Table of Contents
Introduction
Strategic sourcing is a supply chain management process that determines the manner in which information is collected and used by an organization so that it could get full benefits for its purchasing power to make it valuable in the market. The process of strategic sourcing requires a detailed analysis on what the organization should purchase, where the organization ought to make its purchases from, the best price to make the purchase, and the volume at which the purchases should be done (Chipiro, 2010). There exist some contrasts between strategic sourcing and conventional purchases made by an organization since more emphasis is placed on the product’s entire lifecycle but not only on its initial purchasing price. The concepts of procurement have evolved over the last few decades. In cases where the procurement process used to be a stand-alone process with isolated activities such as the issuance of purchase orders and accelerates deliveries, the current overall functions are now interconnected. In this decade, most organizations brand this wide concept of procurement as a wake-up call to realign the procurement sources so that they multi-function by beginning with sourcing of suppliers and end with their payment (Marshall, Heffes, & Marshall, 2007). Most successful organizations that are focused on achieving their objectives tend to deploy a Source-to-Settle (S2S) strategy since it has the ability to integrate procurement, sourcing, and accounts payable. Source-to-Settle strategy empowers organizations’ procurement processes; thus enabling them to strategically manage their supply chains.
Pujawan (2004) states that Source-to-Settle integration normally takes place by the aid of enterprise application software (EAS) or even business process outsourcing (BPO). On the other hand, this concept can be implemented in any environment of an automated business process. Source-to-Settle operational strategy comes with several benefits. One of the most outstanding benefits is that it allows for an agile process that fulfills the demands of customers; thus propelling the organization towards a successful management of its supply chain and improving compliance by the aid of an effective auditable process (Marshall, Heffes, & Marshall, 2007). Other than dealing with issues that arise in supply chain management, a number of objectives can be achieved by the organization through this strategy. These objectives include a reduction in cost, avoidance of extra costs that arise in the supply chain, better regulatory compliance and increased visibility in spending.
Katakol, Makhija, Nagalkar, and Solanki (2015) state that a lot of aspects are involved in the Source-to-Settle processes more than can be found in other procurement modules used in an organization. Some of the imperative aspects that are required in this type of procurement cycle include accuracy, compliance, efficiency, and performance (Katakol, Makhija, Nagalkar, & Solanki, 2015). Accuracy ensures the identification of the right categories and tracking of saving made by the organization. Compliance ensures that the organization is up to date on issues pertaining insurance and regulatory requirements, the effectiveness of pricing procedures and the Sarbanes–Oxley Act (SOX). On the other hand, performance and efficiency dictate for the presence of an integrated process, management of supplier performance and their collaboration (Pujawan, 2004).
When the process of acquiring organizations is carefully studied, it can be realized that these acquisitions are highly decentralized and fragmented. In many cases, the function of supply sourcing is regulated by the end user. It is to insinuate that for organizations that are geographically dispersed, operations in the sourcing and procurement are carried out independently from one another (Katakol, Makhija, Nagalkar, & Solanki, 2015). Data on spending usually do not exist, and when these data are exist, they may be inaccurate due to lack of quality in the processes of gathering data. On the other note, operational visibility is reduced in the manual processes of supplier spending and selection patterns. The available information is often untimely and spotty. It is therefore important to note that compliance is not encouraged without centralized contracting approach (Katakol, Makhija, Nagalkar, & Solanki, 2015).
A number of organizations underestimate the effects that procurement could have on the overall performance of the organizations in the marketplace. Balaji and Choudhary (2011) explain that modern tools of procurement that sensitize on efficient financial and non-financial tools always allows the managers of supply chains to go an extra mile towards the creations and addition of value and the increase on the company’s returns on investments (ROI). To be specific, Source-to-Settle has the ability to empower the procurement transformation procedures; thus enabling organizations to effectively and strategically manage the organization’s supply chain (Balaji and Choudhary, 2011). According to Blame (2015), the best performing organizations deploy procurement automation more frequently across the Source-to-Settle cycle. Blame further adds that the procurement team of a company should have the capacity to accomplish with improved speed than just acquiring widgets.
Major Drivers of future maximization of the Supply Chain
For Source-to-Settle to act as a major revenue driver, it is essential that organizations get the right partner to assist them to implement a supply chain process that is streamlined, outlined and transparent. Many organizations deploy a phased Source-to-Settle project where different processes are accomplished in different phases of time (McHugh, 2011). The most effective and direct avenue to the success of Source-to-Settle commences with a grand plan to evaluate the whole process and incorporates all the stakeholders of Source-to-Settle. Discussed below are some of the considerations that organizations should emphasize when in need of an integrated Source-to-Settle strategy that will enhance the performance of organization’s supply chain.
Cloud-based service and collaboration
The advantages of software as a service (SaaS) are broadly acknowledged and understood. These include flexible accessibility and time constraints. Stakeholders and buyers can also interact easily and effectively, and role-based security will make sure that every individual can only have access to authorized information (McHugh, 2011).
Automation in workflow management
Even though it sounds simple, simple tasks are not always good problem solvers. In order to implement the complex decisions making tools required by organizations, and capabilities of rapid response to result in the highest returns on investment, automation must be a part of the workflow process. It is advisable that organizations look out for trigger based processes, branching and parallel executions that are launched through the integration with additional systems (McHugh, 2011).
Networks of next generation
Most organizations can agree to the fact that they do not like supplier networks. In this decade, the core of supplier management universe is formed by the supplier network. With the presence of a ‘many-to-many’ approach avails several alternatives to organizations that are out there looking for suppliers to cater for their needs.
Predictive Analysis
In order for organizations to achieve competitive advantage, there is a need for them to predict markets and events in their respective industries. A predictive analysis carried out by an organization enables them to combine data from business, supplier and market activities and take advantage of opportunities that may arise; thus avoiding disruptions that were expected in the supply chain.
Source-to-Settle and Big Data Management
In the current digital era, organizations and the procurement departments swim a lot of data from outside and between departments. In the past, procurement processes were carried out manually, transaction-oriented and paper-based. All these have changed over time following the wave of digitization that has taken place globally (Chipiro, 2010). At the moment, big data influences and drives the business world in one way or the other. A big data crisis is also sweeping business firms and procurement teams in the same organizations. When the right individuals, technologies, and process are put in place, big data crisis can be shifted from a challenge to various opportunities for the organization that could transform the operations and value delivery for the enterprise.
Benefits of Source-to-Settle in Strategic Sourcing
When Source-to-Settle cycle in the procurement process is discussed in an insight, the entire procurement process of this strategy is divided into the upstream that is regarded as the value creator and the downstream regarded as the value capturer (Franchi & Alao, 2017). Franchi and Alao also explain that in the case of high-functioning procurement procedures, the upstream is responsible for setting the organization up towards success while the downstream process brings the savings of the organization back home. The Source-to-Settle strategy also offers firms the chance to shift transform the manual labor-intensive processes of procurement into an effective goal-oriented process that can ensure cost savings and general efficiencies in the procurement process. Additionally, this strategy can also aid organizations to protect themselves against their operational and financial challenges in the present evolving global economy. The selection and implementation of solutions are imperative investments of money and time. These solutions require critical consideration of several determinants that will decide the success or failure of these procurement transformations (Sollish & Semanik, 2011).
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Applicability of Source-to-Settle Concept to Student’s Work
First, the knowledge and understanding of the Source-to-Settle concept are very imperative to students, more so those concentrating on procurement procedures in their studies. Students who have knowledge and understanding in procurement concepts and procedures are aware that when an organization decides to carry out the implementation of Source-to-Settle (S2S), then it has no other option but to procure and install existing software packages from software vendors or even create its own software applications (Pujawan, 2004). Another significant aspect of having the knowledge of this concept is that it prepares students by equipping them with different elements used and deployed by the concept. It prepares them for the future in case they will be employed as procurement officers since they will be expected to implement these concepts in a bid to help the organization achieve its goals.
Additionally, since the Source-to-Settle has the ability to improve the standardization of processes and capturing of information that is actionable, student who understand the entire S2S concept and how it benefits the procurement team are able to meet strategic objectives if they become part of the procurement team in their future employment endeavors (Chipiro, 2010). Other than meeting organizational standards, they will also be expected to meet commitments for the sake of customers, reduce the risks that organizations face in the procurement process and improve the supply chain process in their future responsibilities.
- Balaji, N., & Choudhary, L. (2011). Optimized multi criteria decisions in supply chain organizations using AHP Model-A Review. SRM Management Digest-2011, 515.
- Blame, K. K. (2015). Evaluating the Procurement Processes in the Ghana Armed Forces (Doctoral dissertation).
- Chipiro, D. D. (2010). The impact of e-procurement on strategic sourcing: a case study (Doctoral dissertation).
- Franchi, A., & Alao, O. O. (2017). Procurement management for efficient delivery of large infrastructure projects. Research Gate
- Katakol, S., Makhija, S., Nagalkar, D., & Solanki, A. (2015). U.S. Patent Application No. 13/957,053.
- Marshall, J., Heffes, E. M., & Marshall, J. (2007). BPO: Developing Market, Evolving Strategies. Financial Executive, 23(5), 38.
- McHugh, N. (2011). What is driving commercial purchasing card growth? Journal of Corporate Treasury Management, 4(3).
- Pujawan, I. N. (2004). Procurement in manufacturing organization: Portfolio and the use of the internet. Jurnal Teknik Industri, 5(1), pp-13.
- Sollish, F., & Semanik, J. (2011). Strategic global sourcing best practices. John Wiley & Sons.