ASB SUMMER UNIVERSITY: ERP & SUPPLY CHAIN MANAGEMENT

1. ASB SUMMER UNIVERSITY:ERP & SUPPLY CHAIN MANAGEMENT Group (C) Project Presentation Andrew, Newton & Peter Wednesday 1st August 2007

2. Group (C) Project Objectives: • Using SCM theory(ies), identify the strengths, weaknesses, opportunities and threats of Danisco’s recent implementation of an enterprise-wide customer segmentation model. • The learnings should be a clear understanding of the processes Danisco went through and how these processes positively or negatively impacted the policy deployment and process management. • The outcomes should be a concise set of recommendations as how Danisco could use this experience to improve future policy implementations.

3. Presentation Structure: • Introduction & Background [Andrew]: • General introduction to Danisco • Discussion of CRM & customer segmentation from a Danisco perspective • Review [Peter]: • Segmentation model • Discussion of the policy implementation • Analysis [Newton]: • Summary • Conclusions and recommendations

4. Introduction & Background • What is Danisco? • What is Danisco’s business model? • What is ERP and SCM within Danisco? • What is customer segmentation? • Why should Danisco implement a customer segmentation model? • What are Group C’s sources?

5. What is Danisco? • A global production company, • Producing sugar and food ingredients that are used into both food and non-food sectors, • Production at more than 50 sites globally and headquarters in Copenhagen • Almost 10,000 employees and a presence in 50 countries • Revenue in 2006/07 approx. DKK20 billion, or USD350 million, • Quoted on the Danish stock market and is one of the 20 largest Danish companies, although small/medium in a global perspective, • Business split into 4 product areas, divisions…….

6. Organisational Structure:

7. What are some of Danisco’s business model elements? • Mission: ….to accommodate consumer demand for healthy, safe and tasty food and to provide value-adding sustainable bio-based solutions to industry • Branding: high quality products with strong technology platform and customer support structure – slogan ‘first you add knowledge……’ • Recent developments: new CEO with renewed focus on EBIT margins and RONOA….. and therefore cost control across all aspects of the business • ERP: SAP implemented in Danish parent company 2002 and template roll-out to be completed during 2007 • SCM: although an enterprise-wide ERP system the supply chain is still somewhat ‘departmentalised’ some elements integrated but not all

8. CRM within Danisco: • Danisco has purchased the add-on CRM module to SAP, • CRM module is essentially a large database of customer data, with some resource planning (workflow) & analysis functions, • The objective of the module is to achieve customer satisfaction with the most efficient deployment of resources possible, • These resources (services) could be sales manager visits, innovation projects, new application testing, new letters, product launches etc, • But CRM is the analytical tool, not the solution how to best use resources………

9. Customer segmentation within Danisco: • Customer segmentation however is a concept that can be used to rationalise how customers services are deployed, this requires developing a set of rules or ‘criteria’ that then determines the appropriate service level, • Prior to 2006 the service customers received could vary greatly between product divisions and regions, • Therefore in 2006 an enterprise-wide segmentation model was developed and implemented, with the objective to: • “…..provide a superior decision making tool on best use of resources for delivery of profitable growth across Danisco” • In other words to: • Create guidelines for resource allocation by defining ‘service levels’ to the different customer segments, • Enable market intelligence – by understanding better potential growth opportunities, and • Facilitate agreement on shared services in the regions, divisions and innovation

10. The new segmentation model • The new model places customers based on: • A score that signifies the current profit contribution made by the customer • A score that signifies the expected profit contribution made by the customer “The objective is to provide a superior decision making tool on best use of resources for delivery of profitable growth, intelligent maintenance and constant review”

11. Expected profit classificaction Tot. Potential access. sales Scoring: 1-6 pts Tot. Potential access. sales Scoring: 1-6 pts + + Tot.Potential access. profit Scoring: 1-6 pts Tot.Potential access. profit Scoring: 1-6 pts Calculation in CRM Calculation in CRM + + Calculation in CRM Calculation in CRM Potential Cross Selling Scoring: 1-6 pts Potential Cross Selling Scoring: 1-6 pts = = + + Input in CRM by Sales Manager Input in CRM by Sales Manager Strategic importance Scoring: 1-3 pts Strategic importance Scoring: 1-3 pts + + Premium Buyer Scoring: 1-3 pts Premium Buyer Scoring: 1-3 pts Input in CRM by Sales Manager Input in CRM by Sales Manager + + = necessary input from sales managers = necessary input from sales managers Input in CRM by Sales Manager Input in CRM by Sales Manager Loyalty to Danisco Scoring: 1-3 pts Loyalty to Danisco Scoring: 1-3 pts

12. The new segmentation model Platinum Gold A B C D DA CA BA AA BB DB AB DC Future contribution DC CC BC AC DD CD BD AD Bronze Silver D C B A Current contribution

13. Problems with the implementation In spite of a great effort, things did not go as planned • There were a growing resistance towards the new system • The scoring-system was built on unreliable data and on the subjective opinion of the manager. • In some areas service levels are still being regionally defined

14. Growing resistance • When facing changes we react in different ways: • Cognitive resistance • Cognitive resistance shows when the employee does not understand why the changes he is being subjected to is needed. • Emotional resistance • When dealing with emotional resistance, the resistance is not necessary against the change itself, but more against the way the changes are being made. • Personal resistance • Personal resistance shows where there are deep cultural differences between the employees and management. It results in hostility towards management.

15. Growing resistance • The resistance at danisco is mainly built on cognitive and emotional resistance • the cognitive resistance shows where the employees have not been properly informed about how and why the changes are needed. Danisco needs to carefully explain these things to their employees so there will be a greater understanding and appreciation to why the changes are needed. • in order to minimize the emotional resistance management need to involve the employees when making changes instead of pulling it down over their heads. Doing this will also enable the employees to voice their opinion about what works and what does not work.

16. Unreliable data • Another problem with the new CRM module is the actual segmentation model. The model is built around profit per costumer, However the system that calculates profit per costumer is also under development. It cannot calculate profit per costumer accurately, meaning that the data/information the segmentation is based on is unreliable. • Also most of the points the costumer can get is based on the managers subjective opinion

17. Environment Stakeholders Purposeful SC and Long-term Vision Principles of SCM Catch Ball Deployment Continuous Improvement/Reengineering Further Optimization Opportunity Planning and Execution Processes New Capabilities New Supply Chain System Integration/ Optimization/Synchronization The Overall Performance of the SC Unfavorable Outcomes Favorable Outcomes Policy deployment

18. Catch ball content Catch ball processes Catch-ball deployment Segmentation strategy Catch Ball CRM module Catch Ball Operational level

19. SUMMARY - SWOT ANALYSIS:

20. Important factorsto considerbeforeimplement CRM systems • Decide what you want from a CRM system. • S.M.A.R.T. objectives (Specific, Measurable, Achievable, Realistic, Time-bound) • Consider if the current employees will embrace or resist a CRM system. • NT + OO = EOO • Where NT = New Technology; OO = Old Organisation and EOO = Expensive Old Organisation. • Consider if the current available data across departments etc can be pooled together and made into information. • Get referrals from users of each system under consideration. • Develop and implement a training program. • Review of CRMmodule………..

21. Plan Act Do Check Implementing CRM system is a process • Deming’s PDCA Cycle

22. Implementation strategy Radicalchange Great level of vulnerability High level of conflict Low degree of vulnerability Moderate level of conflict Core environment Low degree of vulnerability Low level of conflict Moderate level of vulnerability Low level of conflict Minorchange Source: Buchanan, D & D. Boddy (1992)

23. CONCLUSIONS – SWOT ANALYSIS:

24. RECOMMENDATIONS: • The CRM system should be based on reliable source of data • Greater involvement of employees at the operational level • Incremental implementation of the CRM system, instead of Big Bang

25. Q & A