Optimizing source-to-contract means focusing on wider business needs.
In Part 1 of this two-part blog we addressed the initial approach of S2C. Our viewpoint is, that while S2C is often focused on procurement as the primary users of the technology, decisions around adopting the components — such as sourcing, contract management and supplier management — need to accommodate implementing capabilities with the wider business needs in mind.
Successful supplier relationships begin with value creation for both parties, a well-defined contract, clear objectives and guiding principles. This starts by connecting the dots between the sourcing award and initiating a contract that promotes better compliance to contracts, faster sourcing cycle times, enhanced control and visibility into procurement processes and higher savings recognition.
Contract Management – walk before you can run in digitizing contracts.
Based on the complexities of procurement and services and linking the connectivity of sourcing to contract management may not always be that apparent. But linking contract management with spend analysis and sourcing is a best practice and something we highly recommend.
However, when it comes to supplier agreements, you really don’t always have all the pieces connected and the information available to digitize the entire contract lifecycle.
When we talk to customers about procurement contract management and leveraging CLM, many get hung up on where to start, often hearing about the number of approaches that include advanced use cases related to authoring and the use of emerging technologies in AI and machine learning.
When starting from ground zero and looking for a means to manage procurement contracts, meaning you don’t have digitized contract management to date, trying to automate the full contract management lifecycle is probably not the best way to start. Taking on more than the business can handle will result in low adoption that does not have wider legal or business acceptance.
If you don’t have contracts in a centralized repository and tying some attributes to those contracts so you can visibility into those contracts, the best approach is to be able to address the basic questions like: how many contracts do we have, where are those documents stored today, who is signing those agreements, who is allowed to sign a contract and what are the thresholds tied to the contract.
Once your contracts in one place then you can go into bigger things like workflow, tying the contract signing process and redlining process, and the more complex pieces of CLM like contract obligation and risk management are next steps. Furthermore, contract management starting in procurement can be a stepping stone for wider more advanced use cases around the adoption of emerging technologies such as AI and the wider adoption of CLM outside procurement such as sales.
Supplier Management – it’s not just internal; suppliers are business users, too.
Understanding the value of putting supplier management with the other pieces of source-to-contract helps complete the the bigger picture. Effective supplier management fundamentally answers the questions of who is the business working with today and should the business continue working with them, or can the business work with them based on internal and external compliance requirements integral to the onboarding, performance and risk management.
Moreover, if you think about spend, contracts and sourcing, all these elements connect into supplier management. So looking at a spend file and not knowing if you have preferred agreements with those suppliers is one thing, but knowing who your contacts are with those suppliers and if you have score carded them before, or evaluated them in any way, or did a supplier risk assessment is essential.
By leveraging supplier management procurement is better enabled to segmenting the supply base that can link new ways for identifying the opportunity for cost savings and the levers to identify business risk related to areas like compliance, sustainability or even reputation management.
When considering implementing supplier management tools, we recommend bringing in the wider business, but it’s also thinking about the suppliers and keeping them top of mind as you implement these tools. So if a supplier portal or SIM tool is a key connection point between you and your supplier, you want to make sure that you are covering your bases related to supplier management including:
- The type of data and availability of that data you are looking to capture, and the business outcomes you are looking to achieve by using it. This includes internal and 3rd party data.
- But, you also want to make sure that the technology is as easy as possible for them to use – whether it is for questionnaires, surveys, information repository for keeping things up to date.
In the end, you are going to have a supplier adoption problem the same way you have with the internal users, and on the supplier side it can sometimes be even more difficult to keep them compliant.
Getting Source-to-Contract / S2C right…
Overall regardless of where you start, we tend to look at this as a technology and process automation challenge alone. But one of the leading indicators for getting adoption is maturity. Maturity of the organization to transform those processes must be in lock step with the technology you plan to deploy. This all comes down to identifying the best ways to begin aligning S2C related data and the workflows that connect these processes. As the organization moves from a paper based to digital, it is also critical to not just replicate the existing process, but look for how to improve and consider the data you are going to capture and what you are going to do with the data.
To succeed in implementing S2C strategies, CPOs and their business partners need to identify comprehensive solutions that can best meet their needs as a business.
Preventing the failure of intentions to transform with technology also starts by recognizing when outside talent is needed based on experience and best practices. If you are looking to change the perception of procurement or change the value that procurement provides, S2C is an area where you want to avoid making a lot mistakes.
This often means finding the right partner that can provide a combination of deep category expertise, industry knowledge and proven technology for delivering meaningful improvements across the processes that define upstream procurement.
To learn more about ways to maximize the usage of S2C, register for our webinar with Forrester Research, How To Maximize Value From S2C Solutions. This informative one hour session delves into what defines S2C as it relates to spend analysis, sourcing, contract management and supplier management. It explores the challenges practitioners typically face as their companies seek to implement and unify these solution areas for delivering value.
Learn what your organization needs to do internally to ensure that the Source-to-Contract (S2C) technology you choose is optimized for your business processes and industry needs, schedule a personalized, no-obligation demonstration of our integrated, modular solutions.