STRATEGIC

GLOBAL
SOURCING
Chapter – 03

Source to Settle (S2S)

WHAT IS SOURCE TO SETTLE
 We used to see the procurement (or purchasing) function
as a stand-alone process—isolated, as it were—to
essentially transactional activities such as issuing purchase
orders and expediting deliveries, we now see the overall
function as consisting of multiple interconnected services.

 Today, many organizations view this expanded concept of

procurement as a start-to-finish process that begins with
supplier sourcing activities and concludes when the
supplier is paid.
S2S IDEA
WHY SOURCE TO SETTLE?
 There are a number of compelling benefits to employing an
S2S operational strategy.

 As an integrated process, S2S enables an agile approach to

fulfilling customer demand, and moves the organization
toward the full scope of managing the entire supply chain
effectively.
ISSUES DISCUSSION
 If you carefully examine the acquisition processes of most
organizations, you will likely find that they are highly fragmented
and decentralized. Often the supply sourcing function is controlled
by the end user; geographically dispersed organizations conduct
sourcing and procurement operations independent of one another.
Spend data are often nonexistent; when such data exist, often they
are inaccurate due to the lack of quality in the data gathering
process. This fragmentation leads to costly inconsistencies, such as
implementing multiple sourcing strategies across the organization
and encouraging redundant activities.
WHY SOURCE TO SETTLE?
 Issues

 LACK OF UNIFORM PROCESSES

 LACK OF COMPLIANCE
 Approval work flow
 Conflict of Interest
 Open Competition
BOOK EXAMPLE
WHY SOURCE TO SETTLE?
 Objectives and Benefits of an S2S Process

 COST REDUCTION/COST AVOIDANCE

 SPEND VISIBILITY
 REGULATORY COMPLIANCE
 STANDARDIZED PROCESSES
 REDUCED TRANSACTIONAL COST
 SUPPLIER INTEGRATION
 RISK MANAGEMENT
BOOK EXAMPLE
 An Example of Contract Risk

 Toward the end of the dot-com boom, in the summer of

2001, Cisco Systems, a leading computer network company,
startled analysts with the announcement that it had its first
loss of earnings in more than 10 years. Sales of its products
were down by about 30 percent. As a result, Cisco had to
write off inventory, both on hand and committed to
purchase, worth a reported $2.2 billion. This write-off
occurred despite the sophisticated technology Cisco had in
place to monitor economic conditions.