Source-to-Pay

The Definitive Guide to Source-to-Pay

A company’s vision and strategy for the future must include digital transformation to mature and stay ahead of the curve. Already a leading strategic initiative, digital transformation has emerged as an imperative not only to reduce costs and achieve efficiencies but also to build resilience and flexibility to better deal with the unplanned. Organizations that are lagging in adopting new technologies will struggle to remain competitive as market leaders integrate digital technology into all areas, changing how businesses operate and creating value. As part of this digital vision, organizations should re-imagine and modernize their source-to-pay processes to enable and maintain predictable value. Vision is not the only part of the journey; having the right digital tool and capabilities at your fingertips, crafting and executing a well-thought-out roadmap, and arming its organization to support change are the true preamble to a successful digital transformation.

Challenges

Source-to-pay activities have always played an essential role in safeguarding business viability. Hence, amid recent disruptions, vulnerabilities within the sourcing and procurement space have naturally been at the center stage. These vulnerabilities are not net new. Nevertheless, the crisis shed light on how pre-existing challenges can be more than a hindrance to day-to-day tasks and can ultimately impact the ability to perform strategic work and generate sustainable value. Addressing these challenges by advocating for process modernization and investing in the right capabilities can be a precursor to sustainable success now and in the post-pandemic world.

Some of the most prominent challenges include:

  • Process inefficiencies
  • Limited visibility
  • Maverick spend
  • Supplier related issues

Why Go Digital?

Operating digitally has rapidly evolved from a nice-to-have to being a must. With volatility being the new norm, organizations are compelled to accelerate their digital transformation. Digital transformations enable a shift towards leading-edge capabilities that drive excellence across the source-to-pay value chain while allowing organizations to adapt to new trends and external uncertainties. Digitalization empowers strategic agendas, promotes business continuity, and reduces risk while contributing to perennial objectives such as achieving cost savings, increasing efficiency, and improving working capital. Organizations that are slower to adopt new technologies face an uphill battle to remain competitive, as they are increasingly lagging behind more mature performers. Leaders need to use digital levers to reshape and redirect their efforts towards sustainable value-added activities.

Through digital efforts, organizations can continue to mature through a series of steps, with each step bringing more business value as capabilities are built-in and efficiencies are unleashed. Maturing organizations are embracing automation and more intelligent and predictive processes. Market-leading Software as a Service (SaaS) solutions are at the forefront of streamlining and automating processes, freeing resources from manual and redundant tasks, enabling finance and procurement teams to grow as strategic partners. Moreover, source-to-pay SaaS solutions capture real-time supplier and spend data and deliver powerful insight to the right people at the right time. The generated insights can empower better decision-making, highlight cost-saving opportunities, and promote ongoing risk identification and monitoring.

Digital Capabilities

Source-to-pay software as a service (SAAS) Solutions on the market combine best practices and cutting-edge functionalities. They centralize and automate processes covering the entire lifecycle in a single platform, including ongoing activities such as supplier management, risk management, and spend analysis. While laying the ground for value chain excellence, SaaS solutions also offer a simple and intuitive buying experience that users will embrace.

The SaaS model has flourished within procurement and finance functions due to its flexibility and scalability. SaaS solutions’ modularity enables organizations to shape their application landscape to realize their short-term objectives and support their medium-long term objectives. Should an organization need to expand its scope, additional modules could be easily deployed and replicated on a more extensive playground. That said, value will be maximized once the end-to-end source- to-pay process is fully enabled by a single platform. Some nuances may exist between the range of features presented by procurement SaaS solutions.

A Value Cycle Powered by Technology

The right digital tools, combined with business buy-in, can help leaders identify, create, and realize value beyond upfront cost reduction. The digitalization of source-to-pay allows revolutionizing core competencies and turning them into value creation opportunities. The interaction between the value drivers of a digital transformation is an important one to recognize since each enables the others’ delivery. In fact, the value cycle is a continuous process that will use the data collected in the previous cycle to identify, negotiate, enable, and realize savings.

A comprehensive transformation powered by technology drives constant tangible value across four primary drivers within the source-to-pay stream.

Cost Reduction

A combination of data analytics, strategic sourcing events, supply base rationalization, extreme management and spot buying tools drive lower cost from the strategic level down to the operational level.

Fiscal Control and Compliant Buying

Robust contracting practices, catalog management, approvals and invoice reconciliation reduce maverick spending,
fraud and ensure negotiated discounts are captured.

Process Efficiencies

Streamlining and automating procurement and finance processes such as approvals, purchase order creation and invoice matching means being able to do more with fewer resources.

Cash Management

Formalized payment strategies combined with tools such as supply chain finance, dynamic discounting and card programs can be used to manage cash flow and capture discounts.

Measurement Drives Behaviour

When organizations mature alongside new technologies, metrics are needed to track performance actively. Introducing and monitoring the right levels of incentives and key performance indicators (KPIs) is vital to the fruitful management and continuous delivery of benefits realization.

Key Performance Indicators (KPIs) are a solid starting point for any transformation initiative and help drive performance throughout the journey. The indicators should stem from a company’s business objectives and translate to-be states into measurable results. Priorities, activities, and decisions made throughout the transformation will be assessed against these metrics from the planning phase to sustainment. A transformation initiative will be successful when KPI objectives are met and sustained, well after implementing a particular technology.

From Digitalization to Innovation

Leveraging a SAAS solution can act as the starting point of a digital transformation journey but should not be the endpoint. Organizations should explore the use of innovative tools to seize new opportunities and stay ahead of the curve. Deploying a source-to-pay SaaS solution is an ideal launchpad for the introduction and adoption of more advanced technologies. Emerging technologies can leverage the value created by SaaS solutions, such as richer data and automated processes, to identify further opportunities, increase the degree of automation, and empower proactive and intelligent decision making. Technologies relevant to the source-to-pay space that are bound to generate significant interest include:

  1. Robotic process automation
  2. Machine learning
  3. Internet of things
  4. Smart contracts

Technology-Enabled Approach

Digitalization goes far beyond the implementation of a technology. Organizations need to view digitalization as business transformation, enabled by technology. Approaching digital procurement transformation through this lens keeps people at its heart, not technology.

In theory, technologies should enable users to perform their job more intelligently, collaboratively, and efficiently. However, the blend of people and technology is never that simple; if users are not adopting the tool, tangible value will never be realized. Organizations must work harder to understand how their users think and behave, ensure that new technologies provide a great experience, and match their needs and overall business needs. Mindset shifts, behavior change, and leadership support are the real determinants for a successful digital workplace.