Company-wide integrated desktops and voice over Internet protocol plans.

- Customer call centers

- Customer support centers

- Telephone technical support & service

- Telephone sales

ERP (Enterprise Resource Planning) system from SAP AG

The system integrate all corporate functions:

- Front-end functions (sales administration, customer service & support, order processing, marketing)

- Back-end functions (purchasing, manufacturing, warehousing, transportation, HR management)

- Supply chain management

- Partner relationship management

Result of the new CRM strategy:

· 90% reduction of defects in Dow’s 1.2 million shipments in the first year.

· The target was that all of its global sales force would be using the system by 2003.

CRM brings Dow competitive advantages:

· Low operating costs. With CRM system, Dow is able to simplify its order management processes, shorten order time, reduce shipment errors and minimize sales force.

· Order efficiency. CRM helps Dow reduce defect in shipment and errors in sales administration.

· Differentiation. Dow differentiates itself from competitors by offering e-commerce options to its customers. E-commerce is an innovation in the chemical industry where traditional paper-based orders have been popular for long time.

· Strong partnership and relationship with customers. As chemical technology is getting advanced, customers require increasing support from Dow to use its products and develop their new products. If Dow can help a customer develop a new product, it can supply raw materials to this customer as long as this new product exists. Therefore, strong partnership and relationship with customers will help Dow expand its business.

· Higher customer profitability. The longer customers stay with Dow, the more they buy and the less they are sensitive to prices.

· Better customer service. Dow’ customers can access to the company’s technical support and services via its worldwide websites or by integrated voice internet and desktops system. This allows customers understand more quickly how to use Dow’ products in their production.

5. Challenges

IT infrastructure: Dow needs to develop a good IT infrastructure to ensure the integration and non-stop running of all IT solutions (CRM, ERP, e-commerce, desktops and voice over internet).

Alignment between business and CRM: A key challenge is align CRM system with corporate objectives. Managers are driven by business objectives and targets and the CRM system should enable them to achieve their given objectives and targets. Business objectives must be the drivers and CRM is an enabler to achieve those objectives.

IT staff: Dow should develop an in-house IT force to be in charge of the maintenance, updates and integration of the current IT system.

Sales force: Dow’ global sales force should be able to control touch points with customers via CRM system.

People at Dow: It is a true challenge to get all people in the entire organization into the IT system. As the new CRM solution is now linked with all other corporate function, suppliers and partners, Dow needs to train, encourage and reward its global workforce to use the system effectively.

6. Recommendations

· Build strong in-house IT infrastructure.

· Align business processes with such IT structure.

· Have good IT staff teams who are able to keep the system running properly (system update, maintenance, integration).

· Conduct training for the global sales force and others working at customer touch points.

· Implement individual modules of a new software package before using it in the entire company.

· Adapt current IT structure with new solution.

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