Moore Medical Coroporation

Question 1: (a) Which new info system (CRM, ERP, etc), if any, should Moore purchase?

In 2001, Linda Autore, CEO of Moore Medical Corporation, was faced with several significant company-wide problems that needed addressing. Each problem posed a specific challenge for Autore. For example, share of wallet of current customers was not close to 100% due in part because the company did not offer capital goods, also split shipments were an issue due to excess cost and wasted time, additionally their current ERP system, that was recently installed, was not being fully utilized and lacked important functionality that was key to overall demand planning success and customer satisfaction. These areas of either under-utilized functionality or system errors included: an inefficient customer bid and quote mechanism, an order system that was difficult to use and a new account database that allowed for duplicate records. The challenge, for this company, was in determining what the most considerable problems were and finding the most time-saving and cost-efficient solution to them.

After an intense review of all critical data and information as pertains to the corporation, it is my determination that the most crucial problem facing Moore was in the area of demand planning and its effect on customer retention, satisfaction and attraction. In June of 2000, Moore initiated a performance management system called the "the perfect order." This system recognizes orders that were completed on time, had all items in stock, and were damage free, shipped from the closest DC and arrived to the customer on time and without damage. The overall percentage of perfect orders was 68% at the start of 2001 while the goal for the program was an accuracy rate of 90%. According to Autore "the biggest opportunity (here) is with implementing proactive demand planning to make sure that the right product is available at the right location, at the right time" (6). It is stated that 84% of their opportunity, or 27% out of the 32% of non-perfect orders, was related to resolving demand planning. Autore admits that "The most serious problem Moore faced with its J.D. Edwards implementation was that the system proved to be passive and reactive to demand, rather than proactive in forecasting" (7). Under the current system, when customer orders depleted the stock on-hand to its minimum levels, the system produced a recommendation for a replenishment order for the supplier equal to the quantity ordered previously. There was no system in place to monitor if demand for a certain product was on the rise or fall and how, in that case, to respond. Overall, accurate demand planning and forecasting is imperative to customer satisfaction and will allow Moore to retain their current customers and may positively influence new customer wins as well.

With that said, it is time to consider the solution options facing Autore. The CRM system proposed to Moore by Clarity promises to provide an integrated record of all customer contacts from all sales channels and an optimal salesperson scheduling tool to increase Moore's consistency with its customers, but this in no way resolves the company's largest issue, accurate demand planning. If CRM was implemented perfect orders would remain well below the targeted percentage. This system might indeed solve a lesser problem brought on by the previous ERP implementation of having a system that does not provide a total campaign solution for managing marketing efforts and pricing differentiation between customer satisfaction, but this is not even completely apparent. Even though Clarity's CRM system is reasonably priced it is not a vital addition to the current system and should not be implemented at this time. It is imperative for Autore to consider all options but to remain focused on demand planning as the corporation's key initiative. Moore is in no position to make unnecessary purchases, as they showed a net loss in 2000 of over 4.5 million dollars.

Another solution option facing Moore was adding bolt-on software to the existing ERP system to specifically tackle demand planning, the company's primary problem. The bolt-on modules included: a complete demand planning system which would form purchasing requirements utilizing historical as well as forecasted activity, a warehouse transfer add-on that would scout out excess inventory within all DCs before reordering, a special deal management tool to analyze supplier offers and an inventory simulation module that would evaluate service levels that would result from various inventory levels. Each of these tools was estimated to cost $300,000 for Moore to purchase and implement. At this price-range it is suggested that the company purchase the much needed demand planning system and not the others. This software promises to take advantage of all available information to more accurately predict demand as well as automate purchase order formation and execution. Once in place this system was expected to increase customer service levels and decrease excess inventory expense. Top selling items would always be in stock and this new capability would decrease paperwork and increase overall productivity. As stated previously all non-imperative investments should be put to the side for now in order to allow time for the company to become profitable. The demand planning tool would give the company a boost to profitability, and customer satisfaction levels at a very reasonable price. The only detail left to consider is the contracting with J.D. Edwards on this implementation. An accurate estimation of projected consulting costs should be included in the contract to avoid unforeseen expenses added onto the final bill like the previous implementation.

b) Can the likely financial benefits of any of the proposed new ifo technoloogies be assessed? If so, which ones? What are the benefits? :

The likely financial benefits of both the CRM and the bolt-on software for ERP can be partially assessed. The CRM system has a cost to Moore Medical of approximately $600,000. The pay-offs are somewhat harder to measure. The company's churn rate, or number of customers that quit placing orders with Moore over a year-long period, was 30% and close to 35% in some segments. This percentage is somewhat high compared to the industry average of 25%. This number was thought to be high due to customers that only used Moore when they were the cheapest, these customers showed little to no loyalty to the company. If anywhere from 50% to 80% of these lost customers could be captured year after year, especially if the customers were those from historically profitable sectors, net profits for the company would increase. To retain these customers the CRM system