Chen (2001, p.374) revealed that the supplier relationship management (SRM) is considered to be a significant part of the enterprise resource planning (ERP) and under the supply chain management module (Top, 2017). The reason for this is that sourcing of materials or products is considered to be an essential process within the supply chain (Ramco, 2017). This is due to the fact that the products sold by the external suppliers are the reason why customers purchase from the company, which means that the inventory ordering process must be both efficient and effective (ERP, 2009, p.3). The result is that the company, external suppliers and customers are considered to be a tightly integrated system (Chen, 2001, p.374).
Business Processes
But in order to enhance the effectiveness of the ERP system the company may need to increase the transparency of its operations especially with regards to its inventory processes (Ramco, 2017). This can be done by adopting an effective SRM software so that the procurement process of a company is streamlined, which is perceived by Ramco (2017) as a strategic and competitive advantage. This is because the SRM simplifies time consuming processes such as effectively and efficiently sourcing materials, products and services while improving the supplier relationship (Ramco, 2017). An additional advantage is that automating the reordering process minimizes the occurrence of stockouts since a minimum volume of inventory is always maintained (Ramco, 2017). This will be further enhanced if the SRM is linked to the accounting department since the supplier not only delivers on time but is also paid on time (Ramco, 2017).
Module Interaction
Chen (2001, p.374) believes that the SRM interacts not only with the company’s ERP but also individual modules since it is a vital operating segment. The potential modules that can interact with the SRM are order management, financial systems or the accounting department, human resources, the ERP of the external suppliers and even the customers (Chen, 2001, p.374). This will be further enhanced when the inventory data of the company is shared with the suppliers (Chen, 2001, p.374) so that both the company and the suppliers can track the demand of desirable and potentially obsolete products/materials. In case the company is a production entity then the SRM also interacts with other modules such as manufacturing and logistics (Chen, 2001, p.374). The objective of linking with other relevant modules is that (1) the company decreases its inventory levels, (2) the required working capital is reduced, and (3) product demand for customers is at real time (Chen, 2001, p.374), which decreases the stress on the part of the company to forecast the customer demand.
References
Chen, I. J. (2001). Planning for ERP systems: Analysis and future trend. Business Process Management Journal, 7(5), p.374-386.
ERP Group. (2009). ERP systems market primer. The Progressive Physician. Retrieved from http://www.theprogressivephysician.com/images/mp-midmarket-erp.pdf
Ramco. (2017). Supplier relationship management. Ramco. Retrieved from http://www.ramco.com/erp-suite/scm/supplier-relationship-management/
Top 10 ERP. (2017). Supplier relationship management. Top 10 ERP. Retrieved from https://www.top10erp.org/infor-ln-supply-chain-management-supplier-relationship-management-modules-878
