Source-to-Pay+ is Extensive (P14) … So Do Not Stop at Spend Analysis!

As we discussed in Part 8, once you have your eProcurement baseline, that’s just the beginning. The very beginning. Even though not all modules are equal, and not all modules will return equal results, you, and your organization, will need all of Source-to-Pay eventually. However, since you can’t implement it all at once, you take it one module at a time.

After eProcurement, if you aren’t 100% sure where the most value will come from, you go on to spend analysis and use it to help you identify the best opportunities, and those opportunities may indicate the next best module to implement (for your organization at the current time). After that, you may have a clear answer, or, you may not. Sometimes the analysis indicates almost equal opportunity between sourcing and contracting, between contracting and supplier management, or between sourcing and supplier management. (Or, you might not have the manpower or expertise to do the analysis you need to get the right answer.)

So if it’s unclear as to which solution to choose next, it’s back to arguments and logic in an effort to determine which of the three aforementioned solutions to choose.

How about Strategic Sourcing? It’s the one technology proclaimed to identify the most savings and deliver the best results. The truth is that while it almost always identifies the most savings, it doesn’t actually deliver those savings, or even guarantee them. The savings are guaranteed by the contract, delivered by the (new) supplier, and captured by the eProcurement system.

So how about a Contract Management System? In order to guarantee the cost reductions, you need the contract. Or it’s just a quote that’s given today, denied tomorrow. But, as we indicated in a prior post, you don’t need a contract management system for a contract. You need (e-)paper, (e-)ink, and a pair of (e-)signatures. The right contract management system makes it easy to author, negotiate, manage, track, and enforce a contract. But the contract itself is up to people, and if they don’t agree, there’s no contract, and, thus, no need for a contract management system.

This just leaves Supplier Management. But is this where we start? If we think about the value sourcing identifies, it’s generated by the supplier. So it’s critical that the supplier perform. If we have a good supplier management solution, it will track the supplier’s progress, alert us to issues, and assist us in managing the relationship if intervention is required. It will enable performance management, which is critical because if the supplier doesn’t perform and/or doesn’t adhere to the contract, then it doesn’t matter how great the sourcing event was or how good the contract inked was.

And so, because suppliers, and relationships with them, are key, when all things are about equal, or when it’s hard to identify where to go next, we go with supplier management.

Start the dive in Part 15.