Describing the Source and Contract Process

Companies today face many challenges in the sourcing and contracts phase of the source to pay process. With the changing nature of society, it is important to know these challenge.

For example, a lack of integration and transparency can lead to inefficiency and reduced speed when bringing new products to market. With limited visibility into spend, savings, and other key metrics, it is difficult to make important and accurate decisions for your company.

Other challenges include:

• Spend obscured in multiple systems
• Supplier qualification and segmentation status not available in sourcing and contract management systems
• Manual and error-prone direct procurement processes
• Disconnect between engineering and sourcing
• Contracts stored separately from operational procurement systems

To deliver products on time and at high quality, a company must initiate a strong collaborative process between buyers and suppliers. The source to pay process starts at the beginning with planning your strategy for a certain category, running sourcing events and contract negotiations with pre-approved suppliers.

For example, Kelly is looking for qualified suppliers who are driven, ethical and sustainable but she is having a hard time finding the right ones through the large number of suppliers. She also wanted to make sure that once she found her suppliers, she could create an effective and risk free contract without it taking up too much of her time.

She needed a shorter cycle time for her product to get out to the market fast and wants a 360 degree view of the company spend throughout the whole process.

By digitalizing her source to contract process, she was able to integrate supplier management, the core templates and the best practices with easy reusable content. She was then able to create quicker supplier contracts and reduce source to contract cycle time. This is the Strategic Sourcing Suite.

1. Define and create strategy the category
   • Effective category strategies for increased spend under management
   • Sourcing processes completely aligned to supplier segmentation and qualification to mitigate supply chain risk
2. Identify and source materials and services
   • Strategic sourcing as a means of increasing savings
   • Significant reduction in sourcing cycle times and administrative costs
3. Negotiate and manage contracts with trading partners
   • Comprehensive contract management to drive consistency and accuracy

1. Digitalize the process and improve efficiency

   Having everything in your company integrated into one system will:

   • Reduce the sourcing cycle time and onboarding time
   • Have a faster time to market for new products and creation of new contracts
2. Increase average annual savings

   With higher annual savings and a higher cost reduction savings, an organization can come from:

   • More opportunity to run competitive sourcing events such as two different kinds of auctions at the same time or quicker more frequent events
3. Improve compliance

   With an increase in visibility in contract spend, you can see:

   • A higher addressable spend under contract
   • Increased consistency of sourcing processes across all categories of spend
   • Increased collaboration between engineering, sourcing, and suppliers
   • Better BOM visibility and integration with sourcing process

Companies who use SAP Ariba sourcing and contracts solution tools achieve:

• Process efficiency across all spend categories
• Increased spend under management
• Contract compliance through ERP integration
• Faster sourcing and contracting with integrated master data across systems
• Better management of complex bills of materials with product lifecycle management (PLM) integration
• Greater pricing and forecasting visibility
• Improved supplier selection and lower risk

This video describes, in detail the different sourcing processes and how to manage product sourcing.

This video helps you understand how the product sourcing process works for material quotes.