Given the enthusiasm from early adopters, it is hardly surprising that a wide range of software suppliers is adopting the SRM acronym. There are several dozen vendors that are offering suites of SRM functionality and coming from different worlds, based on their origins. A great part of these logically hail from the SCM space such as i2 Technologies, Logility, and Manugistics, which regard SRM as a natural extension to their core supply chain planning (SCP) and procurement applications. These vendors have recently added functionality to support some sourcing business processes between manufacturer and supplier. As for most ERP vendors, which first extended their offerings to include supply chain activities, they have also added functionality and staked their claims in the SRM market. These vendors have the advantage of being able to tap into functionality from their other core applications like ERP, CRM, PLM, and SCM to support supplier-oriented processes, given they also have access to data in those systems to support such processes.
To add SRM modules to their own software suites, most enterprise applications suite vendors have launched portal initiatives that should tempt partners to share information about customers' demands in return for deeper product knowledge, training, and for more efficient ways of involving suppliers.
Then, as seen many times before in the enterprise software market, many specialist SRM start-up vendors have already jumped at the opportunity and have come up with by and large partial answers to the above market needs. A number of the still existing pioneering vendors that first offered specific SRM offerings a few years ago would include strategic e-sourcing/spend management providers like Diligent, Procuri, Emptoris, Frictionless Commerce, diCarta, Zeborg (recently acquired by Emptoris), Silvon Software, Healy Hudson, MindFlow, Perfect Commerce, B2eMarkets, Digital Union, Portum, Moai Technologies, eBreviate, etc., and vendors like SupplyWorks, Apexon, WeSupply, Eventra, RiverOne, Entomo etc., which focus more on the supply chain visibility, the tactical needs of manufacturing entities, the flow of information between the internal systems and trading partners as to keep the plants running, while supporting some strategic SRM activities.
PLM vendors like Agile Software and MatrixOne, which have recently added sourcing capabilities to their offerings, have also joined the SRM fray. Both indirect and service-oriented e-procurement vendors (A.T. Kearney Procurement Solutions, SupplyWorks, Elance, FreeMarkets, Ariba, Commerce One, CombineNet, VerticalNet, etc.) cannot be omitted either. Neither can the analytic/data mining providers like SAS Institute, Informatica, Salvos, and so on. If one is to nitpick, supplier portal providers like ClearOrbit and Izodia or on-line providers of the supplier invoice and payment services like Burnes E-Commerce, also touch on SRM.
Despite their different backgrounds, all the above vendors prove the point that the processes that make up SRM depend on a hybrid of technologies and require a significant implementation, data cleansing migration, and integration effort at most organizations. Still, two underlying results that an effective SRM project should achieve would be 1) the automation of the processes by which a company buys supplies, which can range in sophistication from automated generation of requests for proposals (RFPs) to more holistic order management systems, and 2) to provide the analysis that enables buyers to assess historical supplier data and base subsequent purchasing decisions on the results.
As a recap, SRM allows companies to integrate with their most important suppliers to streamline order management, replenishment, fulfillment, inventory management, and engineering change management (ECM). The key words pervading so far have been sourcing, spend management, and contract management. Namely, the core procurement process has become fairly mature and most enterprise application packages provide solid support for the purchasing process.
To provide a more distinct value proposition, vendors are providing value-added functionality that helps with tasks outside the procurement cycle. The most significant one is strategic sourcing, which through rating and ranking criteria, a purchasing officer chooses the optimal set of suppliers to negotiate a contract with. It enables enterprises to evaluate potential mixes of materials and services and determine appropriate suppliers and terms and conditions to balance cost, quality, and risk. The applications can capture supplier information and serve as a medium for collaboration between buyer and supplier on the requirements of the purchasing organization.
Generally, the term strategic sourcing denotes many steps that precede the signing of a contract, including spend analysis, identifying potential suppliers, RFQ and contract negotiation, and monitoring and improving suppliers (which logically may happen both and after the contract signing). As companies continue to strive to reduce the internal costs of their products and services, more pressure is on the procurement group to source from the right supplier that can deliver as needed, at the right price, but also subject to many other measures some of which can be of a non-quantitative nature, such as product availability, specifications, freight expenses, warranty, terms of contract, distribution partners, and what not. The sourcing equation can become even more complex when federal and state government regulations and corporate mandates such as sourcing from minority-owned businesses are brought into play as thresholds that cannot be circumvented.
Spend management comes in the form of software and services and allows organizations to gain control of the entire purchasing cycle, since the organizations deploying spend management across their e-purchasing operations should have a much better idea of how their money is being spent. Moreover, they must ascertain how much money is spent and where, before they can identify opportunities to improve sourcing via, e.g., negotiations with the supplier to produce a mutually beneficial contract. Knowing how much is spent on different parts, suppliers and product categories is crucial, as well as how much money has been spent against a corporate purchase contract. These enterprises are then able to instigate consistency across the business, while reducing process times and cutting costs by consistently managing spending across the enterprise, which includes visibility across diverse divisions, geographies, enterprise solutions, and all spending categories (e.g., travel, staple goods and services, projects, MRO, and direct materials). Spend management also requires rigid principles and governance to enforce compliance, which means establishing methods of monitoring spending against the budget and providing appropriate alerting and escalation processes for dealing with spending that exceeds budget levels.
Contract management is another key component of enterprise spend management, since contracts are the point around which much of a company's dealings with its suppliers pivots. Buyers and suppliers can spend an inordinate amount of time figuring out details about obligations and remuneration, incentives and contingencies. However, for companies handling dozens of contracts, ensuring that suppliers adhere to contract details is often too cumbersome to be executed. Most enterprises do not have formal systems in place to manage contracts, and thus, financial or purchasing executives often do not have visibility into contracts because they are kept in multiple different storage systems or, even, as hardly accessible hard copies.
Companies need contract management solutions that can reach across those repositories to help managers gain a comprehensive understanding of the trade agreements under which the enterprise operates. The lack of visibility and control will often cause an enterprise to fail to extract full value from the contract and the relationship with the supplier. At best, the users seem to be increasingly able to track contract expiration, which is only a minor part of total contract management requirements and potential benefits. In addition to simply standardizing contract language, payment terms and other requirements, the efficiencies are gained through analysis of all the contracts to discern trends and identify weaknesses in the process.
While many people have realized the power of e-commerce on the consumer side, there is still plenty of education to be conducted by all the SRM vendors as to prove how much leverage their applications can bring to corporate buyers.
To add SRM modules to their own software suites, most enterprise applications suite vendors have launched portal initiatives that should tempt partners to share information about customers' demands in return for deeper product knowledge, training, and for more efficient ways of involving suppliers.
Then, as seen many times before in the enterprise software market, many specialist SRM start-up vendors have already jumped at the opportunity and have come up with by and large partial answers to the above market needs. A number of the still existing pioneering vendors that first offered specific SRM offerings a few years ago would include strategic e-sourcing/spend management providers like Diligent, Procuri, Emptoris, Frictionless Commerce, diCarta, Zeborg (recently acquired by Emptoris), Silvon Software, Healy Hudson, MindFlow, Perfect Commerce, B2eMarkets, Digital Union, Portum, Moai Technologies, eBreviate, etc., and vendors like SupplyWorks, Apexon, WeSupply, Eventra, RiverOne, Entomo etc., which focus more on the supply chain visibility, the tactical needs of manufacturing entities, the flow of information between the internal systems and trading partners as to keep the plants running, while supporting some strategic SRM activities.
PLM vendors like Agile Software and MatrixOne, which have recently added sourcing capabilities to their offerings, have also joined the SRM fray. Both indirect and service-oriented e-procurement vendors (A.T. Kearney Procurement Solutions, SupplyWorks, Elance, FreeMarkets, Ariba, Commerce One, CombineNet, VerticalNet, etc.) cannot be omitted either. Neither can the analytic/data mining providers like SAS Institute, Informatica, Salvos, and so on. If one is to nitpick, supplier portal providers like ClearOrbit and Izodia or on-line providers of the supplier invoice and payment services like Burnes E-Commerce, also touch on SRM.
Despite their different backgrounds, all the above vendors prove the point that the processes that make up SRM depend on a hybrid of technologies and require a significant implementation, data cleansing migration, and integration effort at most organizations. Still, two underlying results that an effective SRM project should achieve would be 1) the automation of the processes by which a company buys supplies, which can range in sophistication from automated generation of requests for proposals (RFPs) to more holistic order management systems, and 2) to provide the analysis that enables buyers to assess historical supplier data and base subsequent purchasing decisions on the results.
As a recap, SRM allows companies to integrate with their most important suppliers to streamline order management, replenishment, fulfillment, inventory management, and engineering change management (ECM). The key words pervading so far have been sourcing, spend management, and contract management. Namely, the core procurement process has become fairly mature and most enterprise application packages provide solid support for the purchasing process.
To provide a more distinct value proposition, vendors are providing value-added functionality that helps with tasks outside the procurement cycle. The most significant one is strategic sourcing, which through rating and ranking criteria, a purchasing officer chooses the optimal set of suppliers to negotiate a contract with. It enables enterprises to evaluate potential mixes of materials and services and determine appropriate suppliers and terms and conditions to balance cost, quality, and risk. The applications can capture supplier information and serve as a medium for collaboration between buyer and supplier on the requirements of the purchasing organization.
Generally, the term strategic sourcing denotes many steps that precede the signing of a contract, including spend analysis, identifying potential suppliers, RFQ and contract negotiation, and monitoring and improving suppliers (which logically may happen both and after the contract signing). As companies continue to strive to reduce the internal costs of their products and services, more pressure is on the procurement group to source from the right supplier that can deliver as needed, at the right price, but also subject to many other measures some of which can be of a non-quantitative nature, such as product availability, specifications, freight expenses, warranty, terms of contract, distribution partners, and what not. The sourcing equation can become even more complex when federal and state government regulations and corporate mandates such as sourcing from minority-owned businesses are brought into play as thresholds that cannot be circumvented.
Spend management comes in the form of software and services and allows organizations to gain control of the entire purchasing cycle, since the organizations deploying spend management across their e-purchasing operations should have a much better idea of how their money is being spent. Moreover, they must ascertain how much money is spent and where, before they can identify opportunities to improve sourcing via, e.g., negotiations with the supplier to produce a mutually beneficial contract. Knowing how much is spent on different parts, suppliers and product categories is crucial, as well as how much money has been spent against a corporate purchase contract. These enterprises are then able to instigate consistency across the business, while reducing process times and cutting costs by consistently managing spending across the enterprise, which includes visibility across diverse divisions, geographies, enterprise solutions, and all spending categories (e.g., travel, staple goods and services, projects, MRO, and direct materials). Spend management also requires rigid principles and governance to enforce compliance, which means establishing methods of monitoring spending against the budget and providing appropriate alerting and escalation processes for dealing with spending that exceeds budget levels.
Contract management is another key component of enterprise spend management, since contracts are the point around which much of a company's dealings with its suppliers pivots. Buyers and suppliers can spend an inordinate amount of time figuring out details about obligations and remuneration, incentives and contingencies. However, for companies handling dozens of contracts, ensuring that suppliers adhere to contract details is often too cumbersome to be executed. Most enterprises do not have formal systems in place to manage contracts, and thus, financial or purchasing executives often do not have visibility into contracts because they are kept in multiple different storage systems or, even, as hardly accessible hard copies.
Companies need contract management solutions that can reach across those repositories to help managers gain a comprehensive understanding of the trade agreements under which the enterprise operates. The lack of visibility and control will often cause an enterprise to fail to extract full value from the contract and the relationship with the supplier. At best, the users seem to be increasingly able to track contract expiration, which is only a minor part of total contract management requirements and potential benefits. In addition to simply standardizing contract language, payment terms and other requirements, the efficiencies are gained through analysis of all the contracts to discern trends and identify weaknesses in the process.
While many people have realized the power of e-commerce on the consumer side, there is still plenty of education to be conducted by all the SRM vendors as to prove how much leverage their applications can bring to corporate buyers.
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