Supplier Relationship Management Term Paper

Excerpt from Term Paper :

Information Technology

Building Streamlined Supplier Relationships Within the Organisation Using SAP

Organisations are continually recognising the benefits of enterprise resource planning systems (ERPs) to streamline business processes. ERP systems typically address an organisations logistical, distribution, routine shipping and inventory needs. An SRM system typically addresses an organisations supply chain management system, which includes reducing costs, managing organizational performance, overseeing production centres and transportation planning. SRM's help integrate critical business processes from the supplier to the enterprise. The supplier provides the organisation with products and services as well as information vital to the organisations well being.

Companies are continually recognising the benefits of enterprise resource planning systems and SRM to streamline business processes. Multiple vendors currently offer ERP systems that are helping transform business processes by integrating materials resource planning with other key business practices including those of accounting, human resources, marketing and materials management.

SAP is an SRM product that provides companies the software necessary to optimise all transactions and streamline business projects. It offers support for multiple processes including purchasing, sourcing and managing critical supplier interactions. Among the benefits of this system include ongoing cost reductions or repeated cost savings. SAP also provides a long-term solutions for supplier-based business operations and processes. Among the value SAP has to offer include improved risk management, innovated and easy to use software and effective management of sourcing and enterprise procurement processes.


Supplier relationship management solutions enable companies to work closely with suppliers in an efficient manner. In today's technologically advanced business marketplace it is more important than ever for organisations to streamline business processes and save money and time producing high quality products and services. SRM software systems including that of SAP enable organisations to achieve this goal. In simple terms SRM allows companies to collaborate more closely with suppliers in order to manufacture and produce viable products that are cost effective in a quick fashion. There is some question however as to what is involved when using SRM systems. This report details the implications SRM has for this company and others looking for a competitive advantage using a SRM software system. Specifically the report will focus on SAP as a tool for SRM and utilise the experiences of other organisations to demonstrate why SAP may offer superior capabilities with regard to Supplier Relationship Management.

Supplier Relationship Management Defined

One may define supplier relationship management as a comprehensive method for streamlining an organisations interactions with suppliers. SRM allows an organisation to manage multiple processes using a single software system. An SRM system when fully functioning should help organise and make more efficient processes that occur between the organisation or enterprise and its suppliers. SRM includes business operations and the software used to manage it. SRM is part of a wider system called supply chain management that involves the management of information, finances and materials in an organisation as each of these move from supplier to the enterprise on to customers. Enterprise resource planning systems including those made by SAP may help companies make effective decisions by reducing the amount of financial reporting companies engage in, by improving purchasing capability, by supporting expenses incurred by information systems and by allowing organisations to analyse and report on sales, cost and customer data in a timely fashion. Enterprise Resource Planning systems transform business processes by integrating material resource planning with "accounting, finance, human resources and basic marketing" (Pelaski, 2005). A successful system must enable managers to access a single database that is "updated and accessed in real time, that provides cross functional and integrated transaction and processes and that provides seamless interaction between users and transactions" (Pelaski, 2004; Miller, 2003).

Benefits of SRM well selected SRM offers organisations many benefits. The biggest benefits of SRM reported by companies that currently use it include decreased cost of production and a better quality product. Multiple vendors offer SRM products including SAP. A well designed software program enables an organisation to "automate purchasing, daily relationships between suppliers and sourcing" (Miller, 2003). The information system also enables an organisation to easily identify and select vendors. The two largest problems associated with implementation identified by companies using SRM include inadequate training, inadequate expertise regarding the system and lack of appropriate SRM objectives or organizational goals.

SAP's R/3 system enables streamlined process management for human resources, accounting and logistics.

A company can manage materials, financial accounting, controlling, material management, sales, production planning and project systems using a single software application.

Details SAP's SRM Solution

SAP's SRM solution provides many unique benefits over competitors, thus is compatible with multiple companies large and small. SAP's SRM solution has increasingly gained popularity in recent years surpassing competitors including Oracle corporation products. Among the benefits of SAP's SRM solution include user defined fields that are flexible and adaptable to most companies, an import feature that allows users to import data easily and efficiently, a "drill-down feature" that allows a manager to review purchase orders and other documents, multiple time saving features and flexible pricing (Lim, 2004). SAP's system also enables streamlined purchasing capability and flexible end user features that are compatible with most organisations needs, whether large or small. Any SRM system once implemented is always however prone to certain weaknesses. SAP's system is no difference. While there are few features of SAP that are identified as faulty, some organisations using SAP have identified common problems that arise after implementation. These include managers having unclear responsibility or accountability for understanding the benefits the system has to offer. In addition in many cases managers may fail to manage the costs associated with implementation correctly, despite SAP's multiple flexible budget choices.

In addiction a lack of accountability with respect to managers responsible for the projects implementation and completion may also result in failure. Senior managers have a responsibility to understand how much a system like SAP will change "core business processes" (Pelaski, 2005). They may attribute implementation to another portion of management information system activity, which it is not. In this case the information officer may be assigned responsibility for managing the system when ultimately that responsibility should fall on the head of a business unit leader. Business units must have clear responsibility that outlines how SAP should be deployed. This will help them manage the costs associated with SAP implementation as well as resources necessary. SRM installations can also often cost far more than budgeted thus it is also important that managers keep costs minimised by ensuring timely and efficient deployment. This requires accountability on the part of al business unit mangers and representatives. Project managers must be held accountable to their units by phasing in funding, developing contingency plans and defining checkpoints to control costs during implementation.

Samples Companies Implemented SAP, any issues

Volvo IT is currently using SAP R/3 help manage supplier relationships. Working in conjunction with MidTree Volvo thus far has achieved "a saving of 48% on resource costs" thank to the flexibility and efficiency offered by SAP software (MindTree, 2002).

PepsiCO also selected my SAP Business Suite in June of 2004 as the "primary business platform for unifying operations" and standardising all processes in the company (Middlewood, 2004). SAP is replacing Oracle in the company in the hopes that SAP will better integrate Pepsi's current applications that are disparate and spread across multiple subsidiaries.

Other companies successfully using SAP include Dial Corp who is also replacing Oracle with SAP and Tyson Foods, who plan to use SAP as the "Backbone technology platform to complete the integration of operating units" (Middlewood, 2004). In each of these companies SAP is noted for improving the efficiency of operations and helping mitigate compliance problems between suppliers and enterprises. SAP is also expected to help drive up these organisations return on investment and help minimse costs.

Barden Corporation, a German company known for making precision bearings for aerospace and other applications, recently adopted SAP R/3 to help manage the organisations resources. The organisation took 18 months to implement the software package. During that time much time and energy was spend educating managers and employees about using the software. The company points out that in order for an SAP culture to arise at least 15% of employees must attend comprehensive training.

The company now reports routings and bills of material that are more than 99% accurate, and also reports that the "ease of use of SAP R/3" makes the program well worthwhile (Robinson, 1999). The have described the transition as wholly successful and worth the investment, in time, energy, money and education.

Conclusion And Recommendation

Finding the right software is a difficult procedure. A company may not simply select a product based on the features it offers alone. Rather, a company must intimately understand the organisations business operations needs and processes that software must handle with time. For our company to successfully embrace SAP technology the must minimise the risks associated with implementation. That means that senior management must buy into the plan in order to convince employees to take interest in and welcome the changes brought…

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