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6 Immediate Business Improvements Offered by an Online SRM System: Part 2: Online SRM

Written By: Sunil Pande
Published On: October 23 2002

6 Immediate Business Improvements Provided by an Online SRM System

Referencing the activities from the inverted triangle' in Part One (Duane link to Part One), the following is an explanation of how online SRM helps to reduce the time spent on transactional details and put more emphasis on strategic activities.

  1. Faster and more accurate document transmittal
    A result of: Transaction Automation

An inherent problem with traditional procurement processes is that they are manual. To conduct business with suppliers, buyers must print documents such as forecast reports, RFQs, notes, messages, quote responses and POs, and then transmit them using fax or post. Both time consuming and expensive, activities such as these very quickly eat away at the profitability of the procurement department.

Online SRM provides a way to automate these processes. Documents are now accessible by buyers and suppliers in electronic format, and they can be quickly and efficiently transmitted via the Internet. All documents are located outside of both users' firewalls, so there are no security concerns. And transactions that take place through the online SRM system can be easily integrated with back end enterprise systems, ensuring consistency and accuracy throughout the organization.

  1. More efficient and reliable buyer-supplier communication
    A result of: Online Collaboration

Seldom is a procurement document sent and then immediately closed. More often than not, collaboration must take place between buyers and suppliers to ensure that both parties agree on the terms and expectations relating to the document. A supplier, for instance, may need to adjust quantities, price levels or delivery dates on a purchase order. When this collaboration takes place using paper or phone-based means, important details are often lost.

Using an online SRM system, these details are easily maintained. All transactions and communications take place within the Internet-based system, and historical information is stored in a central location that is easily accessible by both buyers and suppliers. Users are able to verify details regarding each transaction by performing a simple electronic query an action that takes seconds not hours, which is often the case with a search involving an overstuffed filing cabinet.

This is Part Two of a three-part article.

Part One presented the supplier relationship activities.

Part Three discusses other points to consider when choosing an online SRM system.

Less time spent checking details

  1. Less time spent checking details
    A result of: SCEM (Supply Chain Event Management)

Because information is not available electronically, manual monitoring of exceptions can be cumbersome, requiring users to constantly create lists of transactions and related conditions and scan them on a regular basis for inconsistencies. Errors are introduced when lists are incomplete or out of date and when participants simply forget to check for overdue or out of parameter situations.

An online SRM system is able to sort through the data and provide the buyer only with information that they must review at once. Users have the option to program alerts and reminders for events that are important to them, such as overdue responses to quotes or an impending missed ship date; these alerts may show up within the system, on an e-mail application, or on a wireless device such as a mobile phone or PDA. In addition, the system provides continuous real time document status updates (read, responded, WIP, etc) and easily viewable highlights of sections that have been changed within a document.

  1. Better contract terms and supplier performance
    A result of: Reporting and Analysis Tools

The reporting and analysis-related benefits of an online SRM system are two-fold. The first is the reallocation of time: buyers who traditionally used non-electronic means to transmit documents, collaborate with suppliers and monitor exceptions are now able to perform these tasks in half the time, giving them the opportunity to focus their efforts on more strategic, analytical activities.

The second are the actual reporting and analysis functions provided within the system. Using the data gathered from the transactions that have taken place within the system, buyers are able to quickly and easily generate reports. These reports provide valuable supply data, including purchasing patterns (which, how many and from whom items are being purchased), and the measurement of supplier performance (including contract compliance, delivery schedules and pricing).

Some online SRM systems also have the ability to analyze the data and make recommendations based on results found. Using these recommendations, buyers are able to strategize how to negotiate optimal contract terms or place orders that keep inventory levels at optimal levels.

Optimal contract terms and inventory management

  1. Optimal contract terms and inventory management
    A result of: Multiple site collaboration

For companies that operate multiple plants or locations, particularly those that have grown through mergers and acquisitions, consolidating the data from disparate systems and making sense of it is a difficult, if not impossible, task. As a result, each plant tends to manage its own inventory and place orders with its own suppliers.

Having the ability to consolidate purchasing and manage inventory centrally provides tremendous leveraging power, and some online SRM systems provide the tools necessary to do this. Acting as a central translating' device, the online SRM system maps the procurement data from each location and consolidates it into one language that can be easily analyzed. From here, central commodity managers are able to view purchasing activities across plants, share inventory to maintain optimal levels, and perform centralized quote gathering and consolidated sourcing enabling better leverage and, in turn, better contract terms.

  1. Suppliers take on the cost of managing the inventory
    A result of: VMI (Vendor Managed Inventory)

Vendor Managed Inventory, or VMI, has become an effective method to vastly improve supply chain performance. Using VMI, the supplier has access to some subset of the buyer's inventory, planning, and order history data and is responsible for replenishing the buyer's inventory, based on mutually agreed upon criteria and replenishment rules.

Some online SRM systems offer this capability a tremendous benefit because, in most cases, integrating VMI into an ERP application is time consuming and cost prohibitive. Using VMI through an online SRM solution, however, is relatively straightforward; it is simply a matter of exchanging VMI data through the already existing import/export function of the enterprise system. Using VMI through a hosted Online SRM system, users can perform functions such as forecast aggregates, blanket POs, release orders and advanced shipping notices through a browser, outside of the corporate firewall. Working through a Web browser alleviates security concerns, because suppliers are not required to enter the network to access VMI information.

This concludes Part Two of a three-part article.

Part One presented supplier relationship management.

Part Three discusses other points to consider when choosing an online SRM system.

About the Author

Sunil Pande, with over 20 years of experience in the high tech industry, is a co-founder and President of Entomo, Inc. He has conceived, developed and brought to market integrated Supply Chain/ERP products for "to-order" manufacturing, an Offline Transaction Processing (OFTP) product, network management, and videoconferencing products. Mr. Pande holds a MS in Computer Science from the University of Oregon and a BS/MS in Computer Engineering from BITS, Pilani, India.

About Entomo, Inc.

Entomo, Inc. offers Online SRM and strategic sourcing applications that electronically link manufacturers with their direct materials supply chain. Its Web-based application, Entomo SmartHub/SRM, delivers transaction automation, online collaboration, exception management, supplier performance measurement, and supply chain analytics. Advanced capabilities support aggregation of inventory and purchasing data from multiple sites delivering cross-plant visibility, consolidated sourcing, centralized commodity management, and inventory sharing. For additional information, please visit www.entomo.com or call 1.877.936.8666

 
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