SRM and technology

SUPPLIER RELATIONSHIP MANAGEMENT & TECHNOLOGY By Arianne Minguito (Senior Purchasing Consultant of Fullstep Networks) The development of technology during the past ten years has brought forward great possibilities of improving efficiency in processes. Leading companies have implemented Internet and business software in order to have at their disposal a range of value-added functionalities. But in most cases results haven’t met expectations. However, the experience of these companies and technology suppliers is a starting point and good base for new developments focused on providing more productivity and requiring less investment. Even though technology has helped to improve the purchasing function, most companies still have the same problems they had ten years ago. This is mainly due to the lack of knowledge on available procurement solutions. Technology by itself doesn’t guarantee success. The best tandem for suitable SRM applications is purchasing expertise and appropriate technology supporting it. Once technology can sustain purchasing processes the main issue is if technology can support the SRM policies your company wants to follow. Can technology be pleaded guilty for not supporting correctly SRM policies? The creation of SRM solutions must lean on three solid pillars: people, cost and Cost technology. A correct interaction among agents involved Agents has to be supported with an adding-value technology at a reasonable cost. Being the main focus the relationship between buyers and suppliers. R-TCO Reduction of total ownership costs I-PRO Increase of productivity Agents: buyers & suppliers Buyers need suppliers and suppliers need buyers. All companies that aim to achieve a satisfactory SRM system should bear it in mind. The secret of success is understanding that SRM has to support the relation between buyers and suppliers, and their interaction must be mutually profitable. On top of this, a SUPPLIER RELATIONSHIP MANAGEMENT & TECHNOLOGY company must have different SRM strategies depending on the materials it is sourcing. Strategic materials must be treated differently to non critical materials. A good example of a common misconception of this issue is the excessive expectations that have been set upon auctioning software. Auctions are only useful in some very concrete material groups and supplier markets. In most cases, sourcing decisions should follow a strategy and not be left to the result of an auctioning process. In many cases, buyers must build lasting partnerships with suppliers by enhancing the value of contacts, relationships, and information shared among the supply chain. This requires that management needs a wide range of options for handling SRM. In other cases, long partner relationship does not make sense. Would you fully integrate with your office material supplier? In this situation, a just-price-relation where there’s a huge distance between buyers and suppliers and they hardly need to interact might be the best option. SRM has to concentrate knowledge and experience in procurement processes in order to optimise relationships. Developers of SRM technology must fully understand the diversity and complexity of these relationships in order to cover all the needs. The best candidate for leading your SRM system is the one who keeps “up to date” with market needs, with full comprehension of buyers’ requirements and what suppliers have to transmit, being aware that that they must adapt to several SRM policies within the same organization. Nowadays solutions tend to understand SRM as a static relation between buyer and supplier, not understanding that you can’t apply the same guidelines to all suppliers. A correct SRM must be flexible and versatile. Technology Buyer Communication Supplier Technology Technology Registration Supplier selection Answer to RFQs Acceptance/rejectal of orders Quality certificates Response to non conformities Scoring Technology Once the different buyer-supplier relationships handled in your organization are defined, the next step is thinking about how technology can make everybody’s life easier, bearing in mind technology is at the agents’ service. SUPPLIER RELATIONSHIP MANAGEMENT & TECHNOLOGY Technology The cornerstone of good technology is the combination of eliminating administrative workload and adding value to all actors related in all stages of procurement processes. RFQ Basic Material Supplier Supply Negotiation Monitoring Scoring Data allocation selection conditions Awarding Potential Technology supplie r cosmos Moreover it’s essential buyers have accesss to versatile tools capable of supporting their SRM estrategy. SRM has to customize solutions to companies’ SRM policies, needs and strategy for each material group. Regardless of whether looking for a partnership, a just-price-relation, or a mixed model technology applied to SRM requieres: Information repository concentrate and store knowledge so that it is available whenever needed, and knowledge can be shared in the company instead of being withheld by individuals. Control and monitoring purchasing managers can have a thorough control of purchasing processes and actions of the Purchasing Departament as well as other areas involved. Accessibility depending on your company’s needs, specific configuration so that different profiles may access only their relevant information ensuring users do only what they are supposed to do. Integration easily integrate with other systems in order to optimise company’s activity and effort. Transparency and traceability tools designed to provide users with transparency and traceability. Flexibility and versatility tools where users can adapt business processes with out the need of reprograming their software. Cost Extended use of computers in business’ started when hardware and software technology became accesible at an attainable cost. Then companies started deploying ERPs to support as many areas as possible, spending in many cases huge amounts of money. Later on, companies realized that ERPs manage most business processes but lacked specific functions for optimising these, adding scarce value and forcing users to adapt to it. This reduces the companies possibilities in searching for competitive advantages based on more productive business processes. SUPPLIER RELATIONSHIP MANAGEMENT & TECHNOLOGY Companies have made such powerful investments in ERPs that usually feel reticent to deploy other versatile solutions. FULLSTEP is aware of this; we understand companies are concercened about their results but, managers must as themselves: is dragging along not suitable applications the correct policy for achieving their targets? It’s obvious that this depends on investments and benefits derived from a new solution. There’s a new trend of companies with an interest in suitable and profitable solutions for precise needs bearing in mind that ERPs are usefull but must be complemented with other systems focused on specific business areas. FULLSTEP’s SRM technologies guarantee a short-term return on investment, based on a reduction of FTE’s (Full Time Equivalent) and a considerable increase in savings derived from purchasing processes. - Reduction of FTE’s FULLSTEP´s platforms look towards systems and processes optimization, that translate automatically into a reduction of administrative and repetive tasks, automating non value-added tasks (supplier seletion and communication, handling RFQs, cost simulations, comparison of suppliers quality rating, etc.) - Increase of savings our tools have been designed to help buyers obtain better economic and service conditions. This automatization level allows buyers to concentrate in value-added tasks such as defining a negotiation strategy, negotiating with suppliers, designing improvement programs, etc. Moreover the reduction of FTE’s is an important saving. Although it seemed years ago that information technology could activate buyers SRM policy towards suppliers, the fact is that an inappropiate use of it has made companies modify their strategy, falling into poor results. Nowadays everybody has the technology, and what differs one from another is the use made of it. The key of a powerful SRM is a customizable application that can be adapted to actual and future needs.