In the 21st century, most pundits agree that customer loyalty is dead. Customers are demanding specialized products and services in addition to rock-bottom pricing -- and their business goes to anyone who can meet their needs at the moment.
For manufacturers, many of which have never gotten the hang of serving end customers, these are not welcome developments. "Manufacturers ... preferred to have the channel deal with their customers. It's too expensive to have a direct sales force or customer service organization," says John Moore, the former vice president and general manager at ARC Advisory Group. "But, these days you have to find ways to be more responsive to customer needs; it's the only way you can compete."
Rexam PLC (London), the world's largest aluminum can maker, has proven that, though rare, customer loyalty isn't altogether dead. The $5.5 billion company has rolled out portals that let customers not just order and track products, but also share forecasts and view live production data that can tell them, for example, about the availability of products. That customer focus enabled Rexam to win Managing Automation's 2005 Progressive Manufacturer Customer Mastery Award.
In 2001, when Rexam launched its customer centric portals, it was a breakthrough idea in the packaging industry, where most companies were still placing and taking orders by fax, e-mail and telephone. Paul Martin, group director of information management, decided Rexam would help lead its customers into the e-business age. "We wanted to give our customers a new way to interact with us," Martin says. So he got on the road to meet with Rexam's North American beverage can customers, which are among the largest companies in the world, including the Coca-Cola Bottling Co.
Taking Price Out of the Equation
"Our customers are multi-billion dollar companies. I ... talked about the value of what we were doing," says Martin. "We were doing this to strengthen and enhance our relationship with customers. Our competitors can make just as good of a product as we can, and they may try to undercut us on cost." With such a humble product, Martin wanted to change the rules of operating in a commodity market. If he could add real value to customers' operations, he figured, they would be much less likely to jump to a competitor on the basis of price.
"We wanted to take price out of the equation and supply such a compelling experience," says Martin. Rexam would also benefit, of course, by cutting inefficiencies, speeding payments and decreasing manual processing.
The customer centric push came as part of a larger Rexam effort to e-enable its business processes by implementing several different SAP America (Walldorf, Germany) systems throughout its offices and 97 plants in 22 countries worldwide. Rexam's Beverage Can Americas (Chicago) unit decided its customers could benefit from getting in on the action.
In the true spirit of customer service, Martin allowed the company's customers to choose from three options to connect with Rexam: ERP-to-ERP connection, connecting via a portal or connecting via electronic data interchange (EDI). The first alternative, the machine-to-machine connection, was the most automated alternative -- orders would not need to be reentered and would flow automatically between Rexam and customer ERP systems -- and the one that both Rexam and its customers would benefit most from, Martin believed. This integration would be accomplished through a variety of enterprise application integration (EAI) technologies. But many customers were in the throes of ERP rollouts themselves in 2001, and they hesitated to get involved in anything that would require more integration work.
Most chose the second option, which was to connect via customized portals based on SAP's NetWeaver offering, specifically the Enterprise Portal product. The order data flows directly into Rexam's SAP R/3 modules.
Rexam sets up each portal with standard defaults that are appropriate for the individual customer. For example, one customer might use 10-digit purchase order numbers. In that case, the system automatically fills in the first six or seven digits of the client's P.O. number, which are always the same. "All they need to do is complete the P.O. number and select the flavor or label for the can they are ordering and that is it. They can bring the order back up and make changes to it very easily," he says.
A few customers have chosen to go the EDI route. And now that the first round of North American customers are comfortable using the portal, some are exploring the ERP-to-ERP integration. "That has always been our long-term goal, because no one has to re-key anything," Martin says. "The information transmits through the network and lands directly in our SAP system without any human intervention."
Though it is not mandatory, most North American customers have chosen to e-enable their dealings with Rexam. Currently, 19.5 billion of the 23 billion cans Rexam makes annually in North America are ordered electronically. Martin considers that a success, though he would like to see the number hit 100%.
There are other signs of success. Rexam has reduced average order handling time by 75%. And recently, a customer told Martin that a Rexam competitor was starting up a portal and wanted the customer to get online. That customer had no interest in using another portal -- a sign that Martin's plan to become indispensable to customers is working. Ironically, Rexam has provided that customer with templates from its portal so orders can be put into a standard format and faxed to Rexam's competitor. "We're allowing them to use our order-entry process with the other supplier," says Martin. From the comfort of the first-mover advantage, he can afford to be generous.
With the success of the North American effort under his belt, Martin was promoted in January 2004 to a centralized CIO position operating out of Rexam's world headquarters in London. He is now expanding the customer portal effort throughout Europe, which he expects will take most of this year. Martin anticipates his team will face challenges that were absent in North America -- cultural, technical and language issues.
"It won't be as easy as what we did in the U.S. Right now, you don't see a lot of electronic collaboration in the U.K. and European can business," Martin says. Since he devotes one-third of his time to visiting customers, there will be ample opportunity for him to make his case.
Next, Martin expects to enhance the ability for portal users to share forecast data with Rexam. Forecasts are notoriously inaccurate, but any incremental improvement will allow both Rexam and its customers to reduce their inventory buffers -- a significant benefit.
"In some cases we actually know more about the accuracy of our customers' forecast data than they do," says Martin. "We show them their shipment history, item level, pull pattern, promotions. It helps them understand more and do a better job with internal forecasting."
Martin hopes to enable collaborative forecasting through the portal this year. This will entail getting data from a number of different sources, including different departments (such as sales and plant floor) at the customer as well as at Rexam, and formulating a consensus forecast based on the complete data picture. "We'll generate a consensus forecast based on inputs from people throughout the whole chain," Martin says. Rexam will pilot this later this year using demand planning functionality in the SAP Advance Planning and Optimization (APO) module, and SAP NetWeaver.
"Having customers input their best estimate of their needs and then sending that all the way downstream to plant and machine scheduling -- boy, that's powerful. That is huge," says Doug Engel, manufacturing industry leader for Deloitte & Touche (New York) and a MA Progressive Manufacturing Award judge. "That will drive a lot of extra efficiency."
It will also put Rexam ahead of most of its competitors. In a recent Deloitte survey of 800 manufacturers, nearly 100% of respondents reported they understand what customers want. But, according to Engel, only a small minority take steps to enhance their relationships.
"This phenomenon [is] the 'customer alignment paradox.' Only about 5% to 7% of the companies ... had done much of anything toward aligning with the customer," says Engel.
Martin is readying a customer relationship management (CRM) rollout for later this year and learning more about his customers' customers. "We're starting to think about how we can add value to our customers' customers. We'd like to see a complete integration of information from Rexam, its suppliers, its customers and their customers. It will happen, but it's probably about three to five years away."
In a world where customers become more exacting every day, the best way to keep them happy is to stay ahead of the demand curve. Martin and Rexam are doing just that.