Source-to-Contract: Key questions for transformation

Do you have an intuition that your organization may be losing time, money and talent in the way it sources suppliers, manages them and takes care of contracts? If so, then here's a simple way to check whether your instincts are correct and recognize the implications.

The Source-to-Contract process, which combines sourcing, supplier management, content management and contract management, is a delicate balancing act.

On the one hand, you need to ensure your enterprise gets the best value from the goods and services you buy from qualified suppliers and approved contracts, obtained using the most appropriate types of sourcing events.

On the other hand, decisions must be weighed against a range of important factors, such as whether the supplier is compliant and meeting performance standards and has the most up-to-date credentials. Unless the answer to these is 'Yes', then there's the risk of disruption, expense and reputational damage.

But the Source-to-Contract process is more complicated - and never ending. Procurement teams need to rationalize their supplier base to better leverage spend (possibly recruit new suppliers where there is limited coverage), retest the market routinely and identify qualified suppliers quickly when new needs arise. Supplier contracts must be monitored continuously. And all the whilst, relationships with key suppliers need to be developed, maintained and strengthened.

Put simply, the sheer ground that Procurement teams need to cover with Source-to-Contract often means that something, somewhere gets overlooked. Time, money and talent is wasted when failures occur, and there's often extra cost attached to putting things right.

Where to start looking?
A helpful way to assess the success or otherwise of your current Source-to-Contract strategy is to benchmark your processes according to 'maturity' levels. There are extremes of Source-to-Contract practice, as well as several gradients of maturity in between.

Let's consider three examples:

Within sourcing, the business of running events is a good indicator of maturity. Some organizations handle these on an ad-hoc basis. Departments may be in the driving seat, with little involvement from Procurement. The processes used each time may be inconsistent and have little transparency. In contrast, an advanced level of maturity would require an open sourcing event process that follows standardized electronic processes and involves collaboration between teams.
In the area of supplier management, communications can be an area that devours resources. There's a big difference in maturity levels between enterprises that struggle daily with mail, email and phone — and those that use a business network.
With contract management, one area where maturity varies can be the integration of contracts with Purchase-to-Pay (P2P) processes. When organizations are struggling in this area, buyers cannot see approved contracts easily. However, when P2P integration is achieved, purchasers will make use of pre-negotiated agreements set up by the Procurement function to capture savings.

Pain points and their causes
The depth of maturity in these areas - and many others across your Source-to-Contract processes - will have a big impact on outcomes.

They can explain questions such as why items purchased fail to meet actual needs, how off-contract buying becomes an expensive problem, and why unwanted contracts renew automatically when they should have been cancelled or renegotiated.

In practice, when Source-to-Contract is managed in a highly manual and ad-hoc fashion, the results will be extremely costly in terms of lost time, money and talent. But things can be turned around with the right approach: Basic improvements will make a big difference, a more structured approach will help you to turn the corner, whilst an integrated and highly-automated strategy will improve performance radically.

It's by tackling deep-seated problems that lurk within Source-to-Contract that you can become a faster, leaner, smarter organization. With the right tools, processes and expertise, you can sharpen performance and boost your bottom line significantly.

Run the test yourself
Recognizing if you're losing time, money and talent within Source-to-Contract is a start. But realizing exactly where it's happening can enable you to take action - and to stop scarce resources from draining away.

Finding out where you stand today doesn't need to be slow, expensive or disruptive either. Simply assess your current situation by using our Source-to-Contract assessment tool.