The Return of Supplier Relationship Management

As the year 2000 approached, the catchphrase "lean manufacturing" was loosely thrown around in manufacturing industries. The media and software vendors led organizations to believe that a supplier relationship management (SRM) system could achieve the promise of lean. Yet the benefits promised by SRM systems were not kept. As organizations matured, they realized how the benefits were interrelated. Information sharing, sourcing, purchasing, and supplier relationships could translate into increased customer satisfaction and control of global spend. How to efficiently predict consumer demand was beginning to come into focus. As organizations realized the need for these separate functionalities, they started to look toward a solution that would combine these tasks. Enter SRM.

As time marched on, organizations were less than impressed by the unacceptable results of how these solutions were implemented. Vendors and resellers did not educate organizations on the full user capacity or on how everything ties together. Lack of knowledge transfer from vendor to organization gave the perception that the system did not meet the organizations' needs. Organizations lacked an understanding of how to translate the benefits of an SRM system into tangible results and of how all the system's features could help businesses save money, increase operational efficiency, and control global spend. Stories of failed implementations and misconceptions of what the software system promised rapidly brought the development of this "next generation" business tool to a near complete halt.

Several years later, SRM systems are now reemerging as the next big promise. Several of the benefits that an SRM system can deliver, such as management of globalization, adoption of mandated standards, inventory visibility, methods of managing stabilizations of technologies, and dealing with supplier auditing issues will be examined.

Reasons for the Resurfacing of SRM

Globalization

As organizations expand and become global operating entities, SRM is viewed as a method to help manage the process. The manufacturing of products is now largely outsourced to the East, as North America has become a service-based economy. This change in business structure has caused organizations to reexamine their current systems to determine if they can satisfy the new economic conditions created by this shift in the economy.

Organizations must deal with foreign suppliers, but how? Information must flow freely between domestic and international channels and from one system to another. Global enterprise resource planning (ERP)distribution products, such as those from SAP and Oracle, often provide such tools as supplier portals. A supplier portal is a tool for compiling information (a significant feature within the SRM software) to build contacts, audit functions of each supplier or partner, verify quality of products, and monitor supplier and partner performance. Users can think of this as customer relationship management (CRM) for suppliers. This is done by way of supplier scorecards, establishment of sourcing relationships, the creation of supplier information, establishment and maintenance of procurement channels, etc. If a North American organization has overseas trading partners, these partners may use the SRM system as an effective means to link up with western operations and schedule shipments, manage trading partners, control sourcing strategies at the point of origin, manage supply overseas, and aid in the organizational planning of inventory to satisfy customer shipments.

Forced Adoption

Large organizations, such as Wal-Mart, Target, Albertson's Metro, etc. are mandating standards that their suppliers must conform to—that is, do business their way as a condition of partner interaction. Suppliers are forced to comply with standards that were created specifically to reduce costs, manage the supply chain from end to end, and ultimately lead to lower prices and increased customer satisfaction. Small suppliers that cannot conform to these guidelines are forced to exit from a business relationship with the originating company.

A system such as Wal-Mart's Retail Link was designed as a tool specifically to manage inventory, suppliers, and procurement and to enable full partner disclosure to adapt to changing customer demands. The thought behind the system was that if partners could share order information, they could more accurately prevent "stock outs," adjust order quantities, predict and accommodate forecasted quantities, and essentially reduce the size of the supply chain, leading to more selection and lower prices for the consumer.

Retail Link performs the following:

* analyzes and controls global spend by category, volume, and product
* manages service level agreements (SLAs)
* avoids duplication of contracts or materials to the same supplier
* consolidates purchasing volumes and improves supplier selection
* involves partners in the early phases of product development

Inventory Visibility

Organizations maintain that inventory visibility makes them more competitive. "How much," "where it's at," "what's its status," "who currently has it," and "when can it be delivered" are questions all organizations ask about their inventory. Knowing and understanding these variables allow an organization to make better decisions pertaining to demand planning, replenishment stocking, and, most importantly, availability of inventory to fulfill customer orders. SRM systems are great tools to accomplish these business objectives. Even vendor managed inventory (VMI) is usually handled by some form of SRM system, normally through the supplier portal.

With the capabilities to view "in transit" inventory over multiple modes, an organization can control and manage potentially critical supply problems. The SRM system provides a unified view of inventory from one source that supports the business. Issues such as custom delays, extended lead times, scheduling conflicts, and transportation problems, to name just a few obstacles, can be adjusted and addressed within the SRM software. This advance notice of possible disruption to the supply of goods can provide alerts to all partners affected so that they may react accordingly and adjust to the disruption. The ability to view "in transit" products allows for accurate forecasting and replenishment. The collaboration of all the affected business partners allows organizations to respond to rapid market changes, and to deliver goods to consumers on time and at decent prices.


SOURCE:-
http://www.technologyevaluation.com/research/articles/the-return-of-supplier-relationship-management-19044/