Contract Management

At least 16 benefits to an integrated source-to-pay solution

Everywhere you look, best-of-breed e-procurement providers are expanding their solution suites, either by building or acquiring code-bases or by developing new modules within an existing framework. At Ivalua, we recently asked Michael Lamoureux, best known as the brains behind the Sourcing Innovation industry blog, to ponder the reasons why suites have become so attractive. He came back with not one, but 16 benefits that an integrated suite provides to organizations pursuing an effective sourcing and procurement strategy.

We thought we’d share a couple of those benefits with our faithful readers. To get all 16 you’ll have to download the full white paper “An Integrated Source-to-Settle Platform Brings Unparalleled Benefits to Supply Management

Reason #1 – Contract Compliance for Buyers

According to analysts, between 30 and 40 cents of every dollar of negotiated savings never materialize in an average organization. Sometimes buyers won’t comply with the business strategy due to lack of training or information, and this is on top of overpayments, duplicate payments and fraudulent payments that can add up to 1 percent of total spend. Lamoureux points out that an integrated source-to-pay solution monitors buyers’ entire range of activity and drives compliance with the procurement department rules.

Access to contracts can also be difficult, and buyers end up negotiating or purchasing items at a higher cost. Different systems share different databases and employees don’t have the cross-system visibility to make an educated decision. And sometimes buyers just want to place the order with a preferred supplier.

“With an integrated solution, the system can easily check to see whether a requisitioned item or equivalent substitute is covered by a contract and, if so, if the order is going to the contracted supplier. In case of an error or an unusual situation, an integrated system sends alerts to the user and may also ask for a managerial override,” writes Lamoureux.

Reason #2 – Supplier Risk

The contract management team holds a considerable responsibility, especially in some critical industries like healthcare and financial services. In some industries, lack of compliance with regulations could seriously damage a company’s reputation and cost a lot of money. Managing this type of risk is one of the strongest arguments for a full source-to-pay solution.

A full source-to-pay solution allows visibility into the entire relationship with suppliers, from initial contract creation to final order delivery. In the case of non-compliance with some regulation or other defined aspect of a contract, a fully integrated system can automatically reject invoices that do not properly reference a contract, that contain product or service line items not covered under a contract, or that include line item pricing that is outside of a tolerance range with respect to contracted or quoted rates.

For more insight from our friend Michael, download the white paper and let us know what you think!

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