Listen to this blog

For contemporary businesses, having an efficient source to contract process is vital to maximizing value and ensuring procurement compliance. However, significant issues await, in the path to Source to contract (S2C) success, including inadequate supplier risk management and poor spend visibility.

The source-to-contract value chain must be digitized and optimized if it is to deliver competitive advantage. Leading organizations adopt technologies like artificial intelligence to catalyze, gain insights from, and exert control over several processes, including contracting in procurement and spend analysis.

Can you and your business afford to use subpar solutions, and source from suboptimal vendors when the stakes are higher than ever? Planned augmentation of your source-to-contract function is the way forward for better efficiency, speed, and security.

Demystifying Source to Contract S2C Process

Source-to-contract refers to the set of upstream procedures for identifying organizational needs, choosing, contracting, & sourcing from suppliers, and managing relationships thereof. It includes essential steps like spend analysis, RFx creation for sourcing events, contract authoring, and supplier risk & performance management.

Organizations looking to get the most out of their procurement, and yet aren’t ready to commit major resources to a transformation can look at the source-to-contract process as a good testing ground/pilot.

A unified source-to-contract system that connects all its sub processes enables procurement teams to have end-to-end visibility and control, thereby facilitating cost savings, shorter lead times, and establishing of key supplier alliances.

Understanding the source to contract process

Although the Source to contract process spans the milieus of spend analysis, sourcing, contract management, supplier information, risk, and performance management, the primary focus of procurement teams falls on sourcing and contracting.

Finding potential suppliers and negotiating the best possible conditions are part of the sourcing phase:

1. Sourcing is typically a strategic process, involving identifying & consolidating organizational needs, before a fiscal year begins. Alongside need assessments, it involves examining spend to find areas for cost-savings by altering suppliers/criteria. Tools for spend analysis assist in cost classification and identify potential areas for sourcing improvement.

2. Suppliers who can fulfill defined needs are then found and evaluated. Using a request for information (RFI), you can learn more about the capabilities of suppliers.

3. Requests for proposals (RFPs) or quotations are then issued, inviting vendors to submit bids for the product in question. This bidding and auction process is facilitated and optimized by eSourcing technology.

4. Before signing a contract, the buyer negotiates with one or more suppliers to get an understanding of terms and conditions, service levels, pricing, etc. Additional consideration can be given to factors like domain expertise/experience, etc. to potentially aid in new product development, etc.

Towards the end of the sourcing process, once a supplier / set of suppliers are identified, the focus shifts to contracting in procurement:

1. A legally enforceable contract between the buyer and provider must be signed by both parties to formalize the agreement’s contents.

2. Tools for managing the contract lifecycle combine the processes of contract creation, evaluation, approval, and signing into a single automated workflow.

3. During contract creation, built-in risk analysis assures compliance and identifies potential risk factors for mitigation.

4. Contract compliance monitoring after signing assures vendors follow all agreed-upon terms while recognizing risk cues or renewal time.

For complete end-to-end visibility and control, a connected source-to-contract suite connects the sourcing and contracting phases. This lays the groundwork for dependable, value-driven supplier relationships that can endure market volatility.

Source to Contract – Challenges, Strategies & Benefits

The Source to Contract process has a few common challenges organizations must overcome to cross the chasm into peak procurement performance.

Roadblocks are produced by a lack of cooperation between sourcing and contracting.
Typical challenges include:

Siloed systems impeding a complete view of spend, suppliers, and contracts
Manual procedures increasing risk by causing delays and errors.
Lower contract quality and compliance due to non-standard workflows
Weak supplier governance normalizes poor performance and unreported hazards

These difficulties are overcome by automating source-to-contract using integrated solutions in the following ways:

Establishing a unified data environment that links contracts and sourcing
Using digitization and AI to minimize manual interventions
Improving contract quality & compliance by standardizing processes and implementing checks & balances
Implementing rigorous protocols including regular assessments, making it possible for supplier performance issues to be proactively monitored and mitigated

These will in turn result in the high-level benefits of:

Cost reduction via competitive sourcing and consolidated spend visibility
Process efficiency through automated, faster, and digital workflows
Risk mitigation with ongoing supplier monitoring and performance evaluations
Centralized contract management that ensures contract compliance
Increased agility to react to market developments immediately

Leading businesses are transforming the source-to-contract process digitally to unlock value. Connecting important workflows is the first step in the process of gaining end-to-end visibility and control. Purpose-built automation enables companies to cut costs, increase efficiency, and create robust supplier networks, giving them a long-term competitive advantage.

Implementing Source to Contract Solutions

The trigger for source-to-contract optimization is technology. The complete source-to-contract suite from Zycus is one example of a solution that adds speed, intelligence, and automation to the whole procurement lifecycle.

Key source to contract processes are streamlined by purpose-built features:

Spend analytics for classification and reporting
eSourcing to digitally transform supplier selection, auctions, and RFx
Contract lifecycle management for rapid drafting, review and approvals
Supplier risk management for ongoing risk monitoring and reduction
Master supplier data to serve as a single source of truth for suppliers

This alleviates disjointed operations and offers thorough spend and supplier visibility. By digitizing workflows, manual, error-prone processes are eliminated.

What elevates Zycus’ Source to Contract S2C Suite of solutions is Merlin AI, that sits in the centre of the solution, orchestrating the process with savant-like tempo. Vital features like swift & comprehensive contract analysis, regular risk monitoring, etc. add serious power to your arsenal.

Accelerated cycle times, cost reductions in the millions, and strategic supplier partnerships resistant to market changes are the end results.

Although people, procedures, and adoption continue to be important, the underlying infrastructure is made up of purpose-built technology. Can any procurement organization afford fragmented tools or manual procedures given the high cost of status quo source to contract? Integrated automation is necessary for resilient, value-driven procurement in the future.

Why Digitize Source to Contract S2C Now?

Excellence from source-to-contract platform is increasingly essential for procurement seeking to deliver strategic value. Organizations are at a competitive disadvantage due to legacy issues like limited visibility, unchecked maverick spend, manual processes, and unmonitored supplier risks.

Enterprises can enhance performance in sourcing, contracting, and supplier management by consolidating through purpose-built source to contract platforms like Zycus. Initially, workflows are connected to achieve end-to-end visibility. Speed, control, and useful insights are injected by adding automation, AI, and sophisticated analytics.

Reduced cycle times, millions in savings, lower expenses, and stronger supplier networks are some concrete ways to quantify the advantages. The elevation of procurement to a strategic corporate function that can handle both complexity and unpredictability, however, is the final result.

Is your business ready to take advantage of source-to-contract optimization? Discover how Zycus is enabling businesses to create value by redefining their source-to-contract framework digitally.

Related Read:

Webinars

Watch the AI Agents Work – Live Demo of Merlin Agentic Platform in Action

source to contract, Source to Contract process

Pranav Ramkumar

Pranav R is a Content Marketer with expertise and experience in creating & curating content for audiences of all ages. Graduating with an MBA from IITM in 2021, he explored his PM inclinations for a year, before joining Zycus. He’s been writing about procurement & paraphernalia for 1.5+ years and is passionate about bringing new perspectives, pointers & puns to what he writes. Outside work, he’s an Arsenal fan, and is a quiz & word games enthusiast.