Analyst Insight: In a world where globalization has taken hold, organizations must adopt new technologies and systems to manage their supply chain risks.  An underutilized system technology that has returned is supplier relationship management (SRM). These systems offer organizations deeper inventory visibility, trade and regulatory compliance capabilities, supplier accountability and an effective way to control costs.

-Dylan Persaud, managing director of Eval-Source

SRM systems allow organizations to peer into an extended supply chain network of trading partners and suppliers.  By collaborating with them, you can be aware of changes in lead times and of delays and disruptions. These risks can be mitigated early on and can increase customer service to the public.  With the capabilities to view in-transit inventory over multiple modes, an organization can control and manage potentially critical supply problems.

Issues such as custom delays, extended lead times, scheduling conflicts, and transportation problems, to name just a few obstacles, can be adjusted and addressed within the SRM software. This advance notice of possible disruption to the supply of goods can provide alerts to all partners affected so that they may react accordingly and adjust to the disruption. The ability to view in-transit products allows for accurate forecasting and replenishment. The collaboration of all the affected business partners allows organizations to respond to rapid market changes, and to deliver goods to consumers on time and at decent prices.

SRM systems can also act as a tool for managing ISO, IFRS, government compliance, customs and tariff strategies.  Larger retailers, such as the big-box and grocery chains, have imposed proprietary SRM systems that force suppliers to conform to their supply-side standards. These systems were mostly created as tools to prevent stockouts.  SRM systems offer advantages such as analysis; control of global spend by category, volume and product; and management of service-level agreements. These systems also help avoid duplication of contracts or materials to the same supplier, consolidate purchasing volumes, improve supplier selection and involve partners in the early phases of product development and pre-supply chain activities.  When these factors are addressed, proper planning can take place for compliance strategies whether they are for customs, industry or for other purposes.

Recent incidents such as lead-contaminated toys and bacteria in foods resulted in recalls and impacted supply chains in a negative way. The appropriate SRM system can manage, track and trace suppliers that are not performing up to service-level agreement terms or quality standards. They not only identify the deficiencies early but enable organizations to work with their supplier network to achieve the proper quality standards.

The Outlook

In 2011, organizations still need to be cautious about spending as recovery has still not taken hold. Doing more with less, organizations will look to reduce costs without making capital expenditures. An SRM system provides insights by gaining deeper supply chain visibility, compliance conformance and supplier accountability.