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Managing suppliers may generate cost savings.


AS A SLOWING economy and the drive to outsource all but a company's core technology puts the cost of buying goods under scrutiny, managing the supplier relationship may supplant e-procurement as the key strategy to reduce spending.


Companies such as Hyperion are championing so-called SRM (supplier relationship management) software that they say will help companies manage suppliers.  Tyndall Consulting Group unveiled its "scorecarding" methodologies that allow a company to evaluate its sourcing procedures.  "It's about understanding how to deal with your suppliers for the mutual benefit of both you and your suppliers." 


Hyperion has broadened its SRM palette with the fall release of the next version of its Essbase suite of 10 applications. The tools will create tighter links to multiple databases, Hyperion officials said, allowing companies to base decisions on integrated information, which is more useful than simply doing business via the Internet.


However, dealing with suppliers may be a euphemism for finding new ways, other than price, to put the squeeze on suppliers.  "Wal-Mart is a classic example," said Jeff Rodek, CEO of Hyperion, based in Sunnyvale, Calif. "The more companies focus on the supply chain and try to take time out of it, it puts more pressure on suppliers. That's business."  Tyndall Consulting Group agrees that businesses need to be smarter in today’s business climate.  A large manufacturer with several suppliers is likely to want insight into which suppliers to bargain toughest with and negotiate on price alone, and which suppliers to treat as longer-term partners. "I want to make sure I don't alienate my best suppliers by undercutting them in terms of price."


Although many companies believed e-procurement via the Net would reduce the cost of doing business, procurement professionals are now saying it's not what they need.  "We were getting pushed to implement e-procurement and we pushed back, because we were looking for something better to see where we were spending our money.  We needed something to pull the information together," said Burgess Perry, purchasing manager at Aventis Crop Sciences, a major crop protection and production company in Raleigh, N.C.


Even if his company deployed an e-procurement system it wouldn't necessarily reduce costs, Perry said.  "It's not a matter of automating everything," said Burgess, who believes savings come from understanding where a company is spending its money and knowing which suppliers to work with.


Despite all the promises of SRM, Gartner analyst Barbara Reilly also had this warning to companies:  "We are at the beginning of the SRM and strategic-sourcing hype cycle, and enterprises can expect an ever increasing number of vendors to appear on the market offering a disparate set of applications and all claiming to have full solutions," Reilly said.


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