When a manufacturer does business with multiple suppliers in several different countries, the job of integrating supplier data with a company's ERP system can be very tedious.
That's where supplier relationship management (SRM) software comes into play. It's a growing industry in which small, best-of-breed players contend for a piece of the market share from giant vendors such as SAP, PeopleSoft, Oracle and others.
The software automates processes in the business-to-business supply chain that previously have been done manually. SRM applications add functionality within a company's ERP system to help companies work with suppliers when purchasing items such as operational supplies.
SAP unveiled the next version of its mySAP Supplier Relationship Management (SRM) software at the annual conference of the Institute of Supply Management (ISM), conference held in Philadelphia, this week. SAP says it is the market leader in the SRM market, booking more than $150 million in new software licenses for mySAP SRM in 2003.
But the challenge for SAP and other vendors is to define exactly what SRM is, said Joshua Greenbaum, principal consultant at Daly City, Calif.-based Enterprise Applications Consulting.
"SRM has become a sanitary landfill that vendors dump a lot of stuff into," Greenbaum said. "SRM is a loosely defined market because there are a lot of products called SRM and then a lot of products not called SRM that have SRM capability."
For example, a company installing a warehouse management software package that tracks inbound and outbound shipments of supplies is installing SRM software, Greenbaum said. Any time there is a supplier and a buyer of goods, the software to track the process can be called SRM software, Greenbaum said.
"The market leadership may be better described as among the packaged software providers," Greenbaum said. "It's not a neat and concise market and I think that's why one of the problems with it is the absence of a precise definition."
SAP is touting the benefits of its SRM software by paring it along side its NetWeaver software stack. The latest version of mySAP SRM is integrated with SAP's NetWeaver software stack incorporating a new feature that lets a company create a master contract that can be distributed to various back-end systems, said Faheem Ahmed, product marketing manager, mySAP SRM.
The latest release, made widely available in June, includes new cost bidding, contract distribution and supply strategy development features.
The built-in cost-bidding feature gives companies the capabilities to analyze supplier bids without sophisticated bid algorithms, Ahmed said. The software tells purchasing managers how special deals or contracts would affect the bid made by favored suppliers, Ahmed said.
A new contract distribution feature helps companies distribute negotiated contract terms throughout the ERP system, Ahmed said. For example, a company that negotiates a new contract for rubber must integrate volume discounts that could reduce or increase the price of rubber each month depending on demand.
"You need to make sure that all the supply systems understand the terms of the contract to include volume discounts resulting in price changes," Ahmed said. "With multiple currencies and languages, negotiated contract prices around the world can be quite tricky when you integrate it with your ERP system."
Developers have also designed a new process for supply strategy development into mySAP SRM. The new process includes demand aggregation, portfolio analysis, category management and purchasing controlling.
The latest supplier collaboration capabilities in the software also offer a completely Web-based view to provide companies with one unified view on design objects, bids and contracts, forecasts, inventory, procurement documents and shipments.