How to Solve Procurement Challenges?

It is the responsibility of the procurement leader to manage a broad range of responsibilities – from identifying needs to managing vendors and processing payments. Every day is never the same in procurement.

Therefore, procurement managers face a variety of challenges and difficulties in their jobs. A direct impact on an organization’s bottom line means identifying and overcoming procurement challenges is time, money, and effort well spent. Depending on an organization’s size, line of business, etc., procurement challenges can vary. Here are six you should know about.

01: Risk mitigation

The procurement process is always fraught with supply risk. Most commonly, market risks, potential frauds, costs, quality, and delivery risks exist. Also, compliance risks such as anti-corruption, policy adherence, and more are a constant headache for procurement leaders.

02: Dark purchasing

Dark purchasing is when you make purchases without going through the defined procurement process. Businesses can end up paying the price for that. Items that can’t be justified by capital outlay or inventory can cause organizations of all sizes to lose revenue and control. Getting your spending under control is a great way to reduce rogue or maverick spending.

03: Transparency issues

It was a wonderful place to start when organizing data, but once you need more out of them, they lose their usefulness. Data access is the first problem you might run into. Finding information across multiple spreadsheets can be a hassle. When you have a lot of data, you get slower at accessing it. You have to be careful about security risks and not tell too many people too much information. Incorrect data can cost you deals, clients, and vendors. The best way to make your procurement process transparent is to automate it. Besides that, it’s really helpful.

04: Inaccurate data

An organization needs accurate and reliable data to make informed procurement decisions. An organization’s bottom line can be affected directly by buying based on inaccurate procurement data, which can cause inventory shortages, excess inventory, and other problems.

05: Lack of technology adoption

When a procurement process becomes complex, manually managing it seems simple, but it can become the largest hurdle to success. Therefore, a procurement challenge is to see technology as a helping hand, as a valuable partner. In order to achieve future goals, you must become an expert in increasing efficiency and fostering innovation with digital procurement solutions.

07: Skill Gap

Procurement is a very specialized department, which has brought it into the spotlight and caused massive demand. Many large firms are looking to hire procurement experts. In order to streamline the process and get the most out of it, companies need to pay attention to the skill development and expertise of their employees.

To keep specialist people and continue procurement, companies need to stay on top of the latest technologies and keep their employees trained.

08: Dealing with Stakeholders/ Engagement

People can be hard to manage, especially when they differ in their interests and have different opinions on how things should turn out. There are some stakeholders who have a direct impact, and others who have an indirect impact. Stakeholder priorities can change.

Because stakeholders are so varied, it’s hard to manage and coordinate between them for a successful outcome.

Procurement Challenges: Overcoming Them

These scenarios should have given you an idea of the challenges involved during various phases of the procurement process. It’s important to understand these challenges and come up with a solution.

Here are some ways to handle some of the biggest procurement challenges you might face.

Managing Risks Correctly

A procurement manager has a lot to deal with when it comes to risk management, as we saw above. With a clear understanding of your suppliers and their upcoming processes, you can manage risks well. Before onboarding, pre-screening is important because it helps pick the right supplier and reduces risk. Monitor all the steps in the procurement process to make sure no risks arise.

From reducing supply chain risks to maintaining compliance, supply chain risks can be anything. It’s easier to secure a procurement process by identifying the risks associated with each supplier, understanding their supply chain process, and setting up recovery plans to handle any issues that might come up.

Team Up Your Finance and Procurement Department

Every business domain relies on finance. Working together, the CPO and CFO can come up with a big acquisition and procurement plan. By working together, finance and procurement can build a stronger market presence, kill competition, and boost the bottom line.

Ensure the Right Data is Integrated

Any business needs data, and as we move forward, it will become increasingly integrated. Big data will become more complex, so figuring out a big data strategy that fits your procurement process will help you win.

Consider Sustainability

Sustainable means thinking about the future and using only what’s necessary. An approach like this helps companies move towards a circular economy, where recyclables are favored over linear economies, where resources are entirely exploited. Financial stability and profit growth can come from sustainable development and economic processes.

To Sum UP!

Each of these issues hampers the overall procurement process, leading to financial losses and operational ineptitude. An insight-based approach to procurement is preferable to instinct.

When procurement is systematically done with risk analysis and insight, it turns into a profitable activity that helps build a successful company. A key function of any business is procurement, and it should be done in a way that shows the corporate and social responsibility of any organization, as well as the data it has acquired.

Streamlining the procurement process can be highly beneficial and can yield better business outcomes. The simple way to get here is to invest in skilling up your procurement managers and arming them with new-age tools for streamlining procurement processes. If you are confused, consult with procurement management training experts at Promise Training & Consultancy.