Source to Procure Optimization
Enterprises often focus too narrowly on cost savings and lose sight of critical measures like improving bottom line impact, reducing total cost of ownership (TCO), improving customer satisfaction and achieving global cost competitiveness. The approach outlined in this paper focuses on achieving these outcomes by maximizing their source to pay (S2P) function and becoming a maturity ranked 5 best in class S2P operation. Best in class sourcing and procurement organizations achieve performance levels that are – at a minimum – 2-5 times higher than average organizations. For a typical US$5 billion company, that can mean a total spend reduction of US$100-175 million and a margin increase between 100 and 300 basis points in three years or less – statistics that no chief financial officer (CFO) can afford to ignore.
Best in class S2P also emphasizes the role and impact of the “non-pricing levers” of the source to pay process, like adherence to compliance, effective demand management, PO Management (P2P) and spend visibility, to elevate S2P organizations' performance.
This paper highlights how CPOs and CFOs can deliver bottom line impact by:
- Setting cost-savings and spend under management (SUM) enterprise and business unit (BU) objectives of uplifting their SUM to above 85% world class status or a maturity ranking of 5 in S2P operations
- Managing the spend portfolio effectively within each BU/profit and loss
- Setting organizational and policy framework for effective spend analytics, sourcing, contract management and buying processes through a compliance and controlled P2P process
- Partnering with a third party service provider to achieve the desired results by bringing in experts that can uplift the SUM throughout the total enterprise as well as by commodities with focus on compliance and control
