Supplier Relationship Management - Overview

Supply management is a term describing the methods and processes of modern corporate or institutional buying. This may be for the purchasing of supplies for internal use, purchasing raw materials for the consumption during the manufacturing process, or for the purchasing of goods for inventory to be resold as products in the distribution and retail process. Inventory  is a list for goods and materials, or those goods and materials themselves, held available in stock by a business.

Inventory are held in order to manage and hide from the customer the fact that manufacture/supply delay is longer than delivery delay, and also to ease the effect of imperfections in the manufacturing process that lower production efficiencies if production capacity stands idle for lack of materials

SRM is part of the my-SAP Business Suite
SRM is a web based purchasing platform for sustainable savings and value generation through enterprise-wide supply management. It covers full supply cycle, from strategic sourcing to operational procurement and supplier enablement, leveraging consolidated content and master data.
 

With my-SAP SRM, you can collaborate with all suppliers for all purchased goods and services. This means you can constantly optimize supplier selection, compress cycle times and devise focused sourcing and procurement strategies
 

• My-SAP SRM is powered by SAP Net-Weaver
• mySAP SRM offers options for integrating with multiple backend ERP systems that allows centralized purchasing with heterogeneous system landscapes
• Ease of use, no need for mastering multiple ERP systems as all systems can be accessed by unified portal
• Lower administrative costs due to centralized procurement
• Web based procurement reduces cycle time delays, errors arising from slow paper based processes and communication gap with suppliers
• Availability of audit trails for regulatory compliance as business transactions are captured resulting in history records
• mySAP SRM empowers employees to create and manage their own requirement requests thereby reducing burden of purchasing dept. and allows buyers to focus on strategic tasks

Limitations of SRM
 

• SRM components are designed for Web based applications so high usability of web applications is recommended for the user. The network set up should be designed for such applications
• The implementations are involved with huge license cost so small scale organizations are not able to get the benefits of enhanced purchasing face
• Batch management kind of material handling is difficult
• Handling the critical applications of MM procurement like subcontracting, consignment needs custom developments
• SAP ERP 2005, SAP SRM can be deployed
• SAP SRM Server as an add-on to SAP ECC Server (product instance SAP ERP 2005 - SAP ECC) to run SRM in one client of the ERP system.
• This deployment option is new in SAP ERP 2005.
• Installation of SAP SRM Server as a separate component to SAP ECC Server .

The following deployment and migration constraints apply:

• SRM as an add-on to my SAP ERP 2005 does not support hub deployment.
• SAP ERP 2005 with SRM as an add-on does not support any multiple backend functions for procurement.
• It is not possible to upgrade or migrate from a separately-installed SRM system to SAP ERP 2005 with SRM as an add-on.

Innovative methods to coordinate your business processes with your key suppliers and make them more effective.

• SRM integrates purchasing execution, sourcing and collaboration to manage supplier networks
• Enables you to optimize your procurement strategy, to work more effectively with your vendor pool, and thus to gain long-term benefits from all your vendor relationships.
• Forecast purchasing behavior
• Shorten procurement cycles
• Also work with your partners in real time
• Develop long-term relationships with all those vendors that have proved themselves to be reliable partners
• Cut down your procurement expenses

The supply management function of an organization is responsible for various aspects of acquiring goods and services for the organization. In many organizations, acquisition or buying of services is called contracting, while that of goods is called purchasing or procurement.

Tasks associated with supply management include:

• Analyzing spending
• Strategic sourcing
• Obtaining and evaluating quotes from suppliers
• Negotiating
• Managing supplier performance

Implementing technologies, processes, policies, and procedures to support the purchasing process (Supplier Relationship Management or SRM)

My-SAP SRM enables you to optimize your procurement strategy, to work more effectively with your vendor pool, and thus to gain long-term benefits from all your vendor relationships.
Procurement : 

• The acquisition of goods and/or services at the best possible total cost of ownership,
• Right quantity and quality.
• At the right time.
• In the right place.
• For the direct benefit or use of governments, corporations, or individuals, generally via a contract.
• Simple procurement may involve nothing more than repeat purchasing.
• Complex procurement could involve finding long term partners - or even 'co-destiny' suppliers that might fundamentally commit one organization to another
  

  R/3 Enterprise	SRM
  No backend, entire procurement cycle is initiated and closed in the same system	SRM is integrated with backend ( Can be coupled with Multiple backend
  Purchase requisition needs to be created which requires lot of data entry, hence scope for errors	Shopping cart is to be created that requires less data entry, if catalog is available it makes procurement even simpler as catalog ensures correct material/ vendor selection & search for required commodity becomes easy
  Client is SAP GUI based/ web version of SAP GUI	SAP GUI based screens are not used for procurement, SRM procurement is with ITS
  Since single system, no much use of RFCs or XI components	Communication with backend through RFCs, ALE & XI
  Database table updates are direct	ALE is used to update R/3 database tables through SRM
  'On behalf of' functionality is not supported in R/3	You can shop on behalf of another individual/ organization unit

  My SAP SRM consists of the following Business Scenarios:

• Self-Service Procurement
• Service Procurement
• Plan-Driven Procurement
• Spend Analysis
• Strategic Sourcing
• Catalog Content Management
• Contract Management

My SAP SRM is based on the following components:

• SAP  Bidding Engine
• SAP Business Intelligence
• SAP Enterprise Buyer
• SAP Exchange Infrastructure
• Supplier Self-services
• SAP Catalog Content Management
• SAP Enterprise Portal

My-SAP Supplier Relationship Management (my-SAP SRM) is a solution that you can implement in a heterogeneous system environment that includes SAP systems and/or other Enterprise Resource Planning (ERP) systems as backend systems. You must have the components Financial Accounting and Controlling in your system environment.

There are different business scenarios that you can apply depending on your role as a user and the kind of business you wish to conduct using my-SAP SRM. You can deploy each of these business scenarios using one of three different technical scenarios. These technical scenarios are listed below. For more information on an individual scenario, follow the link provided.
For example, to deploy the business scenario self-service procurement using one of these scenarios. The scenario you choose depends on the system in which your purchasing department wants to work and, consequently, where you want the follow-on documents to be created.

• The Classic scenario
• The Extended classic scenario
• The Standalone scenario

The classic scenario
The shopping cart is created and approved in SAP Enterprise Buyer. The remainder of the procurement process takes place in the backend ERP system (s) and all other follow-on documents, such the purchase order, goods receipt/service entry sheet and invoice, are located there.
With SAP Supplier Self-Services, you have partial supplier involvement for the operational procurement business scenarios when buying materials. There is no support for services.

The extended classic scenario
The shopping cart is created in SAP Enterprise Buyer. The purchase order and follow-on documents are also created there and then replicated to the backend system. The purchase order in SAP Enterprise Buyer is the leading purchase order and cannot be changed in the backend system.
Goods receipts and invoices can be pre-entered in SAP Enterprise Buyer or entered directly in the backend system. With SAP Supplier Self-Services, you have partial supplier involvement for all your operational procurement scenarios. In these scenarios, you have supplier involvement for the purchase order and the purchase order response.

The standalone scenario

The shopping cart and purchase order are processed directly in SAP Enterprise Buyer. You have no materials management functions in your ERP system and, instead, use those in SAP Enterprise Buyer for all procurement processes.
The final invoice is sent to a backend accounting system. With SAP Supplier Self-Services, you have complete supplier involvement for all your operational procurement scenarios.

The following table gives an overview of the differences between each of these scenarios in terms of where the main processes occur.