A Comprehensive Introduction To Strategic Sourcing And Source-To-Pay Solutions
What Is Strategic Sourcing
Whether the goal is to leverage market data for cost savings and process efficiency for sourcing products and services, or to manage the entire supplier network, business require solution for strategic sourcing. This can be achieved using source-to-pay software, which is designed to optimize sourcing processes and maximize cost reductions.
C-suite executives, especially those in the finance department, seeking source-to-pay solution must become familiar with the terminology, purpose, and components of strategic sourcing, as well as the features and capabilities of source-to-pay software. This article offers an extensive introduction to both strategic sourcing and source-to-pay solutions to enable executives to make informed decisions.
What Is Strategic Sourcing?
Strategic sourcing is the process of actively managing supplier relationships to obtain value over period of time. It requires analyzing external environment and industry pressure, managing supplier network and performance, and controlling the total cost of ownership (TCO). Strategic sourcing is continuous process incorporating the life span of purchase, from the initial need or purchase, to selection and delivery, to post-purchase invoice and payment.
The objectives and benefits of strategic sourcing are wide-ranging and include:
?Reducing overall costs and making cost-saving decisions.
?Improving the quality of purchased products and services.
?Maximizing strategic objectives with acquisitions and capitalizing on market trends.
?Improving the information and communication with suppliers for better decision making.
?Creating equitable supply agreements with suppliers and reducing risk factors.
?Improved supply chain management and resource allocation.
?Reducing cycle times (order processing times, delivery periods) and improving lead times, reducing total handling costs.
?Improve supplier relationships.
What Are the Features of Source-To-Pay Solution?
A source-to-pay solution enables efficient management of the entire supplier network and provides an integrated view of the sourcing process. This enables business to access, monitor, and control the entire process, resulting in cost savings and process gains.
The features of source-to-pay solution include:
?Bid management: The organization can seek bids from various vendors to compare various products or services available.
?Contract management: This facilitates streamlining the contract negotiation process, creating legally compliant electronic contract that can be archived for future reference.
?Spend analysis: This allows companies to make better-informed decisions by understanding spending patterns and identifying opportunities for cost savings.
?Risk management: This helps to ensure risk processes are managed at all times in the sourcing process.
?Procurement analytics: business can use procurement analytics to analyse data from the sourcing process to identify inefficiencies and opportunities for improvement.
?Supplier management: This module enables organizations to manage the performance of their suppliers by accessing supplier profiles, contact information and other relevant data.
Conclusion
Strategic sourcing is the process of actively managing supplier relationships to obtain value over period of time. To achieve this, business can use source-to-pay solution which is designed to optimize sourcing processes, maximize cost reductions and manage the entire supplier network.
C-suite executives, especially those in the finance department, should become familiar with the terminology, purpose, and components of strategic sourcing, as well as the features and capabilities of source-to-pay software. With an in-depth understanding of strategic sourcing and source-to-pay solutions, business can ensure cost savings and process gains.
