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SRM Services

Procurement 301 Supplier Management 301 SRM Services

The Internet provides purchasers with new avenues to transform services traditionally used to execute procurement processes. In the past, purchasers were required to perform laborious and time-consuming searches for sources of new products and services. In contrast, B2B marketplaces provide a level of service features impossible to attain in the past. These features include online catalog of products, sales promotions and special pricing, payment processing facilities, and post-sales support. Web-based technologies have made it possible for purchasing functions to significantly streamline this process by utilizing the following B2B marketplace service functions:

Supplier Search

B2B marketplaces offer communities of buyers and sellers a way to enable a two-way interactive mode of communication and collaboration. Buyers can leverage Web-based applications to deepen their existing relationship with preferred suppliers while expanding their search for new ones on a global scale. In addition, buyers can explore new dynamic purchasing models, such as Internet-based buying exchanges and auctions for sourcing and spot buying.

Product Search

SRM provides for the creation, aggregation, and Internet access to a wide-range of online product and service catalogs that can significantly enhance product search. B2B marketplaces host electronic product searches for all types of goods and services, including maintenance, repair and operating inventories (MRO) and indirect materials, production, administrative, and capital goods. Effective Web-based applications should enable e-marketplaces to centralize product and service content offerings, permit suppliers to host content on their own sites, and enable buyers to develop customized catalogs.

Strategic Sourcing

e-Sourcing involves leveraging Internet applications to find and build long-term, collaborative relationships with key trading partners. Technology tools for e-sourcing include spend analysis applications; automation of request for quote (RFQ), request for proposal (RFP), e-auction and reverse auction, contract management processes; and supplier monitoring and improvement.

Value-added Services

SRM leverages the Internet to pursue a variety of other critical value-added business services, including

  • financial services such as the use of payment cards, or P-cards, credit approval, corporate check payment, clearinghouse functions, and direct electronic billing
  • comparison shopping functions
  • collaborative design and configuration management functions for complex, make-to-order production
  • advertising, promotions, and dynamic pricing models based on market demand
  • transportation and logistics support to facilitate product fulfillment
  • synchronized supply chain procurement planning
  • establishment of marketplace performance benchmarks and key indicators

SRM Processing

SRM Processing

Originally, the central focus of supplier relationship management (SRM) Web-based applications was service and indirect inventories procurement. The reason was these goods and services are extremely well-suited to business-to-business (B2B) e-markets. They are normally highly standardized commodities, purchased in large volumes, evaluated primarily on price, require minimal negotiation, and acquired frequently through spot purchases.

In contrast, purchasing of production inventories is much more difficult. These items are subject to highly detailed designs, low volumes and variable prices purchased from specialized vertical industry suppliers. Because of the specialized nature of the products and services, procurement is often preceded by a complex negotiation process involving an RFQ, competitive bidding, long-term contracts, and continued involvement in relationship-specific investments. e-SRM in this area is more about leveraging collaborative partnerships with trusted suppliers than using a free market bid/ask exchange. These are the components constituting this area:

  • Product catalog. Internet-based catalogs provide for the exchange of goods and services via electronic markets where buyers have access to virtual storefronts to search for any product and service mix at the lowest cost.
  • Requisitioning. SRM applications seek to facilitate the requisitioning process by integrating product and service catalogs of exchange marketplaces, industry consortia, or third-party aggregators located across the Internet into a single “virtual” catalog available through on-line interfaces. SRM applications provide for online document interchange, supplier chat-rooms, open requisition status, and access to the latest budgeting and inventory information for transfer to the firm’s enterprise resources planning (ERP).
  • RFQ. The Internet significantly automates the request for quotation (RFQ) process. The RFQ can be created electronically, and then posted in a public, on-line bulletin board for open bidding, or transmitted to preferred suppliers by e-mail, fax, or private exchange.
  • Shopping tools. Shopping agents augment the work of buyers by performing searches of possible business-to-business (B2B) marketplace sites to identify and match targeted products, pricing, quality, delivery, or other desired procurement attributes as well as to execute transactions.
  • Auctions. Electronic auctions are used primarily to buy and sell products whose values are difficult to determine, that are commodity-type items, or that are custom-designed. Auctions enable companies to expand beyond the domain of niche markets to reach potential bidders across geographic barriers and traditional industry lines. Almost any product can be offered on an auction site.
  • Order generation and tracking. Purchase orders can be created using ERP functionality and are then transmitted to the supplier through a paper order or electronically via fax, EDI, or the Internet. The progress of the PO can then be tracked and used to provide critical status information needed by manufacturing or distribution planners.
  • Logistics. The Internet enables logistics to offer enhanced services such as order tracking, carrier selection, shipment management, and freight bill management, as well as advanced functions, such as network planning, reverse logistics, locating suppliers with e-fulfillment capabilities, dynamic strategies for cross-docking, in-transit merge hubs, postponed assembly, and commingling of loads to optimize shipments.

Portals and Auctions

Portals

Portals can be used for many business needs not just SRM.

Both consumer portals and business portals may be accessed through a browser and they help people interact either with automated systems or other persons. Security and access is predetermined by the role of the position using the portal.

Auctions

Auctions are a service that determines the value of a good or service on the open market through winning bids. A winning bid constitutes a contract. Auctions are best for commodities and should be avoided when delivery time, reliability, or quality are priorities. They are solely differentiated by price. 


There are several different types of auctions:

  • Classic or forward. One seller and multiple buyers who bid up the price until it is sold.
  • Reverse auctions. Internet auctions in which suppliers attempt to underbid their competitors. Company identities are known only by the buyer.
  • Dutch auctions. one seller and multiple buyers for multiple but finite quantities of the same item for sale. Price starts high and goes lower.
  • Demand management auctions. Clearinghouses to liquidate excess supply. Must be indifferent as to the other party.
  • Stock-market style auctions. Dynamic pricing based on multiple buy and sell bids and offers on commodities.
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