How Source To Pay Platforms can help lower your product costs
- Posted by: admin
- Category: Best Practices
The popularity of Source to Pay as a business concept has been rising rapidly ever since the start of the pandemic, as businesses realise the need to connect and integrate sourcing of goods/services with the purchasing and payment for those goods/services. This has driven a sharp rise in Source to Pay automation solutions as businesses look to utilise technology to get greater visibility and control over their finance and procurement operations. Source to Pay evangelists will push the benefits of adopting an integrated Source to Pay Solution with a major benefit being lowering your cost base and getting better deals with suppliers. In reality, how does this really work? How do Source to Pay platforms help you lower your product costs?
The biggest area of efficiencies that Source to Pay solutions provide is at the early stages of the Source to Pay process, from Sourcing to Contract highlighted below in red:
Consider how organisations manage this process without a centralised platform guiding them through the process.
- Sourcing – there may be 1,000s of items that need to be sourced, keeping track over what parts have been requested and their status in each bid is a logistical nightmare. Source to Pay solutions automate this process through a centralised record.
- Bid Preparation – Collating all the terms and conditions of the sourcing event, making sure that you get approval from all areas of the business required and then making sure all this happens is a very manual, time consuming process. Source to Pay automation platforms drive great efficiencies through a predefined workflow, automated reminders and central document editing.
- Bidding – With the sourcing event underway you will start to receive responses from suppliers, this can be via email, sometimes by post or uploaded to a file location. Keeping track of who has responded and when, is difficult manually. Source to Pay platforms provide a central, tracked location for invited suppliers to respond.
- Review and Award and Contract Negotiations – the previous points identify a number of time and efficiency savings which will help you be more productive. Review and Award and Contract Negotiations are where, Source to Pay automation platforms really drive value. Done manually, procurement professionals will need to collate the responses from each provider together in a way that a fair comparison can be conducted but also find the greatest value for your company. Source to Pay solutions make this really easy, pulling together key pricing and tender requirements into a central location and displayed in a way that helps procurement professionals identify the best combination of suppliers to deliver the result they are seeking and help to drive negotiations as procurement professionals can clearly see Suppliers bids against one another.
- Contract Creation, Review and Approval – Contract creation and review can be a long and challenging process. Done manually this could involve multiple versions of documents being passed back and forth, fragmented information from emails, phone calls and meetings. Keeping track of this is a nightmare and usually leads to documents named FINAL FINAL v6. Source to Pay automation platforms centralise all of this, so there is only ever one master version of contracts that can be edited by both suppliers and you. They will also have digital approval workflows that can be utilised to ensure the right people sign it off in the right order.
Through this automation, procurement professionals are able to drive much greater leverage against suppliers to get the best deal possible. Based on data analysed by PWC, organisations who arm their procurement teams with the tools to drive greater savings are saving huge amounts in different categories:
Interested in understanding how well your Source to Pay processes work? Try our free online benchmark assessment today!