What is supplier relationship management
Supplier relationships are critical to the success of an organisation as they directly impact the financial performance and profitability of a buying enterprise; the cost of product development; inventory levels; manufacturing schedules and the timeliness of delivery of goods and services
Supplier relationship management (SRM) is a comprehensive approach to managing an enterprise's interactions with the organisations that supply the goods and services it uses. The objective of SRM is to streamline and make more effective the processes between an enterprise and its suppliers.
SRM Technologies defines SRM as:
"the integration between supply chain strategy, best practice business processes and technology in order optimise the synergistic relationship between buyers; suppliers; strategic sourcing; price negotiation; contract management; procurement, logistics and business intelligence..
SRM is being adopted by enterprises as they realise the value that can be created by focusing on SRM. Research indicates that effective SRM can shorten time-to-market cycles; lower development, material, inventory, and process costs; and improve the quality, reliability, and manufacturability of new designs.
Simply put, the effective management of suppliers across the enterprise has significant bottom-line benefits for an organisation.
The impact of SRM
Since its inception, SRM has encompassed the full life-cycle of supply decisions and drives a supply-side revolution not dissimilar from the sell-side revolution caused by Customer Relationship Management (CRM) in the1990’s
Like CRM, SRM cannot be viewed as a single system or component, but should rather be seen as a collection of business processes that are either supported or automated by technology infrastructures. Individual SRM processes are inevitably supported by a number of different technology applications, some of which already exist within the organisation, and some of which don't.
SRM value realisation represents an end-to-end perspective, and results from capturing the value generated across the entire enterprise. For example, a well-negotiated and leveraged contract promises large savings, but poor integration, compliance and performance management can cause these savings to leak away. Applying SRM principles to the negotiation of a contract will ensure that a holistic approach takes into account all the variables that, at the end of the day, affect value creation.
Case studies show that early adopters of SRM were forced to follow a modular approach driven largely by the fragmentation in SRM solutions available. It is therefore essential, even by following a modular approach, that a holistic strategy and solution is adopted.
Typical components of SRM include:
• Strategic e-sourcing: utilising web-based technologies to support the identification, evaluation, negotiation, and configuration of optimal groupings of trading partners into a supply chain network.
• Spending and supplier analytics: understanding the current spend of each business unit, plant and commodity; and profiling suppliers.
• Supply market discovery and supplier intelligence : identifying the players in the supply market and their corresponding capabilities
• Contract tendering and negotiation: implementing electronic request for information (RFI/RFP/RFQ) processes and negotiating supply terms and contracts.
• Operational sourcing and reverse auctions: ad hoc or spot purchasing and commodity auctions.
• Optimisation and decision support: supply allocation, constraint optimisation, scenario planning.
Design and engineering collaboration and contract management also forms part of the SRM landscape, although they are often considered as areas in their own right.
• E-procurement: automating and managing procurement processes for all commodity types, including
plan-driven orders; self-service ( or ad hoc) orders; stock requisitioning and ;replenishment; shipping / receipt; advanced ship notice processes; invoice management and payment. |
