December 1, 2020
By Nathan

Source To Pay Platforms help in achieving better product costs

Sourcing requires a special focus on every part.  In Direct Materials Sourcing, when 1000’s of parts are sourced, keeping track of every part becomes a challenge. Take the case of Supplier Negotiations – In most organizations, negotiations take place on emails and over phone.  The negotiations conducted over the phone are not documented till they reach the end stage in which case the communication channel shifts to email. The parties negotiate the terms in detail but there is much information that is not documented when the process shifts from phone conversations to email discussions. The process remains fragmented as negotiations alter between emails and phone calls. Add the fact that the negotiation may span dozens of emails and multiple conversations, the result is a highly inefficient process. 

When sourcing for several hundred/ thousands of parts, the process of negotiating becomes unmanageable with the increasing quantum of emails and phone calls. The information gathered from emails and phone conversations has to be manually entered which becomes a time consuming and laborious process when 1000’s of parts are involved. Due to the sheer volume of data, the buyer finds it difficult to locate the suppliers with the right capabilities for each part. This is where spreadsheets break down. Summarizing the information for a part can take several hours, sometimes a few days if not weeks, when there are intervening priorities and a long negotiation. With the process becoming lengthy, fatigue sets in and along with the pressure of Time-to-market, there is a suboptimal settlement between the parties.

For the sourcing process to become cost effective, the negotiation process must be quick and thorough.  This calls for a sourcing platform that allows real-time communication between the buyer and the supplier. Such a platform must allow new and existing suppliers to quote their prices, review terms and place orders. This enables the sourcing manager to easily compare prices between multiple suppliers and engage seamlessly with no information being lost.  

This also enables the supplier response to be quicker. This in turn allows continuous and simultaneous negotiations between qualified suppliers. Accurate, Real time Data is available to all the stakeholders based upon which pricing conversations can be carried.  Multiple rounds of negotiations can be easily conducted while at the same time, shortening the cycle times for sourcing and suppliers. The platform must also eliminate clerical work by supporting the tactical execution of the sourcing process like Supplier Management, Contract Management and automated approval workflows. 

By eliminating all this paperwork, a direct sourcing and procurement platform can enable all stakeholders involved to focus on the technical parts of the process and directly contribute to the bottomline of the organisation.

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