Supplier Relationship Management : An Opportunity for Procurement Makeover
Supplier Relationship Management (SRM) Maturity is Correlated with Profitability
The last year demonstrated precisely how important it is to have an agile and mature SRM capability. The global economy is going through a period of unprecedented churn. Hence, procurement teams are compelled to scale up, scale down, pause, or even accelerate processes depending on the market situation and current supplier dynamics.
Their ability to do so determines overall business continuity and the generation of profits. Indeed, research by McKinsey indicates that the degree of maturity in supplier collaboration is a strong indicator of organizational success.
Companies with advanced supplier-collaboration capabilities tend to outperform their peers. Leaders in supplier development and innovation tend to beat industry trends by approximately 2X times in growth and other metrics.
As solution providers retire support for their on-premise SRM solutions over the next few years (for example, SAP intends to retire its SRM platform by 2025), organizations must reassess their existing procurement and supplier collaboration/relationship management capabilities with an eye on the future.
The Sun Sets on On-Premise SRM: What this Means for Procurement Efficiencies
Since the mid-2000s, on-premise SRM systems have been widely entrenched as a popular solution for procurement and supplier relationship optimization. However, companies using on-premise or hybrid systems have complex data and process environments that have been established over time and, in many cases, over several years.
With the gradual decommissioning of legacy SRM and the ongoing SaaS revolution, companies must look for an alternative, utilizing this as an opportunity to replace and rebuild better processes and achieve new efficiencies by introducing cloud-based modernization. In this context, there are a number of improvement areas to consider:
Integration gaps with existing systems
On-premise solutions are characterized by low intra-suite integration and challenges in data flow across the source-to-pay process lifecycle. This means that multiple installations were needed to provide coverage for a global organization with a distributed supplier landscape.
Persistent dependence on manual efforts
Due to this lack of interconnectivity, many procurement tasks continue to rely on manual processes and paper-based transactions. This multiplies the risk of errors arising from human fatigue, negligence, or oversight, especially in iterative tasks involving complex systems.
The absence of cognitive technology
In a recent survey conducted by Zycus for its annual Pulse of Procurement report, procurement executives voted Artificial Intelligence / Machine Learning as the most influential technology trend for the future of procurement. An AI-based solution can help monitor supplier performance, automatically identify issues and risks. In addition, it can suggest corrective actions, risk mitigation strategies, and real-time relationship monitoring and resource re-alignment.
Concerns around supplier data integrity
Fragmented systems can lead to fragmented information, with deduplication, cleansing, and information verification adding to inefficiencies in the procurement function.
Solutions that connect the end-to-end supplier relationship lifecycle from e-sourcing of suppliers to contract management and spend analysis, and finally, procure-to-pay transactions daily – leverage a single source of truth to make data-driven decisions.
User interface (UI) complexity
Chief Procurement Officers (CPOs) should look at this as an opportunity to do away with the UI and workflow complexities associated with the traditional solution ecosystems. Instead, one can proactively adopt SaaS-based platforms that empower business users with informative dashboards, configurable
workflows, and AI-generated metrics that help increase adoption.
Beyond Legacy SRM – How Zycus iRisk Enables a Competitive Advantage?
Zycus’ solution portfolio encompasses the full spectrum of SRM needs, from e-sourcing and spend management to contract management and supplier management. iRisk is the AI-powered 360o supplier risk management tool that unlocks a competitive advantage over traditional SRM solutions. It consolidates risk data from internal evaluations, external score databases, performance data from ERP, and millions of sources aggregated online.
Dynamic AI ensures that the risk score is continually updated, informed by millions of risk sources every day. In addition, most other providers offer a far lower coverage. For example, most tools use approximately 600K data sources (or thereabouts), vs. several million by Zycus. This equips CPOs with the most complete and accurate risk scorecard possible.
iRisk also segments suppliers in terms of critical, tactical, commodity, and strategic importance so that CPOs can prioritize the relationships most likely to add immediate and long-term value.
Download the full white paper here to know more about how Zycus helped the world’s sixth-largest automobile manufacturer decommission its SAP SRM installation in favor of a modern, unified solution that would streamline the management of 10,000+ dealers and a sales network spread across 160 countries.
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