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How to build an effective supplier relationship management (SRM) software strategy

Building a supplier relationship management (SRM) software strategy means considering several variables that are critical to supplier management: supplier on-boarding, content management and financial processes.

Building a successful supplier relationship management (SRM) strategy requires much more than software system selection. It requires consideration of three key variables that are crucial to both you and your suppliers' internal business processes: supplier "on-boarding," content management and shared financial processes.

Supplier on-boarding. Companies must put suppliers at the center of their SRM strategy. This means considering how to bring suppliers into the system and how to capture and validate information about the supplier and its products. This supplier evaluation should include factors such as mundane banking details as well as complex quality accreditations and insurance certifications.

Content management. After you have suppliers on board, the next crucial issue is deciding how to load supplier content (e.g., catalog information) into an SRM environment and to establish processes for maintaining this content overtime. If suppliers manage content, you must develop a strategy to enable this to occur. This is especially critical for supplier content that falls outside of the direct purview of the buying organization. Factors to consider are buying rules, workflow, approvals and the process in "punch-out" situations where many steps of the transaction take place outside of the manufacturer SRM system.

Financial processes. It's not good enough to stop with the transaction. An effective SRM strategy should include all of the financial elements shared by you and your supplier. For example, the accounts payable process, which is part of the back-half SRM, should create a payment environment that give suppliers flexibility on their negotiated terms while leveraging your ability to maximize working capital, profit from early payment discounts and achieve greater control and visibility into overall payables' liability and maturity.

At its core, building a successful SRM strategy requires thinking about the supplier and internal business process elements that you want to enable. Doing this successfully is not easy. It requires working with stakeholders in procurement, operations/supplier management, finance and IT -- as well as the suppliers themselves.

While no one said developing an optimal SRM strategy is easy, if you think and plan beyond the software itself, it can lead to one of the largest paybacks within all of your enterprise application investments.

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