What is the meaning of Source to contract, and how does it works?

What is the meaning of Source to contract, and how does it works?

Source to Contract (S2C) denotes the collection of procurement procedures that a user uses while sourcing a good or service. The Source to contract (s2c) procedure begins with analyzing the needs, creating a sourcing strategy, negotiating the contracts, implementing the contract, and performance management of the Supplier. Source-to-contract technology provides the upstream procurement activity by regulating and automating sourcing operations. Or if the user wants to read more, then we can say that

Source-to-contract (S2C) is the aggregation of procurement procedures adopted while sourcing goods or services. S2C technology assists in coordination, visibility, and continuation of business for procurement teams. The process starts with analyzing the goods or service requirements and creating a sourcing strategy, and the software helps in the following activities:

  • Spend analysis and visibility
  • Electronic Auctions
  • In the management of Supplier base
  • In the Contract management
  • eRFx

Components of Source to Contract (s2c)

As we have mentioned earlier, Source to contract generally refers to the whole procurement system in its entirety. In other words, the s2c system is a collection of processes used by the entire procurement team.

  1. The 1st step in the procurement process is sourcing. Sourcing is an activity performed in the procurement department which is managed by the professionals of procurement. Generally, the sourcing process starts by short-listing qualified retailers. These retailers are normally filtered on the levels of best quality with the best prices.
  2. The 2nd step is to perform a reverse auction in which the retailers bid lesser amounts on the contracts being provided by the company doing the auction till the winner is declared. This assists the company in saving money on procurement operations.
  3. In 3rd step, after the contracts have been given, they move up to the procurement chain and overview for final acceptance before making their way to the accounting department, where it’s processed for payment. Either right on the spot or down the line onto receipt of products and services.

Benefits of Source to contract:

  • Supporting Sourcing Data:

Eliminate the chances of potential human error in the data gathering process. By having quick and easy access to correct sourcing data, decision-making can be quickly based on actual data, not spontaneous. Benefit-tracking records show the true picture of sourcing teams, while figures would be diluted with the annual figures approaching the board.

  • Build up internal and Supplier Compliance:

Digitalization yields more structure, insight, and control to the regular operations. Sourcing procedures can be more easily regulated by using workflow technology. Management can easily reach the dashboard status of the project to evaluate which projects are behind schedule and which are on time. Users can acquire and examine the data from various dimensions to drill down the detail. Supplier compliance is enhanced by getting all data easily and timely available online with final reports. The notifications and red flags are there to warn the buyer of non-compliance.

  • Improve Spend Under Management:

Procurement professionals are fundamentally automating and smoothing operations by digitalizing sourcing. Increase the speed of the cycle time, and improve the %age of spend under management. E.g.:

  • Click on a particular category to see all registered suppliers.
  • The software will accumulate and examine supplier responses, facilitating the buyer by providing one detailed report on the qualitative and quantitative aspects of data for analysis.
  • Push RFx data to an electronic auction or another bidding option.

Electronic Auctions increase savings and majorly reduce the time of negotiation. The average electronic auction stays less than 1 hour without accommodating the quality, which means that days of face-to-face negotiations can be concise into 30 minutes. Supplier onboarding and acceptance procedures become smooth as suppliers register by answering questionnaires and uploading documents for acceptance. A collection of templates on a central platform improve compliance fidelity and efficiencies.

Enhance Auditability:

Audit logs make it clear that who will perform it, what has been performed, and at what time. There is no need to continuously seek emails and search through spreadsheets and collect information for audits. The whole necessary data is easily and readily available in one place. This data may include:

  • Supplier onboarding
  • Messaging details
  • Supplier replies
  • Decisions of the Award
  • Notes
  • eRFx

About the author

Bilal Tahir Khan who owns All Tech About.

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