Organizations procure goods and services from reliable suppliers in order to perform their operations. To remain competitive and profitable, they need to procure the required goods / services at the lowest total cost of ownership from suppliers that are reliable and in a position to meet the organization’s quality and delivery requirements. Thus, procurement becomes a strategic function for organizations. Because of the importance of the procurement function, organizations are making efforts to address the challenges of the end-to-end procurement process and ensure smooth functioning of their supply chains by investing in software solutions. The procurement process is complex and dynamically evolving; it starts with sourcing and ends with payment and hence is called Source-to-Pay.
Source-to-Pay or S2P is the process that involves finding reliable suppliers to efficiently source, order, and pay for goods and services; it includes evaluating them and negotiating & contracting with them. The S2P process starts with the identification and selection of dependable suppliers / vendors and culminates with the payment to them for the products / services provided by them. The S2P process encompasses requesting potential suppliers to provide information / proposal / quotation, & bid, negotiating contract, ordering, fulfilling contractual obligation, etc. It includes strategic sourcing, spend management, vendor management, accounts payable, etc.
Source-to-Pay process
The S2P process consists of the strategic component, which compasses identifying and selecting the most appropriate and reliable suppliers, and the operational component, which helps to manage the actual procedural part of procurement of goods / services from the selected suppliers. Sourcing or identification and selection of suppliers involve the following:
- identifying the organization’s requirements for goods / services
- identifying the possible suppliers and evaluating them based on the data collected and set criteria
- collecting data from possible suppliers by sending to them the requests for information, proposal, and quotation
- Shortlisting the selected suppliers
- Negotiating the price and contract terms
- Signing the supplier contract
Managing the operational aspect of procurement involves, raising the requisitions, processing the requisitions for the procurement of goods / services, obtaining the procurement approvals, generating the purchase orders, receiving the supplies, making payments, etc.
The strategic component becomes highly important when organizations want to onboard new suppliers that offer better terms compared to their existing suppliers or provide goods / services that are not available from their current suppliers.
Source-to-Pay software
Source-to-pay suite software manages and automates the S2P activities. It enables organizations to compare, for supplier selection purpose, offers from multiple suppliers using various user defined criteria, such as by location, by rating, etc. The S2P software helps to streamline and efficiently manage all the S2P activities starting from the identification and selection of suppliers to supplier payment. It integrates and automates the source-to-pay cycle, which is procedure intensive.
The S2P software is used to enhance the efficiency of the entire process and produce business value. The overall objective of using the S2P software is to obtain goods and services required by the organization at the lowest total cost of ownership and from reliable sources.
Organizations use the S2P software to select suppliers, purchase, and pay for goods / services by adopting streamlined and efficient processes with the following objectives.
- Select the most appropriate and reliable supplier in a systematic manner
- Procure the required goods / services at minimal total cost of ownership and in a transparent manner from reliable suppliers
- Build supplier relationship
- Facilitate contract, order, payment management
- Follow clearly documented procedures while ensuring greater visibility of the process
- Ensure compliance with procedures and regulations
- Reduce errors, holdups, and redundant work
Benefits of using S2P software
- Results in cost savings
- Improves spend visibility
- Captures data that helps improve decision-making
- Helps systematize and streamline the supplier selection and procurement processes
- Reduces the time it takes to place orders and obtain approval
- Enhances efficiency and throughput by reducing the errors and delays
- Establishes a single source of information and acts as a repository of procurement related information
- Facilitates closer collaboration and communication among all stakeholders during the entire sourcing to payment process
- Helps build a reliable and strong supplier network
- Helps build relationship with suppliers
Because of the need to improve effectives, efficiency, and productivity of the end-to-end source-to-pay procurement process and the growing awareness about the power of the information technology to automate and solve some of the sourcing and procurement challenges and the benefits that could accrue from the deployment of S2P software, organizations are investing in S2P software suite. Geopolitical and other supply chain & business related developments are also pushing more and more organizations to deploy S2P software instead of depending on error prone, expensive, and difficult to manage paper based manual methods. The organizations that have invested in S2P software and automated both the strategic and operational components of procurement are reaping the benefits.
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