Supply chains are the lifeblood of any business as the value they deliver extends across the spectrum of data, product, services, and information needed to run any operation profitably. Supplier Relationship Management (SRM) software is specifically designed to streamline and optimize the many relationships that manufacturers rely on to build, sell and service their products. By creating a series of applications that form the foundation of a SRM-based system of record, enterprise software companies are setting the foundation for manufacturers and the suppliers they rely on to improve their operations. In turn, this increases quality, gaining speed, scale and accuracy in the process.
Each company or organization has its series of unique SRM processes and workflows that are highly unique, unlike any other business. As a result, SRM systems often have a wide variation in how they are implemented, yet each of them share strategic roles. Maintaining strategy, managing transitions, implementing projects, monitoring performance, managing contracts and operating solutions are the six main SRM roles that are included in varying levels of each completed implementation.
SRM Stats of Note
- Only 39% of Chief Procurement Officers (CPOs) actively drive innovation initiatives with their suppliers, according to Deloitte’s Supplier Relationship Management (SRM) Study: Redefining the Value of Strategic Supplier Collaboration.
- In 2016, the SCM market, which SRM is a core part of, generated $11.2B of global software revenue. In 2017, this is expected to reach $13B with cloud and Software-as-a-Service (SaaS) responsible for providing new growth opportunities, according to Statistica.
- Applying analytics to improve supplier performance, enabling more effective supplier collaboration and setting challenging goals for supplier quality are three of the primary factors that motivate supply chain executives to implement Supplier Relationship Management, according to PriceWaterhouseCoopers’ study Supplier Relationship Management: How Key Suppliers Drive Your Company’s Competitive Advantage.
- Manufacturers can attain an additional cost savings of approximately $100–200M annually by collaborating with suppliers on cost savings innovations, according to Conference Executive Board.
Supplier Relationship Management Success Factors
There are many approaches that companies are using to accomplish their SRM goals. Managing suppliers using an evaluation system that takes into account product quality, managing contracts and accelerating their renewals is one method. Managing payment terms and relying extensively on procurement and Electronic Data Interchange (EDI) is another. No matter the approach, the outcomes of investments in enterprise-wide procurement and SRM strategies are significant. Based on a survey of C-level executives in Deloitte’s SRM study, the following benefits were mentioned the most:
- Consolidate the supplier base and gain economies of scale, leading to lower direct costs. This is the most common motivation many companies have for implementing an SRM system and series of workflows. Often manufacturers will rely on the inbound inspection, product quality, order accuracy and other key metrics and key performance indicators (KPIs) to determine which suppliers they will promote to the primary source for components, parts, and materials needed to deliver products. Consolidation of the supplier base also increases the speed and responsiveness of an entire supply chain. This alleviates any potential delays in logistics, inbound inspection, receiving and quality control.
- Centralizing all purchasing activities into a single system that scales globally. Nearly every Fortune 500 company has gone through several iterations of centralizing purchasing, with Microsoft being one of the most well-known. Their Microsoft Market platform handles over 60,000 products and services the software company purchases every year. Microsoft Market also has an entire series of SRM features embedded within it to streamline the purchasing of the thousands of laptops, servers and suppliers Microsoft purchases every year. In addition, Microsoft Market is designed on the company’s SQL Server platform, allowing for quick updates to product records. Indirect and direct procurement is managed through Microsoft Market, making it one of the most pervasive strategic sourcing systems in the technology industry.
- SRM systems and the platforms they are based on enable the defining and re-engineering of indirect and direct purchasing processes. Without a SRM system in place, redefining and re-engineering purchasing processes, workflows and the systems that support them would be time-consuming and prone to error. Making it possible to streamline purchasing processes without intensive manual effort saves thousands of hours a year, along with millions of dollars in savings. Cloud-based SRM systems are enabling this level of process redefinition in days, as compared to the months that it took previously. Standardizing purchasing processes using an electronically-enabled SRM platform can help speed up strategic sourcing as well. Microsoft stays on top of its supply chain challenges by automating many of these tasks, using business intelligence from Microsoft Power BI and other analytics tools to track performance.
- Gaining new insights into supplier performance with predictive analytics that includes entirely new metrics and key performance indicators (KPIs) are becoming increasingly commonplace. Nearly all SRM systems today have a baseline level of analytics that is being used to measure internal process efficiencies, costs, and contributions of indirect and direct purchasing. Managing strategic sourcing strategies to a common scorecard is also becoming increasingly commonplace. The goal of integrating analytics into SRM systems and the platforms that support them is to improve purchasing accuracy, quality and fulfillment speed. Taken together, these factors are fueling the adoption of Business Intelligence (BI), predictive analytics, real-time data integration and more effective revenue forecasting.
- The opportunity to streamline supplier enablement and make catalog management more efficient. The first steps to enabling suppliers are easy for many manufacturers to accomplish. The process involves signing contracts, creating marketing partnership and alliances agreements, co-writing press releases and more; pretty standard for most manufacturers. The challenges start when suppliers must be integrated into the broader workflows and systems of the manufacturer if they are to succeed. Supplier enablement encompasses the initial onboarding of supplier systems via EDI, as well as supporting their Application Programmer Interfaces (APIs) and advanced Web Services. The more diverse a given supplier’s catalog is from a product perspective, and how complex their pricing is, often determines how expensive they are to enable. Third-party service providers that specialize in streamlining the supplier enablement process and catalog management tasks are gaining in popularity, as many companies don’t have the staff to get this work done.
- The opportunity to attain real-time integration across the supplier base and make global supply chains more accurate, cost-effective and efficient. The current and future generation of SRM systems are designing in APIs, Web Services, and intuitive user interfaces to enable real-time integration across entire supply chains, manufacturing, distribution and support centers. Attaining real-time integration across a base of suppliers needs to move beyond the traditional transaction data found in Enterprise Resource Planning (ERP) systems, however. For SRM systems to deliver value beyond transactions, there needs to be integration with contract data, customer analytics and supplier quality data tracking and analytics. The most advanced SRM systems are now also building forecasting and planning data management applications and tools to track individual supplier performance against forecast. In complex manufacturing, enabling integration for Engineer-to-Order (ETO), Configure-to-order (CTO), and Build-to-Order (BTO) workflows is a must-have. This integration ensures accurate supplier data is available to support each of these complex production workflows and highly specialized products they deliver.
- SRM data has the potential to revolutionize supply chain management through the use of predictive analytics and machine learning. Aggregating and analyzing the massive amount of data that supply chains generate every year holds insights that could revolutionize the performance of supply chains globally. By having SRM data become the system of record for an entire supply chain, it will be possible to create planning scenarios for alleviating out-of-stock conditions, improving product quality and staying in compliance more effectively than ever before. Infor, Oracle, SAP and other companies providing enterprise-wide ERP systems are strengthening their SRM suites and back-end systems to support an enterprise-wide system of record. Adding in the ability to mine the data with predictive analytics and machine learning, which excels at finding patterns in data, and the implications for supply chain management and planning become clear. Supply chain scenarios and plans that would have taken weeks or months to see the impact on operations can be simulated with SRM data and seen in minutes.
Common Supplier Relationship Management Software Features
Improving product and service quality, delivery times, and supplier enablement performance are the top three priorities supply chain and senior procurement executives are pursuing today. Additional priorities include getting more value out of technology investments, generating greater revenue from services, and streamlining supplier enablement processes. The SRM software community is basing their product roadmaps and direction on these six needs. The result is a series of product features designed to scale across supplier networks globally, enhancing and strengthening relationships as a result. Today’s most common Supplier Relationship Management application software features include the following:
Bid Management – Integrating bid management into an SRM suite is now becoming more commonplace, as manufacturers are looking to save time by creating, distributing and tracking Requests For Proposal (RFP) and Requests for Quotation (RFQ) from within supplier records. Tracking RFPs and RFQs by the supplier is useful within an SRM system, as it provides a single source of data across the entire supply chain.
Contract Management – One of the most valuable features of an SRM suite or application, contract management is critical to the success of any supplier enablement strategy. The goal of including contract management in SRM workflows is to streamline the contract creation, tracking, and monitoring process. It’s also critically important to know, down to the clause level, what liabilities a manufacturer is liable for as a result of their contracts. The time payoff of having contract management systems within an SRM suite is significant as well, as contracts are often included in a separate, usually isolated system. As SRM systems become more of a system of record for all supply chain activity, fully integrated contract management systems will become more commonplace.
Catalog Management – The most valuable aspect of catalog management is the flexibility of importing data from a wide variety of data formats, data structures, and programs that suppliers use to get transactions completed. Catalog management also supports the cleansing, normalization and quality assessment of inbound supplier data. Advanced latent semantic indexing (LSI), machine learning and predictive analytics have led to advances in the more reliable usage of supplier data in complex catalog management searches. The most advanced catalog management applications in a SRM suite also support data model definition and flexibility.
Procure-to-Pay – Tier 1 ERP vendors, including Infor, SAP, Oracle, and others, all support Procure-to-Pay. Adding greater optimization of the Procure-to-Pay process is on every SRM vendor’s roadmap, as Tier 1 ERP vendors are investing heavily in R&D to add a greater depth of functionality to their SCM and SRM suites.
Quality Management – In today’s most advanced SRM systems and suites, it’s possible to track the overall quality levels by supplier and products. This is the level of best practices many companies aspire to as a part of their SRM and SCM strategies. In addition to quality levels of shipments by the supplier, there is also the tracking and traceability of components to the certification level. This makes it possible to do audits quickly using system data, while supporting Corrective Action/Preventative Action (CAPA) process workflows.
Risk And Liability Management Tools and Apps – Managing supply chain risk requires risk assessment and aggregation workflows to be embedded within SRM systems, as well as across a manufacturing shop floor. Using SRM data to predict and evaluate supply chain risk rising out of internal process control and process performance data is one of the most popular ways companies are evaluating supply chain risk and liability. Also, there is the continual adoption of advanced analytics and machine learning to provide insights into the areas of a supply chain that are at the greatest risk. Supplier performance and demand management variability are two factors that are a primary focus of risk and liability assessments today.
Role-Based Access to Each SRM workflow – All SRM suites today provide role-based access to functional workflows and tasks. As SRM systems continually evolve onto cloud-based platforms, they also support mobile-based alerts, task lists, and workflow management applications. It’s now common for suppliers to able to log in and configure specific alerts to the role-based level while tracking their performance against plan. It’s also possible to create mobile-based dashboards that provide insights into the long-term performance of a supplier relative to their own goals.
Support For Creating and Managing Supplier And Buyer Portals – The progression of portal-based technologies continues to accelerate, with the latest generation supporting mobile-based, responsive designs that serve live streaming video of events and have the bandwidth to provide video content. There’s an entire series of role-based content and approval configuration options in the majority of portals today, including integration to track RFPs and RFQs in dashboards. Suppliers and buyers can configure common workspaces as well, including workspaces for sharing data and files for current and future projects. The taxonomy and structure of supplier and buyer portals has progressed to the point where they are now the preferred method for collaboration across supplier networks. Many have Facebook-like chat features that allow for quick communication anytime, anywhere.
Top SRM Vendors
Coupa Cloud Spend Management – Designed to support expense management and e-procurement, Coupa Cloud Spend Management provides a series of SRM reporting, auditing, and intelligent expense management auditing applications. Coupa is highly regarded for their customer service and the rapid pace of innovation in their product strategies.
Infor Supply Chain Management – Designed to support enterprise-wide SCM and SRM strategies, Infor has developed this product to provide a reliable, scalable system of record of supply chain activity. Infor also has extensive supply chain management functionality and support for advanced reporting using its extensive tools and reporting library.
Oracle SCM Cloud – The Oracle SCM Cloud has specifically been designed to scale across large-scale multinational supply chains, enabling manufacturers to attain their SCM and SRM strategies quickly using a unified system. Oracle is the leader in creating an enterprise-wide system of record using SRM data, and their analytics applications, server products, and platform are revolutionizing supply chain intelligence.
SAP Supplier Relationship Management – SAP’s legacy of extensive expertise in transaction systems is evident in their SRM module. The company has successfully integrated their support for supplier relationship management tracking and analytics with its expertise in real-time integration and depth of expertise in supplier networks. This module is actively being used to alleviate supply chain risk due to rapid changes in demand and supply volatility. It also manages support for specific forecasts. SAP has integrated this module into inventory, shipping and order fulfillment, making it one of the most robust SRM systems available today.