Jasmine Birtles
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Automating the Source-to-Pay Process with Cutting-Edge Tech
Moneymagpie Team
29th Nov 2023
Procurement teams have long sought the holy grail of a fully automated source-to-pay (S2P) process. Automating these workflows can drive major efficiency gains, cost savings, and value creation. However, traditional automation efforts using manual integration have fallen short.
Fortunately, a host of new technologies like robotic process automation (RPA), machine learning, and natural language processing (NLP) could finally make end-to-end automation a reality, opening up a new opportunity for business owners to boost their bottom line.
In this post, we will discuss these emerging technologies enabling next-level S2P automation and provide guidance on getting started. Let’s dive in!
- What is the Source to Pay Process?
- Emerging Technologies Enabling S2P Automation
- Getting Started with S2P Automation
- Final Word
What is the Source to Pay Process?
The source-to-pay process encompasses all activities from procuring goods and services to making payments. Key steps include:
- Sourcing: Identifying suppliers, obtaining quotes, negotiating contracts
- Ordering: Raising purchase orders and sending to suppliers
- Receiving: Accepting delivery of goods or services
- Invoicing: Receiving and approving supplier invoices
- Payment: Making payments to suppliers
The source-to-pay process requires cross-functional coordination between procurement, finance, suppliers, and business units. It’s not just a siloed procurement function. S2P encompasses strategic activities like choosing suppliers, negotiating contracts, and managing relationships. But it also includes high-volume transactional tasks like processing purchase orders and invoices.
The end-to-end process is filled with chances to drive efficiency, cut costs, improve compliance, and boost control. Automating S2P unlocks these savings opportunities. Even better, it lets employees shift their focus from repetitive administrative work to more value-added analysis, decision-making, and relationship management. An automated source-to-pay workflow also feeds accurate, up-to-date spend data into critical downstream processes like compensation management for data-driven decision-making.
Emerging Technologies Enabling S2P Automation
Several cutting-edge technologies can overcome previous barriers to automating source-to-pay:
Robotic Process Automation (RPA)
RPA uses software “bots” to emulate the repeatable tasks humans perform on software systems. The bots interact at the user interface level, avoiding complex integration requirements. RPA is ideal for high-volume, rules-based S2P processes like invoice processing. Bots can also help companies integrate disjointed systems by removing manual workarounds. This helps stitch together automated workflows across the entire S2P process.
Machine Learning
Unlike RPA, machine learning algorithms can handle non-routine tasks requiring judgment. This makes ML suitable for things like properly categorizing spend data. One financial institution greatly improved the speed and accuracy of spend analysis for savings opportunities using ML. Machine learning delivers insights that would not be possible manually. For example, ML can track and evaluate negotiation outcomes to provide tailored recommendations on negotiation strategies most likely to succeed.
Smart Workflows
Smart workflow platforms coordinate work across people, systems, and bots. They define rules for dynamic routing and task hand-offs. A business services company is piloting smart workflows to manage the cross-functional process of supplier onboarding and risk management. Smart workflows link humans and machines into end-to-end processes with clear handoffs. This is extremely useful for workflows like supplier risk management that differ case-by-case.
Natural Language Processing
NLP technologies analyze unstructured text data like emails, documents, and social media. This allows easy integration of free-form procurement data. NLP is being used to automatically interpret purchase orders and match them to qualified suppliers. By processing unstructured data, NLP provides a convenient bridge between human-readable information and structured databases used by RPA bots and analytics systems.
Cognitive Agents
Cognitive agents leverage vast knowledge bases to understand context and recommend actions. They power chatbots and complex tasks like sourcing recommendation. By comparing products and suppliers, cognitive agents may someday suggest optimal sourcing arrangements. In the near-term, cognitive agents can improve help desk interactions by answering supplier and buyer questions based on existing knowledge bases.
Getting Started with S2P Automation
- Conduct Assessments – First, conduct assessments of your current processes to identify automation potential based on the capability requirements of each task. Estimate the size of the value opportunity from closing each automation gap in terms of potential efficiency gains, cost savings, and improved controls.
- Prioritize Opportunities – With gaps and opportunities mapped, prioritize areas to focus automation efforts. Start with quick wins like RPA for high-volume transactional activities. But also pursue automation for strategic sourcing tasks with bigger long-term value impact.
- Balance Value, Cost, and Feasibility – When evaluating automation opportunities, balance the ROI value with total cost of ownership and technical difficulty. Favor solutions like RPA that are quicker and cheaper to implement in early phases
- Phase Implementation – Rollout automation in stages focusing on end-to-end improvement of discrete S2P sub-processes. Deliver early successes to gain buy-in for more advanced automation down the road.
- Continuously Improve – Use analytics and feedback loops to continuously improve upon automated processes. Expand automation and enhance value creation over time.
- Focus on Change Management – Don’t underestimate the importance of change management. Get stakeholder and employee buy-in through involvement and communication. Support reskilling and adaptation to new roles and ways of working.
- Partner with Technology Experts – Partnering with specialist automation vendors and integrators is crucial. Leverage their expertise to implement solutions tailored to your needs and environment.
Final Word
The promise of fully automated, touchless source-to-pay has lingered just out of reach for procurement teams. However, emerging technologies like RPA, machine learning, NLP, and cognitive agents finally make comprehensive S2P automation achievable.
If you want to get started with automated S2P, you should start by analyzing the automation potential for each process based on the required capabilities. Quick wins like RPA for transactional activities can fund pilots of advanced automation in strategic sourcing and other complex tasks. The roadmap should balance automation value, cost, and complexity. But even starting small can generate savings from efficiency gains, lower processing costs, and tighter compliance.
With a thoughtful strategy grounded in business value, cutting-edge technologies can optimize and automate source-to-pay, helping you to boost savings, gain strategic advantages, and realize the long-sought goal of fully automated S2P.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.
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