Supplier Portals Fail To Address Key Business Processes

Origin: CRMDaily (http://www.crmdaily.com)
By: Kimberly Hill
Date: 08/05/2003

Moving supplier relationships to Web-based portal tools leaves behind several important business processes, according to recent research by AMR. Specifically, too many companies install supplier portals that address only the needs of the procurement department, AMR Research analyst Bill Swanton told CRMDaily.

These portals tend to accommodate such processes as proposals, contracts and payments, Swanton said, and they focus on buying goods for the lowest possible price at any particular time. However, this approach ignores interactions that other enterprise departments have with suppliers, such as defining product requirements or monitoring quality.

Seven Process Areas

AMR proposes a supplier portal reference model that includes seven groups of business processes:

• Product development and engineering
• Sourcing
• Supply chain collaboration
• Supply chain execution
• Settlement
• Quality management
• Performance management

Prepackaged software may offer good support for several of these seven process categories, but it rarely addresses the entire supplier relationship, according to Swanton. Enterprises currently deploying supplier portals are using only one of three approaches available in the enterprise software marketplace.

Three Paths

In the aforementioned supplier portal approach, portals supplied by ERP vendors -- such as J.D. Edwards, Oracle, PeopleSoft and SAP -- cover several of the business process categories and allow enterprises to sidestep sticky integration issues. Their advantage is relatively painless deployment; their disadvantage is an inability to extend to cover a wider range of business processes.

Another approach, supplier relationship management (SRM) software, can support the interactions among procuring companies and their suppliers, said Swanton. But it does not provide comprehensive integration with the back-end systems on either side of the transactions.

A third, full-blown approach -- installing a portal and then integrating it with a variety of systems using Web development tools -- is expensive and time-consuming. However, it supports more comprehensive coverage of supplier relationships without replacing the multiple departmental systems of those units that interact with suppliers.

ROI Challenges

One reasons why both enterprises and software vendors may be favoring supply chain execution functions over planning functions in portals is the relative ease of proving ROI for those tools. Yankee Group analyst Michael Dominy told CRMDaily that this is one of the reasons that best-of-breed supply chain software vendors, such as i2 and Manugistics, had such a tough time last year.

Supply chain execution projects are smaller and offer fast ROI, Dominy said. By contrast, the return on automating planning efforts with suppliers -- by, for example, having product designers consult with suppliers in the early stages of the product lifecycle -- is more difficult to quantify.

Enterprise-Wide View

Swanton recommends that enterprises considering supplier portals gather a team of people who represent all areas that interact with suppliers -- including departments like engineering. Procurement is a natural choice to lead the group, he said, because it has the best vantage point from which to measure results.

For example, one area often omitted from supply chain projects is employee spending. Aberdeen Group senior analyst Christa Degnan told CRMDaily that enterprises can save up to 20 percent on their total travel and expense budgets by including these items in the total spend that an organization seeks to optimize through automating supplier relationships.

Swanton also advises companies to closely analyze exactly who within an organization interacts with particular suppliers. In order to most fully optimize price, he said, enterprises must be willing to simplify interactions on both their own and their suppliers' sides.