Supplier management goes a bit further

United Technologies Corp, the giant high tech manufacturer primarily in the aerospace and building sectors with companies like Pratt & Whitney and Carrier, has invested in web-based procurement software and services firm FreeMarkets’ new ES suite, just launched. UTC is one of FreeMarkets earliest and most enthusiastic big league users. “Since 1996, FreeMarkets has been an integral part of UTC’s supply management initiatives, providing software, knowledge and services that we have used successfully to improve our sourcing,” says Kent Brittan, vice president of supply management at UTC. “We have placed more than $2 billion in annual contracts into the marketplace through the execution of over 3,000 online negotiations – identifying savings in the range of 20%.” He says the firm will use its new system to enhance and support ongoing global supply management initiatives. In brief, ES is a suite of scaleable applications that essentially allow companies to streamline and indeed automate online procurement of both direct production materials and indirect commodities. It covers self-service and compliance management, but more than that – everything from supplier pre-qualification, to ongoing monitoring and management. It’s aimed at the very large organisations: around the $1 billion of purchased goods per annum. Implicit in adopting the system is the benefit of achieving lower costs, not just through deals on procured materials, but through setting-up and managing suppliers better across a corporation, potentially globally. This is about online trading, yes, but also sharing information and ensuring robust processes and compliance – and thus ‘spend visibility’ and control, largely automated. Hitherto, the individual strength of FreeMarkets’ approach has been that it spans both software and services, with high flying, technical purchasing and materials supply specialists operating globally to sort the initial deals. ES provides the over-arching mechanisms to support companies with their own people. Shahriar Broumard, director and general manager for FreeMarkets in the UK and Scandinavia, says it builds on the firm's QS software solution, currently being used by around 100 companies. “That tends to be used for commodity purchasing – simple, low value, high value non-complex products – while the service element has been for strategic purchasing,” he says. The evolution to ES, he says, now provides all the product sourcing and supplier find and management modules, whatever the requirement, on one platform. That includes contract management, decision management, supplier relationship management, spend management and so on – much more than mere procurement. And it serves the purposes of operational, engineering, quality and management people. By plugging into companies’ existing ERP systems, the system can provide aggregated views of spend and suppliers that would otherwise be difficult to achieve. “60% of what we’re trying to achieve can be done using existing software,” says Broumard. “But people and engineers need to get the real information right down to line item.” And hitherto that’s been the tough part. Now management can get pas the complexity and tangle of data and sources to make what, according to UTC, can be enormous savings. In a sense, it’s the other end of customer relationship management (CRM): all the issues around supplier seeking, dealing and management co-ordinated and opened up for collaboration and the benefits that flow from that.