Source-to-Pay: How to Master the Process — Part 1
Sourcing and Procurement professionals live in the Source-to-Pay process each day to create value for their organizations and the overall value stream in which they work. Whether you’re new to the Sourcing and Procurement world or you’ve been in the profession for years, I’m glad you’re here for the journey of Mastering the Source-to-Pay Process.
During this mastery journey, we will discuss key sub-processes within the overall Source-to-Pay Process for goods and services. This journey will focus on the pain points experienced and how to shift them into gains for you and your organization.
Before we get into the sub-processes, let’s start with the high-level view of Supply Chain Management.
Supply Chain Management
The Supply Chain involves Operations, Sourcing and Procurement, Manufacturing, Inventory Management, Distributors, Warehouses, Logistics, Retailers, Suppliers, and other pieces of the larger puzzle that enables the creation of value and improves the long-term performance of enterprises and the supply chain as a whole.
The goal of Supply Chain Management is to maximize value creation as it moves product or services from their origins of supply to their point of final consumption while driving innovation, transformation, continued improvement, integration, and collaboration.
The larger context of Supply Chain Management drive the perspective that each of these key business functions must work together to achieve goals with a focus towards value creation from the source all the way end customer or consumer.
Source-to-Pay Process
McKinsey defines the Source-to-Pay process as “the end-to-end value stream that encompasses all the activities required for an organization to obtain and pay for goods and services from other entities.”
This process is segmented into four main sub-processes:
- Source to Contract: This process is key in finding sources of supply for goods and services that are needed by the organization, selecting the right supplier to achieve desired goals, and leveraging the right contracting strategy to achieve a win-win outcome.
- Procure to Invoice: This process takes the executed contract and starts with a purchase requisition, generating a purchase order for the scope required, and receiving the scope of that purchase order.
- Invoice to Pay: This process starts with receiving an invoicing from suppliers, getting the necessary approvals, and processing the payment according to payment terms.
- Supplier Management: This process focuses on a win-win relationship between customer and supplier to maximize return on investment (ROI) and minimize risk in the supply chain.
In future articles, we will be looking at these key processes within the Source-to-Pay Process, their pain points, and how to address them to drive to increased value creation for your organization and the supply chain as a whole.
See an index of all the articles in this series below.
