Over the last several years, companies have turned to customer relationship management (CRM) software systems to automate and streamline the way they interact with the customers they sell their products to.

Now, supplier relationship management (SRM) solutions are emerging as an important tool to coordinate relationships with a company's strategic suppliers.

"Supplier relationship management is a corollary to CRM," says Dave Horne, executive vice president for SRM products for i2 Technologies, Dallas, Texas (www.i2.com). "It's the side of the business that faces suppliers. It's important because so much more of a company's costs and risks today are in the hands of suppliers who are providing contract design and manufacturing and third party logistics services."

In fact, outsourcing is one trend driving the need for supplier relationship management tools. Mergers is another.

"When two companies merge, fundamental purchasing data is locked up in two disparate systems," says Horne. "SRM allows a company to aggregate what they buy and who they buy it from."

Horne says users of SRM solutions can anticipate reductions of 5 to 20% in their overall spending through tighter control of the purchasing process.

SRM solutions typically provide tools to manage supplier relationships across the lifecycle of a product, including strategic design; strategic sourcing; contract management; contract negotiations, including electronic RFQ's and auctioning; buy, including the creation of requisitions and orders of direct and indirect parts; design and manufacturing collaboration to share product specifications, schedules, and workflows; collaboration to automate material requirements and replenishment signals; and catalog and content services.

"Those solutions allow users to automate the three critical areas of supplier relationships," Horne says.

The first is the creation of a supplier relationship. Those are tools to determine who to buy from, and what to buy from them. "You want to get the right portfolio of suppliers and optimize the variety of things you buy," says Horne.

The second is the execution and management of purchase orders. "When it comes to direct materials, you're managing order releases against contracts with your suppliers," Horne says. "On the indirect side, including MRO and office supplies, you're managing the requisition and approval process."

Finally, it's sustaining the relationship, which might include the creation of a web-based catalog system, to building a bridge between a design team and procurement department for the roll-out of a new product."