Procurement Challenges Condensed

Published September 2019

1: Introduction

I took on the challenge of writing a condensed version of all the current Procurement challenges. Basing this on the many articles I have read covering this subject. I rapidly came to the conclusion that these articles were excellent at the helicopter view of the challenges, however seemed unable to apply categorisation to the challenges.

I believe the issue with these articles is the broad range encompassed by the word Procurement and the constant change within this domain. To my mind, your challenges depend on where you are in transformational change within your organisation, the scope of your function within Procurement and the nature of the organisation’s supply chain.

For example, is your focus on strategic long-term supply relationships to support your manufactured product? Or are you perhaps focused on the supply of marketing branded goods?

These two procurement domains have distinctly different challenges. Yes, there are areas where you can identify common challenges across key procurement domains such as technology, market intelligence, organisational alignment and cost reduction.

Exploring the Not for Profit procurement differences

However, there will be fundamental differences in the challenges that are faced as you dig down below these headline terms. Plus, they will both be experiencing distinctly different change dynamics.

So, my article started to balloon into a much wider piece and I therefore decided to tabulate my thoughts rather than write a long-winded article. Condensing the thoughts into bullet points.

The following tables are my first attempt to do this and I would welcome any feedback (chris.haddock@claritum.com), so that I can improve and develop this model.

2: Breaking Down the Domains

So, let’s start this article by breaking down the domains by nature of purchases. If we can do this, perhaps, we can then start to align challenges with these domains at a slightly lower layer than the obvious headlines.

These domains are not your classic procurement categories. These classic categories are aligned within the domains I am defining. Here we are trying to group categories that would have similar challenges.

The following table is my first attempt to do this and I would welcome any feedback (chris.haddock@claritum.com)

Procurement Domain Name

Procurement Domain Description

Manufacturing supplySupply of parts for a product
Process supply (commodities)Purchasing raw materials that are needed within a process industry (for example oil or chemicals)
Marketing Supply (Hard)Physical marketing goods that are necessary to promote your business

Marketing Supply (Soft)

Marketing services and systems
Infrastructure (Hard)Office space, machines, uniforms or physical tools that are necessary for your business to function. These have a longer shelf life, unlike consumables below.
Infrastructure (Soft)Software tools that are necessary for your business to function
ResourcingPurchasing resource time of people. This would include consultants, marketing agencies and accountants for example.
UtilitiesGas, water and electricity for example
TravelTravel related requirements for employees
ConsumablesThis would include, for example, office supplies and any food/drink for office consumption.
Logistics / FreightThe purchases associated with the physical movement of goods sit here. Note: warehousing and lorries would sit as infrastructure (hard) and software as Infrastructure (soft)


3: Identifying the Challenges by the Domain

For this section, there are two charts. The first chart identifies those challenges that are common across all the domains. The second identifies the more detailed challenges that are unique to the domain:

Procurement Domain Name

Common Challenges Faced

Manufacturing supply

Process supply (commodities)

Infrastructure (Hard)

Marketing Supply (Hard)

Marketing Supply (Soft)

Infrastructure (Soft)

Resourcing

Utilities

Travel

Consumables

Logistics / Freight

Constant change and need to remain flexible
Cost (value) management
Poor quality of supplied goods or services
Corporate Social Responsibility (including Ethical, green and sustainable supply)
Supplier Management (supplier behavior issues)
Market Intelligence
Poor or inaccurate data capture
Effective procurement data analytics (information overload)
Process Optimisation
Stock control
Risk Management and Mitigation
Strategic alignment to the Business goals
Stakeholder engagement
Brand and Public image impact of procurement decisions
Knowledge of technology impact on sourcing (innovation opportunities)
Knowledge of technology impact on logistically how and physically what you are sourcing (innovation opportunities)
Securing Procurement Talent
Fire fighting, as a result of late requirement capture
Purchases outside of process (Procurement visibility)



Procurement Domain Name

Specific Challenges Faced

Manufacturing supplyIdentifying current and future critical supply chain risks and mitigating these (government, financial and environmental impacts on supply for example)
Multiple/global sourcing of critical components
Supply chain optimization (time and cost) and development
Becoming a customer of choice
The potential impact of competitors on the supply chain
Change management – product/tools/people/organisation
Mitigating specific supply chain risks
Partnerships and alliances
Leasing of equipment

Whole-life cost analysis

Process supply (commodities)Points as above.
The key distinct difference is the nature of the supply of raw materials often includes additional intelligence on political dynamics.
Risk management through buying or reserving natural resources at key times, based on prediction (Intelligence)
Partnerships and alliances
Leasing of equipment

Whole-life cost analysis

Marketing Supply (Hard)Efficient and effective order capture
Speed of supply
Real-time data
Reach to multiple potential suppliers
Enabling the Marketing team to purchase

Quality control (Image)

Marketing Supply (Soft)Points as above.
The key distinct difference is the nature of the supply of services and specifying these services sufficiently to scope activity
Project management: often these services are project-based and may consist of phases of spend.
Infrastructure (Hard)Efficient and low-cost Rfx process
Enabling the organization to buy
Security and Compliance
Infrastructure (Soft)Efficient and low-cost Rfx process
Security and Compliance
Enabling the organization to buy
ResourcingEnabling the organization to buy
Agency contracts / legal conformance
Controlling rates and margins for temporary resources
Expense control of temporary resources
UtilitiesUsage forecasting and control
Managing the shift to renewables
Supplier selection over a fixed term
Continuity of supply
Some element of government impact on supply (risk analysis and mitigation)
Weather impact on consumption levels and supply continuity (risk analysis and mitigation)
TravelEnabling the organization to buy
Controlling Maverick spend
Automated or fast sign off process
Remote / mobile access (international)
ConsumablesAn efficient and effective ordering process
Controlling Maverick spend
Enabling the organization to buy
Automated sign off process

Distributed stock control

Logistics / FreightIdentifying current and future critical supply chain risks and mitigating these (government, financial and environmental impacts on supply for example)
Logistics/freight supplier selection typically over a fixed term
An element of enabling an organization to buy: in terms of using approved shipping agents and couriers
Identification and combination of shipping items to minimize freight shipment costs

Change, associated with paperwork and taxation rules

4: Conclusion

I do not believe that these tables capture all the challenges to the level of detail necessary and I would love, as previously stated, to get feedback on the specifics of each domain. Chris.haddock@claritum.com

I hope you found this article interesting.

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