Outcome Driven Solutions

Sourcing Operations

Drive Materials Cost Savings and
Optimization Across All Sourcing Efforts

Sourcing Operations is a structured framework for managing category strategies, spend analysis, supplier selection, competitive bidding processes, and pricing evaluations. It standardizes procedures, aligns procurement practices with organizational objectives, and establishes clear policies and workflows for securing goods or services from external sources.

By incorporating activities like market basket consolidation, multi-round sourcing steps, and consistent data management, Sourcing Operations ensures procurement initiatives are executed systematically and according to defined protocols.

ODS implements ServiceNow Sourcing Operations to help businesses secure high-quality goods and services at optimal costs, directly impacting profitability and competitiveness.

Case Study: Sourcing Operations
with ServiceNow Source-to-Pay

Before implementing ServiceNow Source-to-Pay, the procurement and technology teams faced numerous challenges related to fragmented data, inefficient spend intelligence, and disorganized sourcing strategies. These inefficiencies led to unrealized discounts, increased overhead, and a lack of transparency in procurement processes.

The customer, a prefab housing manufacturer, sought a solution to optimize sourcing efforts and streamline operations.

Challenges Before ServiceNow Source-to-Pay

ODS identified several key challenges in their existing sourcing processes:

  1. Fragmented and Disparate Data: Information related to products, volume, pricing, suppliers, and contracts were scattered across multiple sources, limiting visibility and analytics.
  2. Incomplete Spend Intelligence: The consistency of spend classification was weak and fragmented, obscuring insights into strategic sourcing and cost optimization opportunities.
  3. No Organization-Wide Sourcing Strategy: Most sourcing did not take advantage of volume aggregation, category management, long-term contracts, and ‘best-practice’ sourcing strategies.
  4. Limited Partnering with Business Units: Business unit frustration with long sourcing cycles lessened collaboration between Sourcing and IT, leading to reactionary rather than strategic sourcing.
  5. Manual and Tactical Sourcing: The competitive bidding process relied heavily on email and spreadsheets, creating a lengthy sourcing cycle and limiting the volume the Sourcing Team could handle.

Why They Chose ServiceNow Source-to-Pay

After considering several options, they chose ServiceNow Source-to-Pay because it offered the right balance of capabilities for their requirements:

  1. Centralized Data Management: Consolidating and enhancing procurement spend data into a single platform enabled the analytics to drive strategic decision-making.
  2. Strategic Category Management: Spend data was categorized, and sourcing efforts focused on groups of similar products and services, enabling better negotiations.
  3. Real-time Analytics & BI Dashboards: Enhanced analytics capabilities helped identify price variances and volume consolidation opportunities, leading to rapid cost savings.
  4. Streamlined Bidding and Price Comparisons: Replaced a highly manual quote request and analysis process with a streamlined, centralized solution, significantly accelerating sourcing cycle times.
  5. Embedded Savings Tracking provided management with real-time visibility into savings results.

Outcomes Realized After Source-to-Pay

The effectiveness of their new Sourcing Operations solution was measured using several key performance indicators:

  1. Category Management: Through strategic grouping of products and services, aligned with preferred suppliers, in some areas, they found savings of up to 16%
  2. Sourcing Process Optimization: With bid process automation and prioritized task management workspaces, they reduced sourcing effort by 36%.
  3. Product Price Benchmarking: Part-level price analysis reduced costs on individual items by up to 17%.
  4. Market Basket Pricing Model: Category analysis for a basket of products across all vendors provided the lowest cost baseline to negotiate pricing better than the current best pricing.
  5. Dynamic Reordering: Self-adjusting reorder point thresholds optimized inventory levels while reducing the effort to monitor and reorder inventory by 47%.
  6. Efficiency Gains: By decreasing the time spent on sourcing requests, they could increase their sourcing volume.
  7. Lower Carrying Costs: They reduced carrying costs by 23% through dynamic reordering and vendor-managed inventories.

Measured Results from First Year in Production

1st Year Recovered Spend: $6.3 million

1st Year Recovered Hours: 7,342 Hours

Go Live: 6 Months

Days to Break Even*: 47

These metrics underscore the rapid ROI and tangible value that you can unlock using ServiceNow Sourcing Operations.
While these numbers are good, we typically see a steady increase in savings in years 2 and 3.

Benefits Realized

Benefits To the Procurement Team

  1. Spend Management & Cost Optimization
    • Better collaboration with business stakeholders facilitates strategic planning, leading to better pricing and delivery.
    • Better pricing through volume aggregation.
    • Category management strategy, grouping similar products and/or services and aligning purchases with appropriate vendors for additional savings.
    • Multi-year contracts enable leveraging several years of purchasing volume to deliver additional price incentives. Vendors benefit from long-term commitments.
  1. Compliance & Risk Mitigation
    • Enhanced compliance with bidding and contracting policies through better utilization of sealed bids, competitive bid dollar thresholds, RFPs, and contracting requirements.
    • Approvals and justification for decisions (i.e., not purchasing from the lowest-cost supplier) are captured in-tool.
  1. Process Efficiency & Automation
    • Savings are automatically captured from negotiations and reported via ServiceNow.
    • Vendor-managed inventories lower carrying costs, eliminate shrinkage, and ensure more predictable deliveries.
    • Sourcing operations workflows manage the quote request and RFP processes, eliminating many manual processes and enhancing efficiency.

Benefits to the Technology Team

  1. Budgeting & Cost Control
    • Vendor-managed inventories resulted in lower carrying costs, predictable deliveries, and reduced shrinkage.
  1. Project Delivery & Supplier Performance
    • Better sourcing strategies led to lower costs for delivering projects.
  1. IT & Procurement Collaboration
    • Enabled a common procurement platform for IT and Procurement to source the best products at the best prices.
  1. Automation & Workflow Optimization
    • Improved automation in procurement workflows, reducing inefficient manual processes and enhancing procurement visibility.
    • Enhanced collaboration between IT and Procurement enabled sourcing the best products at the best prices.
    • Comprehensive sourcing strategies led to lower costs for delivering projects.
    • Vendor-managed inventories resulted in lower carrying costs, predictable deliveries, and reduced shrinkage.

Conclusion

Implementing ServiceNow Source-to-Pay transformed the organization’s sourcing process from a fragmented, spreadsheet-driven approach to a centralized, data-driven, automated system. They realized significant cost savings, improved strategic sourcing, and more effective sourcing operations.

Customer Testimonial

“ServiceNow Source-to-Pay has been a game-changer for our sourcing operations. By centralizing our sourcing processes, leveraging real-time analytics, and automating critical workflows, we identified and realized over $6 million in savings within the first year. The efficiency gains have allowed us to recover thousands of labor hours and optimize our vendor relationships, setting a new standard for cost control and strategic sourcing.”

Key Takeaways & Next Steps

  • Actionable Tip: Start with an ROI analysis to establish benchmarks for tracking your results. If you need assistance, ODS has calculators that provide ROI estimates based on standardized practices and decades of previous experience.
  • Benchmarking: Regularly assess your progress with BI Analytics to track project alignment with expectations, avoid surprises, and optimize return on investments.

With the right technology and a clear, outcome-focused roadmap, organizations can achieve rapid, sustainable gains in procurement efficiency and ROI using ServiceNow Supplier Lifecycle operations.

Some incrementaloutcomes delivered by ODS:

Category savings up to 20%
Strategic Category Management
ODS implements structured category management practices, aligning sourcing strategies with business objectives to drive efficiency and cost savings. By aligning UNSPSC standards with sourcing categories, ODS conducts market basket analysis to identify potential savings, enhancing procurement effectiveness. Having a centralized system simplifies regular data reviews, making it easier to conduct reliable spend analysis. Ultimately, this means procurement activities are based on solid, up-to-date information, which is a great benefit for everyone involved.
Lower sourcing costs by 18-22%
Enhanced Sourcing Optimization

Utilizing advanced analytics, ODS optimizes sourcing decisions by balancing cost, quality, and risk factors, leading to improved supplier selection and contract terms. This comprehensive approach ensures that procurement strategies are both efficient and aligned with organizational goals.

Realize annual savings up to
6%
Return on Investment Tracking

ODS provides KPI dashboards that deliver detailed insights into expenditures by category and vendor, enabling organizations to identify cost-saving opportunities and optimize spending. This comparative analysis highlights incremental savings opportunities, facilitating more informed financial decisions.

With advanced analytics at your fingertips, you’ll be empowered to make smarter decisions that match your financial goals and operational needs.

Avoid overpayments
of up to 20%
Product Price Benchmarking

By facilitating comparisons of product prices across suppliers, ODS ensures competitive pricing and supports informed purchasing decisions. Advanced analytics optimize sourcing strategies, allowing organizations to achieve better value in their sourcing efforts.

This approach helps reduce costs while also enhancing the value of supplier relationships.

"By implementing ServiceNow Source-to-Pay (S2P)
we realized over $6,000,000 in savings in 1 year."

Kathy D, VP of Procurement

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TESTIMONIALS

What Clients Say About Us

  • 200% Return on Investment
Disconnected visibility prevented us from taking advantage of volume purchase opportunities. Our team was also wasting 20% of their time on unfunded requests. On top of that, we were paying maintenance on expired infrastructure. We identified savings in the first 12 months that provided us with over 200% Return on Investment!
  • Reduced Efforts by 80%
We no longer blindly overspend our budgets because we have current information at our fingertips; we know what was approved, what has been committed, and our actual spend. After having the solution in place, our tracking efforts have been reduced by over 80%. In total, we've recovered the equivalent of 3 FTEs.
  • Doubled Team Productivity
We have a self-service portal so our consumers can view current status on-demand and make requests with real-time updates.
The level of trust between IT and the rest of the University increased overnight. Doubling the productivity of our teams while making our consumers happier made this a no-brainer.

Want to know your potential savings?

Only ODS has pre-built ROI estimators for the some of the strongest Source-to-Pay. savings categories

We provide our estimates free of charge with no strings attached to every ServiceNow customer.

We want to help them see why we believe Source-to-Pay is one of the smartest ways to maximize the value of ServiceNow