SRM: Leveraging the Supply Base for Competitive Advantage

Abstract

ABSTRACT In today's accelerating world economy, manufacturing companies are faced with the market realities of ever more demanding customers, shrinking product lifecycles and steep price erosion. The drive to continually cut costs and focus on core competencies has driven many to outsource some or all of their production. The recent craze of marketplaces, exchanges and reverse auctions has caused many manufacturers and their suppliers to question the value of once-trusted long-term buyer/seller relationships. In this environment, improving supply chain execution and leveraging the supply base has become more critical than ever in achieving competitive advantage. A new category of supply chain software applications is evolving, called Supplier Relationship Management (SRM), which can dramatically improve supply chain performance and empower a new level of supply base management. This paper explores the value that these ground-breaking SRM solutions deliver, and provides a framework for understanding how these solutions fit into typical manufacturers' supply chain processes. SRM contributes to competitive advantage through three primary mechanisms: (1) support of improved business processes across the supply chain, (2) a next-generation architecture that can handle multi-enterprise processes, and (3) facilitation of rapid product cycles and new product introduction. Together, these mechanisms can drive competitive advantage through substantial reductions in the true cost of parts and materials, increased flexibility to respond to changes in customer demand, and faster cycle times which can enhance customer satisfaction and increase market share.

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