The 6 Major Procurement Challenges Burdening Procurement Teams Today
In this guide, we walk you through the common procurement challenges and help you overcome them with strategic changes to your procurement practice.
Can you believe that procurement dates all the way back to 3000 BC? The ancient Egyptians used scribes to track material procurement and supply. From then to now, procurement has come a long way and undergone massive transformation.
From being regarded as a tiny part of business operations, procurement today is seen as the cornerstone of businesses. Excellence in procurement is a must for businesses to succeed in these challenging times.Sourcing Poor Quality Products to Cut Down Costs
This is one of the biggest procurement challenges faced by sourcing managers is to strike the right balance between costs and product quality. Very often, businesses that sacrifice quality over cost, end up losing the trust of their customers.
Supply Risks
The pandemic has shown us how fragile supply chains are, With country after country closing their borders, supply risk was one of the top procurement challenges in 2020 and 2021. Supply risks include potential frauds, market risks, lack of quality, delays, missed deliveries and more. Besides these risks, the procurement team also has to deal with policy adherence, corruption and other compliance risks.
Procurement professionals are tasked with identifying the right suppliers to ensure product stability and timely delivery of goods and services. Additionally, procurement managers have to ensure that all delivery demands are met at all times. Risk mitigation is one of the major procurement challenges and the one in which the majority of time is spent on.Lack of Supply Chain Transparency
With supply chains getting more and more complicated, spreadsheets are no longer adequate to organise and analyse data. Transparency and visibility across the supply chain is a key factor in meeting compliance requirements and in mitigating risks. A recent market study by Deloitte reveals that 65% of procurement professionals do not have visibility beyond tier-1 suppliers.
Uncontrolled Spending
Uncontrolled spending is another major procurement challenge. Last-minute rush orders, accidental orders, purchasing additional items from suppliers, purchases made outside established procurement practices all lead to indirect spending, which leads to loss of revenue. The only way to avoid uncontrolled and unplanned spending is by increasing visibility and planning ahead.
Inaccurate Data
Inaccurate data is another major procurement challenge. With the procurement process getting automated, it has led to fragmented systems that do not communicate with each other. As these programs are not interlinked, there arises a need for manual data entry, which causes errors.
Without accurate and reliable data, organisations cannot make sound procurement decisions. This could lead to excessive ordering, inventory shortages, supply delays, bottlenecks and more, all of which impact the organisation’s bottom-line.
Compliance
With supply chains having dozens of suppliers and contact points, it’s becoming increasingly difficult to ensure compliance from start to finish. It’s becoming difficult for businesses to track whether their suppliers meet compliance standards.
Automation is the Future of Procurement
Procurement challenges can be overcome with the right tools and technology. Automating the procurement process frees procurement professionals from micro-managing each step of the process. Additionally, automation helps in eliminating manual errors, and provides procurement teams with accurate and reliable data, thereby increasing procurement efficiency. Procurement efficiency is a must for businesses to succeed in today’s globalised business environment.
If procurement challenges are disrupting your business flow, then it’s time to invest in the right tools to upgrade your procurement process. The right tool can help you assess new suppliers, onboard them, get a complete view of all procurement data from a single place. The right tool can also help you evaluate supplier quality periodically, reduce risks, improve visibility and offer data-driven insights to help you make smarter decisions.
