When we started in Part 1, we noted that even though all core sourcing and procurement technologies have been available for twenty (20) years (although it is debatable just how good the initial versions of many of these applications were) … the majority of organizations still do not have what any modern analyst would consider reasonable support for the full, core, source-to-pay process.
However, now that inflation is back with a vengeance, anticipated savings is leaking faster than a bald spigot, and most organizations are in a cash crunch as a result of down sales during the pandemic (and now due to a lack of core inventory to sell), they need to update their procurement tech stack fast.
But, and this is the kicker, they can’t do it all at once. We went into a lot of the details as to why, but, basically:
- the applications don’t work without data … and don’t work well without LOTS of data … clean, organized, enriched data … (that you don’t have now and won’t have for a while)
- the applications don’t deliver without user training …
- you need value out of the gate to justify the purchase … and good luck getting enough value to justify the license cost of an entire suite!
- your users need to see results for them to adopt … and use … a solution long term
So, you need to figure out where to start. And after three posts, we figured it out — e-Procurement. We then spent a few posts discussing the need for e-Procurement, the benefits, the barriers to e-Procurement (which were not what you think), and providing you with a large list of vendors. But then we had to step back and figure out what came next again because, depending on the particular situation at hand, there were good arguments for contract management, spend analysis, strategic sourcing, and supplier management (but not invoice-to-pay). It took quite a bit of analysis, and the answer was spend analysis because, even if all things seemed equal, or one solution looked more attractive than another, spend analysis could identify the (biggest) opportunities and the solution best suited to the most / biggest opportunities, and so spend analysis always made the most sense to adopt after e-Procurement.
After that, it was difficult. But, if all opportunities are equal, or there is no one to do the thorough spend analysis that can help differentiate the savings opportunities that can be enabled by each S2P module, there still has to be a best choice for what’s next. And that was … Supplier Management. The reason? Just like you needed to get your spend data captured for everything to function (which is what e-Procurement does), no matter what you’re doing, you’re interacting with suppliers, so you need to manage them effectively.
Then it was easier. Even though you technically need to find the products and services before you contract for them, the reality is that you are already buying products and services, you already have contracts, and chances are you can’t find most of those contracts when you need them, don’t know what the obligations and deliverables are for anything that’s not available through the e-Pro catalog, and don’t even know the pricing, permitted price escalations, etc. Furthermore, most organizations without a modern CLM don’t know how many evergreen contracts they have, when they automatically renew if not terminated or renegotiated by that date, when key contracts they need are expiring, and so on. Nor do they understand just how much excess manual effort and time the organization is taking to re-negotiate existing or negotiate new contracts. They are also completely unable to do a proper analysis of existing payment terms, key risk clauses that are required for a new regulation, and so on.
Contract Management may not identify any big opportunities, but without a good, enforceable, contract that can be easily monitored throughout its lifetime, the reality is that the identified savings will likely never materialize. Thus, Contract Management was key to have in place before you started strategically sourcing, as you want to immediately turn the bids into contract terms before the process disconnect from not having a good CLM solution causes bids to be retracted “because they were only good for 15 days” or some other excuse a supplier will come up with to not honour a bid. And then it was time for e-Sourcing, the ora et labora of the savings-focussed part of the Source-to-Pay process, and the ORA in particular: Optimization, RFX, and e-Auctions.
And now that we’ve finally covered all the core upstream modules, and e-Procurement, there’s just one left, the one that comes after e-Procurement and the one we skipped because it’s relative value was limited compared to the other solutions (when you consider that any e-Procurement solution worth its price can accept and store invoices and do some minimalistic processing). This isn’t to say there isn’t value in the solution, as a good I2P solution will greatly increase invoice-processing and payment-related efficiency, reduce the manpower needed for 100% invoice verification, and enable financing and global trade. Furthermore, a great I2P solution will also enable other value-generation capabilities the organization wouldn’t have otherwise. In fact, over time, it will become one of the more valuable solutions since one analysis, sourcing, supplier management, and contract management take the waste out of the process and your organization becomes a Source-to-Pay leader, the key to maintaining S2P value will be efficiency and 100% capture and compliance. That’s why no Source-to-Pay implementation is complete without a modern invoice-to-pay/accounts payable module, and why you must implement it even if the initial estimated ROI is considerably less than the other solutions.
But what should you look for? And why? That’s the subject of our next part where we’ll break down the core in Part 32.