Today, no one can say that procurement professionals and sourcing teams have it easy. They face daunting challenges and struggle to stay abreast of all the regulatory changes happening around the globe. Procurement, for many, is an undervalued operation that impacts every facet of your business. While there are many procurement challenges, each organization will face its own unique set of challenges. In this article, we’ll talk about some of the common procurement challenges that companies will face while sourcing goods and services this year.
TOP PROCUREMENT CHALLENGES
Effective risk management
Procurement challenges are an inherent part and parcel of every business process. Each business faces them at some point but managing them effectively is something that every procurement team struggles to do. With the focus shifting towards business expansion, it is no longer good enough to engage with tier 1 suppliers. Implementing an effective risk management strategy at the very start of the procurement process, therefore, becomes a necessity for companies looking to expand their boundaries. But before any company thinks about engaging with tier 2 or tier 3 suppliers, implementing risk mitigation strategies like analyzing the risk of each supplier, comprehensively understanding their supply chain, and putting backup plans in place in case things go wrong become essential.
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Managing globalization
The 21st century has been marked by numerous technological advances, which in some ways has helped overcome some of the communication challenges caused by globalization. Technologies like e-procurement systems allow companies to establish standard vocabularies for each procurement process. And with data being updated in real-time, reports can be retrieved at any time from anywhere in the world. This fosters global collaboration between individuals anywhere in the world. However, the inability to evolve and adapt to the rapidly changing technology landscape will make it difficult for companies to control costs centrally and establish any degree of regional control.
Reducing supply chain complexity
Can a procurement process ever be sustainable? Most organizations across the globe are making tremendous strides when it comes to reducing supply chain complexities in direct procurement, but when it comes to indirect procurement, companies are at a loss. The level of auditing required to ensure that indirect procurement processes are sustainable requires extra labor and time. Consider asking all of your suppliers to fill-out a complete questionnaire and then turning them into actionable business plans – It’s pretty resource intensive right? To avoid procurement challenges such as this, businesses are issuing written codes of conduct and implementing them in supply chains.
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Cutting costs and eliminating unmanaged spend
Reducing costs and unmanaged spend are common procurement challenges faced by businesses of all sizes. The task becomes even more daunting when your procurement team’s core function is to spend money! To deal with such a scenario, procurement teams must demonstrate that they’ve performed diligently when it comes to seeking quotes, selecting suppliers and proposals, and managing the entire procurement process. Now, coming to reducing unmanaged spend, the logic is simple – You can’t control what you don’t manage. When the purchasing process is not effective, businesses can lose out on opportunities to save time and money.
Improving reporting and analysis
With the use of big data becoming common among businesses, it becomes extremely difficult to meet expectations when you don’t have access to accurate data and reporting tools. Having access to good business intelligence tools is quintessential for overcoming procurement challenges related to accurate reporting and understanding whether the procurement process has failed or succeeded.
To know more about procurement process improvements and the major procurement challenges facing businesses this year
