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The insideEdge (SAPinsider Vol. 8, Iss. 2)

by John Zepecki | SAPinsider

April 1, 2007

by John Zepecki, Senior Vice President, SRM Product Development and Strategy, SAP SAPinsider - 2007 (Volume 8), April (Issue 2)

The role of procurement to date has been predominantly focused on cost — namely on how to reduce it while still maintaining high quality and a reliable supply base. But while managing costs remains the most important priority of supplier relationship management (SRM), we are now beginning to see an evolution, a sophisticated blending of procurement into top-line growth.

There is a growing trend among boards of directors and CEOs who are coming to see procurement as an enabler, a function that can be leveraged within strategic projects. These stakeholders envision the role of chief procurement officer as one that collaborates with the vice president of research and development, or the vice president of sales and marketing. As a result, procurement can help drive key strategic activities, such as new market entry and accelerated R&D cycles.

Several companies are making names for themselves by employing SRM as a strategic weapon within their corporate arsenal. Steelcase, a leading office furniture manufacturer, has reduced its cycle times and saved millions of dollars through online bidding and electronic invoice processing. Online bidding, for example, enables Steelcase to react to changing market conditions and quickly adjust materials to help offer its customers the best products.

There's also a European utility company that has established a portal to provide real-time access to its suppliers so it can continue to reduce costs and immediately react to changes within the industry. The company's entire contracting process is more effective as a result, and provides greater flexibility for customers. This translates to better customer relationships and, in turn, increased profit.

The list of companies for which SRM is at the heart of the business model goes on. Consider Cable & Wireless, a global telecommunications provider. By effectively employing SRM strategies, such as spend visibility and the automation of key processes, the company has become more competitive, leveraged its purchasing strength, and enforced governance globally. Another example is Sea Containers, a logistics service provider that has been able to automate the procure-to-pay process, effectively moving procurement away from traditional purchase-order processing onto a more strategic level.

The future of SRM lies with greater interaction among stakeholders, be they suppliers, customers, or internal departments. Forward-thinking companies moving in the direction of strategic SRM start by instituting best practices around sourcing tools, such as online auctions or automated request for proposal (RFP) engines, which can enable savings of as much as 35% over current purchasing practices.

From there, the future lies with a company's ability to integrate SRM with its other enterprise systems. mySAP SRM enables you to integrate procurement with business processes upstream, into obvious areas such as R&D (where up to 80% of procurement costs are determined) and budgeting, but also into less obvious areas, such as marketing or contracting.

By wielding SRM to secure stakeholder collaboration and integrate procurement with cross-organizational business processes, your procurement team can evolve from a cost cutter to a top-line influencer.

John Zepecki
Senior Vice President
SRM Product Development and Strategy

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