Glossary
Source-to-Pay (S2P)
Source-to-Pay is the end-to-end process that covers everything from sourcing strategy and supplier selection through to paying for delivered goods and services. It’s broader than Procure-to-Pay: it extends upstream into strategic sourcing, supplier evaluation, and contract management, across the full lifecycle of a buyer’s commercial relationship with its suppliers.
What It Is
Procure-to-Pay (P2P) starts at the point of an identified purchase need. Source-to-Pay starts earlier: at the strategic level of deciding which suppliers to work with, negotiating contracts, and setting the terms that govern every transaction that follows.
The decisions made at the sourcing stage (which suppliers to select, what payment terms to negotiate, what quality standards to require) determine the efficiency of every downstream P2P transaction. Strong sourcing sets the foundation for strong procurement.
For supply chain finance, this is where the important decisions happen. Payment terms, reverse factoring access, and dynamic discounting are all negotiated during supplier contracting, not at invoice approval.
The Full S2P Process
Stage 1: Category Management and Spend Analysis
Procurement teams analyse total spend by category, supplier, and geography, looking for opportunities to consolidate suppliers, leverage volume, and improve contract terms. Spend visibility is the starting point for any strategic sourcing initiative.
Stage 2: Market Analysis and Supplier Identification
The market is assessed for potential suppliers. Existing suppliers are benchmarked against alternatives. New suppliers are identified and evaluated for capability, capacity, financial health, and compliance.
Stage 3: Request for Information (RFI)
An RFI is sent to potential suppliers to gather information about capabilities, capacity, certifications, and financial stability. It collects facts without committing to a purchase.
Stage 4: Request for Proposal / Quotation (RFP / RFQ)
Shortlisted suppliers submit formal proposals or price quotations. Evaluation criteria typically include price, quality, lead times, payment terms, sustainability credentials, and service levels.