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Procurement Challenges and How to Manage Them

Published May 2020

In an increasingly complex environment Chief procurement officers have to face many procurement challenges. They can no longer focus purely on reducing costs and delivering goods and services:

  • The role of procurement within organisations continues to expand, so the challenges faced increase.
  • Processes often involve a long supply chain or at least multiple points of contact.
  • The more complex a procurement process is the more chance there is that something will go wrong.

Errors

Errors can delay or even spell the end of a project. However, they’re not just an inconvenience to the buying organisation. They can lead to:

  • damage of reputation
  • financial loss
  • and in some cases litigation

All things businesses want to avoid.

Whether it’s simple miscommunication, natural disaster or circumstances affecting just one link in the supply chain, having a highly visible audit trail for supplier engagements and purchases is essential.

End-to-end procurement challenges

It’s easy for procurement teams to simply record what is seen as the ‘most important’ aspects of the procurement process. But when it comes to analysis of specific issues, particularly those that escalate to legal proceedings, a secure, end-to-end process can provide the vital information which resolves a situation quickly or secures a win.

The simplest way to ensure an audit trail is to use entirely online processes. Any offline aspects of a process are easily lost and insecure as they’re not managed and rely on users accurately recording all activity. Ensuring every item is recorded; even minor amends to documents or changes to contact details is essential.

Managing Procurement Challenges

Risk management

It is essential to Incorporate risk management into supply processes from the very start. Assessing the risk of each provider, understanding their supply chain and putting plans in place in case things should go wrong is important to secure the supply chain.

Without addressing risk, procurement teams are opening themselves up to what can potentially result in a significant impact on their organisation.

Globalization

The most significant issue we come across with globalization is that of communication between business entities and suppliers.

Technology can help overcome some of the problems of communication caused by globalization. Cloud based eProcurement systems can help to enable companies to set up standard vocabularies for business processes. As data is updated in real time, reporting can be retrieved from anywhere in the world. This enables global collaboration between individuals and suppliers. See our ASL case study here for an example.

Cloud based eProcurement systems not only enable procurement to control cost centrally, but also allow for a degree of regional control. Making sure that all the parties involved get the best of both worlds.

Complex Spend

Every year, companies make millions of purchases that are too small to be handled by procurement or too infrequent to be included in a single vendor catalog. Suppliers are often keen to bypass official procurement processes and employees often find them a burden to be avoided. In 80 per cent of businesses, these categories are often sourced manually using Internet searches, phone, fax, and email, allowing them to bypass the mandated rules or purchasing guidelines.

Reporting and Analysis

As the buzz continues to grow about Big Data and AI, procurement officers need to focus on providing good data. Access to large volumes of data does not help a business. Access to good reporting and analysis tools does. Good business intelligence is crucial to help procurement understand how and why it is being successful and where it is failing.

Plus, If an organisation relies largely on manual processes then it may not be able to trust the data that it is using.

For more on this see the article: Dig Deep for Effective Decisions on Indirect Spend

Want to discuss your challenges and how we can help?

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