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Supplier Relationship Management (SRM)

Procurement 201 Supplier Management 201 Supplier Relationship Management (SRM)

SRM Defined

Supplier relationship management (SRM) is a comprehensive approach to managing an enterprise’s interactions with the organizations that supply the goods and services the enterprise uses. The goal of SRM is to streamline and make more effective the processes between an enterprise and its suppliers. SRM is often associated with automating procure-to-pay business processes, evaluating supplier performance, and exchange information with suppliers. An e-procurement system is often an example of an SRM family of applications.

Benefits of SRM Software

  •  Sourcing process improvements: 
                      ◦ Simplified, repeatable sourcing reduces cycle time and cost
                      ◦  Easy comparisons: electronic ERP forms can automate comparisons. The software brings the data together for simplified presentation, analysis, and selection. Price can include total cost of ownership.
  • Standardize purchasing: Decentralized buyers can act as if they were centralized when standards are used.
  • Communication improvements
                   ◦ Faster, sometimes fully automated
                   ◦ For example, supplier can check buyer's inventory

Components of SRM System

SRM systems have multiple components that can be transactional or analytic.

  • Internal interfaces. ERP systems are the most common interface. They provide information on procurement history (including dynamic data on open PO status and active supplier files), open order file, operations synchronization, accounting, purchasing planning, supplier performance measurement, and supplier database (supplier histories).
  • External supplier interfaces. Internet or electronic data interchange (EDI) links or ERP links allow for direct transactions (requisitioning, PO generation and tracking, logistics, receiving, payment, and credit). Portals can be used for messages or collaborative design.
  • SRM analytics. Solve issues related to materials, information, and finances using decision support systems (DSS) (e.g., optimizing suppliers or material quality), strategic sourcing and RFQ analysis, spend analysis, value analysis, and performance analysis. For example, it could recommend using a substitute good rather than expediting.
  • SRM services. This initiates strategic sourcing searches or other supplier searches that go beyond arm’s length transactions.
  • SRM procurement. Goal is to streamline the procurement process by providing interfaces to online trade exchanges or auctions, as well as transactional purchasing—such as shopping tools, special pricing, payment processing, order status and tracking, and after-sale support. B2B tools include product search, supplier search, and custom searches by content or parameter.
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