Source-to-Contract(S2C)
From spend analysis to a framework agreement in the purchasing system: how the source-to-contract process runs, how it is measured and where tenders and contract signature lose time.
Also known as: S2C · Source to Contract · Strategic sourcing · Sourcing-to-Contract
What is Source-to-Contract?
Source-to-contract (S2C) is the end-to-end process of strategic sourcing, from analysing demand and spend to a signed contract that operational purchasing can order against. It covers spend analysis and demand aggregation, the sourcing strategy, supplier search and qualification, tenders (RFI, RFP, RFQ), bid evaluation and negotiation, the award, and the creation, approval, signature and maintenance of the contract. S2C determines with which suppliers and on which terms purchase-to-pay later operates.
Starts with
A demand or an expiring agreement calls for a sourcing decision.
Ends with
The contract is signed and available in the purchasing system as a source of supply for orders.
Typical phases
- 1
Demand & spend analysis
Spend, the needs of the business units and expiring contracts are analysed and grouped into categories.
- Spend analysis
- Demand raised
- Sourcing project created
- 2
Strategy & supplier selection
A sourcing strategy is set for the category; potential suppliers are identified, assessed and qualified.
- Sourcing strategy defined
- Suppliers identified
- Supplier questionnaire requested
- Supplier qualified
- 3
Tender & negotiation
Requests are sent out, bids collected, evaluated on technical and commercial criteria and negotiated in one or more rounds.
- RFx published
- Bid received
- Bid evaluated
- Negotiation round
- Award decided
- 4
Contract signature
The award turns into a contract that is reviewed by legal, approved internally and signed by both parties.
- Contract drafted
- Legal review
- Contract approved
- Contract signed
- 5
Contract deployment & maintenance
Terms are set up as a framework agreement, catalogue or outline agreement in the purchasing system and maintained, renewed or re-tendered until expiry.
- Outline agreement created in ERP
- Catalogue activated
- Contract amendment
- Expiry or renewal
Business objects and systems
These are the objects the process leaves in the source systems – with timestamps, owners and relationships to each other.
- Sourcing project
- The umbrella for a sourcing decision, with category, owners and schedule.
- Supplier
- Existing or potential supplier, with qualification status, questionnaire and rating.
- RFx event
- Request, tender or auction, with participants, deadlines and rounds.
- Bid
- A supplier’s response to a request, including the versions from negotiation rounds.
- Contract
- Agreement with terms, duration, approvals and a status from draft to expired.
- Outline agreement & catalogue
- The contract as set up in the purchasing system, which orders are released against.
Typical source systems
- Source-to-pay suites (e.g. SAP Ariba, Coupa, Jaggaer)
- Supplier management and spend analytics
- Contract lifecycle management (e.g. Icertis, DocuSign CLM)
- ERP purchasing for outline agreements and catalogues (e.g. SAP S/4HANA MM, Microsoft Dynamics 365)
KPIs that can be measured
- Sourcing cycle time
- Time from the sourcing project being created to the award.
- Contract cycle time
- Time from the award to the contract being signed and available in the system.
- Spend under management
- Share of spend that runs through negotiated contracts.
- Competitive award rate
- Share of awards preceded by competition with several bids.
- Expiring contracts without follow-up
- Contracts nearing their end with no renewal or new tender under way.
Typical problems
Signed but not usable
Time passes between signature and the outline agreement in the ERP. Until then, business units keep ordering on old terms or from other suppliers.
Awards without competition
Under time pressure, contracts are awarded directly or negotiated with a single bid – against the procurement policy and without a documented reason.
Approval loops before signature
Legal, the business unit and procurement approve one after another. Queries send the draft back to the start, and nobody can see where it currently sits.
Contracts expire unnoticed
If the end of a contract does not trigger a new sourcing event in time, contracts roll over automatically or a gap without valid terms opens up.
How Noreja analyses Source-to-Contract
In strategic sourcing, many objects hang together: a sourcing project leads to several tender rounds, each round to bids from several suppliers, the award to one or more contracts, and every contract later to outline agreements and purchase orders. A flat event log has to pick one of these levels as its case and loses the connection. Noreja links them in the event knowledge graph – right through to the purchase orders in purchase-to-pay, so it becomes visible whether a negotiated contract is used at all.
Procurement policies are modelled as the expected order: qualification before invitation, competition before award, approval before signature, outline agreement before the first order. Direct awards, skipped approvals and contracts that never reach the system then show up as concrete cases.
Questions Noreja answers
- In which phase do sourcing projects lose the most time?
- Which awards were made without competition or without the required approval?
- How long does it take from signature until a contract can be used in the purchasing system?
- Which contracts are sent back repeatedly during approval?
- Which contracts expire in the coming months without a follow-up project?
- Which contracts are actually ordered against in purchase-to-pay – and where is spend going around them?
Matching agents from the Minerva Agent Library
Frequently asked questions about Source-to-Contract
What is the source-to-contract process?
Source-to-contract (S2C) is the end-to-end process of strategic sourcing, from demand and spend analysis through supplier selection, tendering, negotiation and award to a signed contract that operational purchasing can order against.
What is the difference between source-to-contract and purchase-to-pay?
Source-to-contract decides from whom and on which terms a company buys, and ends with a usable contract. Purchase-to-pay starts there with the purchase requisition and runs until the invoice is paid. Together, the two processes are often called source-to-pay.
Which KPIs matter in source-to-contract?
Typical KPIs are sourcing cycle time, contract cycle time, spend under management, the competitive award rate and expiring contracts without a follow-up project.
Can process mining be used in strategic sourcing?
Yes. Sourcing projects, tenders, bids, approvals and contracts leave timestamps and status changes in sourcing and contract management systems. Process mining shows the actual flow, waiting times in approvals and deviations from the procurement policy.
Demo cases with a worked-through analysis
End-to-end processes we have played through with findings, causes and measures – some of them touching Source-to-Contract.
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