For some time now, the backbone of Procurements digital transformation has largely meant digitizing and automating Source-to-Pay processes. This began in smaller “chunks” (e.g., Source-to-Contract, Procure-to-Pay, Supplier Management, AP automation, etc). Some S2P innovators noticed this trend and worked towards interconnected Source-to-Pay, but for many procurement professionals S2P remains a disconnected, siloed set of technologies and processes.
Those that saw the writing on the wall, stand out as leaders in Procurements digitization. We call them “S2P Innovators”, as they have embraced Source-to-Pay (S2P) technology to its fullest potential, setting themselves apart from their peers. S2P innovators outperformed their peers across most major Procurement KPIs, in particular achieving 56.4% more savings!
This article explores what makes an S2P innovator, the key characteristics that define these trailblazers, why they perform so much better, and the competitive advantages they gain through their advanced use of S2P technology. The research is based on a survey by Ardent Partners of approximately 400 procurement leaders, diving into key decisions, challenges and benefits of Source-to-Pay solutions.
So, What Are S2P Innovators?
Procurement is a critical function in any business. But what sets the top performers apart? Enter Source-to-Pay innovators—the game-changers who elevate procurement to a strategic advantage.
S2P Innovators are procurement organizations that fully integrate and optimize S2P technology across their entire procurement process. Unlike their counterparts who may implement procurement technology in isolated parts of their operations, S2P Innovators utilize a comprehensive, end-to-end approach.
This means they harness the power of digital tools (either separate providers or a single one) from sourcing, contract management, supplier management, and procurement to AP automation, in a well integrated manner, creating a seamless and efficient workflows and dataflows.
See how CACI has outperformed in their industry with the help of S2P Technology.
Characteristics of S2P Innovators
S2P innovators are those who have mastered this entire spectrum, leveraging technology and best practices to drive efficiency, cost savings, and strategic value. These trailblazers go beyond traditional procurement roles.
They integrate advanced analytics, employ automation, and adopt dynamic supplier management techniques. Their objective? To transform procurement into a data driven, value creating function.
Several key characteristics define S2P Innovators:
- Full Scope Technology Integration: S2P Innovators use technology to cover the entire procurement spectrum. The interconnected nature of their S2P solution(s) ensures that all processes/activities and data are accessible from any part of the process and by whomever necessary, from initial supplier sourcing to final payment, providing visibility and control over the entire process. Moreover, processes are informed by the necessary data and workflows are connected.
- Advanced Data Utilization: These organizations excel in using data to drive decision-making. By leveraging advanced analytics and AI, they gain deep insights into spending patterns, supplier performance, and market trends, enabling more informed and strategic decisions. Similarly, connected data and workflows ensure higher degrees of automation as opposed to data silos.
- Emphasis on Collaboration: S2P Innovators prioritize effective communication and collaboration both internally and with their suppliers. This collaborative approach enhances supplier relationships, improves negotiation outcomes, and ensures alignment with business goals. Collaboration with suppliers is brought to life across workflows, projects, information sharing, etc.
- Commitment to Continuous Improvement: They are not content with maintaining the status quo. S2P Innovators continually seek ways to optimize processes, adapt technology to address unique business needs, and refine strategies to stay ahead of the curve and make Procurement a competitive advantage for the organization.
Learn about the best practices, benefits and trends in Source-to-Pay technology in our latest blog: The Comprehensive Guide to the Source-to-Pay Process.
Top Issues Impacting Returns From Source-to-Pay Investments
It’s important to highlight the challenges many face when trying to maximize the benefits of their S2P (Source-to-Pay) technology investments. The top three issues limiting the ROI on S2P technologies are related to data and integration:
- Poor data quality and limited data access within the technology (remember this is something you’re trying to solve for). This hinders insights and decision-making, leading to missed opportunities, inefficient processes, and higher risk. Watch for solutions with multiple databases or underlying technologies across S2P. If you go with a Best of Breed approach, that’s cool but consider how you will maintain data quality.
- Lack of integration, both between S2P technologies and third-party systems. Depending on the complexity of your organization and IT landscape (e.g., multi-ERP), integration capabilities can make a big difference.
- Lack of integration across S2P processes limits end-to-end automation. Integration just at a UI level is not sufficient, there must be seamless interconnectivity at all levels – UI, data, workflow, etc.
As shown by the chart below, in the Source-to-Pay Digitization Study, the three biggest issues impacting ROI of S2P investments are: Poor data quality and/or access (48%), lack of integration between S2P solution and other systems (34%) and a lack of integration across various S2P processes (33%).
Get the latest insights in S2P innovation in Ardent Partners report: The State of Source-to-Pay Digitization 2024.
Why Do S2P Innovators Perform Better?
The comprehensive adoption of S2P technology enables S2P Innovators to achieve significant advantages over their peers. The table below highlights by just how much:
Here’s why companies that lead with source-to-pay technology innovation perform better:
Enhanced Efficiency
Automation of repetitive tasks and streamlined processes free up procurement professionals to focus on strategic activities. This leads to faster cycle times and reduced manual errors, significantly boosting operational efficiency. Source-to-Pay processes need to and even rely on information from different parts of the process (e.g., invoices and supplier information, supplier risk scores and sourcing or payments, purchase requisitions and contracts, etc).
When these processes break down or are siloed, automation is limited. S2P Innovators report efficiency gains ranging from 40% to 80% across their procurement processes. These improvements are driven by the automation and optimization capabilities of S2P technology.
Improved Strategic Sourcing
More interconnected processes and seamless flow of information and data make executing on strategic sourcing strategies more efficient and effective. S2P Innovators competitively source an impressive 55% of addressable spend compared to 42% for S2P Followers. This metric is a key driver of higher savings results and reflects the Innovators’ ability to scale operations and drive more activity.
Greater Savings
By optimizing their procurement processes and leveraging data insights, S2P Innovators can identify cost-saving opportunities more effectively. This leads to higher savings and better financial performance. S2P Innovators achieved actual savings of 8.6% in 2023 compared to 5.6% for the S2P Followers; Innovators have also set much higher targets for 2024 (9.04% vs. 5.78%).
Contract Compliance
A lot of what Procurement is charged with is to drive spend into compliance so that savings can be captured and not just identified. S2P Innovators achieve 67.0% contract compliance compared to 62.7% for Followers.
Better Supplier Management
Stronger relationships and better communication with suppliers lead to improved performance and collaboration. S2P Innovators are able to negotiate better terms, manage supplier risks, and ensure higher quality and reliability. S2P Innovators enable 54.6% of suppliers compared to 38.8% for Followers and so are able to better manage their relationship.
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The Future Of Procurement Is Here—Are You Ready To Innovate?
The journey to becoming an S2P Innovator is not without challenges, but the rewards are well worth the effort. By fully embracing S2P technology, whether starting small or not, seeking seamless data flows, workflows, end-to-end analytics and overall continuous improvement help to achieve significant efficiencies, cost savings, and competitive advantages.
As the procurement landscape continues to evolve, those who lead the way as S2P Innovators will be best positioned to thrive in the face of future challenges.
Get the latest insights in S2P innovation in Ardent Partners report: The State of Source-to-Pay Digitization 2024. The report also examines how S2P innovators are leveraging technology to outpace their rivals and the rising impact of Artificial Intelligence on both strategy and results.
