Kickstarting Source-to-Pay: It's Time for Sourcing

Written by Fluenta | Oct 27, 2023 3:13:02 PM

In an era where the fundamentals of sourcing and procurement technologies have been around for over two decades, it's surprising – and a bit disconcerting – to note that many organizations are yet to adopt a holistic approach to the source-to-pay (S2P) process. With the resurgence of inflation and the persistent economic challenges stemming from the pandemic, it has become imperative for businesses to reconsider their procurement strategies and the technology that underpins them.

Understanding the Challenges

A quick tech stack update won't suffice. A series of challenges prevent a rapid overhaul:

Data Dependency: Modern applications thrive on rich, clean, and organized data – a treasure not immediately available to all organizations.
User Training: Introducing a new application without adequately training users can spell disaster.
Immediate ROI: The substantial license costs associated with many suites demand visible value right out of the gate.
User Adoption: For long-term efficiency, users need to see tangible benefits and results.

Deciphering the Starting Point: e-Procurement

Prior analyses led us to e-Procurement as the logical foundation. However, what follows e-Procurement? Contract management, spend analysis, strategic sourcing, and supplier management all present compelling cases. After thorough analysis, spend analysis emerged as the front-runner. The rationale? Its unparalleled ability to spotlight significant opportunities and align them with the most fitting solution.

The Sequence to Success

Post spend analysis, the choice was clear: Supplier Management. As e-Procurement captures spend data, Supplier Management becomes paramount. Regardless of your business activities, supplier interactions are constant, necessitating effective management.

The subsequent step gravitates towards Contract Management. Despite its potential lack of large opportunity identification, its significance is undeniable. Without enforceable contracts that are readily accessible and monitored, anticipated savings might remain a distant dream. Furthermore, without an advanced Contract Lifecycle Management (CLM) system, organizations remain oblivious to critical contract details, potentially risking revenue and compliance.

Ready for Strategic Sourcing

With a robust foundation of spend analysis, supplier management, and contract management, the stage is set for strategic sourcing. Although there might be challenges in invoice processing, the ability to cross-verify invoices against Purchase Orders (POs) ensures businesses don't overspend. For perspective, even if an invoice processing costs $30, it's negligible against contracts securing substantial savings.

Historically, almost 40% of savings identified through strategic sourcing remained unrealized due to inadequate infrastructure. To truly capitalize on identified savings, it's crucial to establish a robust S2P support system prior to venturing into strategic sourcing. This not only ensures realized savings but also optimizes expenditure by negating unnecessary costs.

Sourcing's Dual Role: ORA et labora

Sourcing is a delicate balance between work ('labora') and hope ('ora') that the work will be fruitful. Fortunately, we have three powerful tools to guide us through:

Optimization: Streamlining processes maximizes efficiency.
RFX: Request for Information/Proposal/Quotation serves as a structured method for gathering information.
Auction: A dynamic pricing strategy ensures best value acquisition.

In summary, as businesses traverse the intricate realms of the S2P process, a structured, step-by-step approach is imperative. By appreciating the intricacies of each stage and the order of their implementation, companies can truly harness the power of modern procurement, ensuring both savings and value addition.