Today, organizations are increasing their focus on financial processes and are designing strategies to reduce indirect spend. However, the value of such strategies and solutions are limited to industries where indirect spend is less than the direct spend, as direct procurement management involves a different set of requirements.
Direct procurement management is an extensive process that entails multinational suppliers, lengthy lead times, and heavy reliance on logistics. Direct procurement management also requires extensive collaboration among different parties to manage the supply chain. It has a greater impact on organizations’ customer retention, as failures in supply chain management and product delivery affect customer experience and loyalty, as well as business success and growth. Therefore, in this blog, we have highlighted the key challenges that companies face in direct procurement management.
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Challenges in Direct Procurement Management
Complex supply chains
The supplier base for direct procurement is usually much wider and complex when compared to that of indirect procurement. This puts valuable goods at stake and increases the possibility of process inefficiencies. Factors like supply chain movement, supplier base health, and brand value play a critical role in direct procurement management.
In addition, direct procurement process requires companies to engage with suppliers directly for placing orders and sharing forecasts. This involves multi-tiered supply chains making it even more difficult for companies.
Improving visibility into all supply chain processes will help organizations track their shipments and keep the production going. Also, gaining supply chain financing will provide access to capital when required and maintain the efficiency of the supply chain and the supplier base.
Globalization has been a critical factor in transforming the way how organizations have been managing their procurement. Global direct procurement management requires businesses to manage an expensive and diverse supply chain that operates across different borders. More touch points are needed to gain accurate data in real time for the efficient flow of goods. In addition, shipping orders across borders entails extensive documentation to clear customs, as well as requires detailed coordination between organizations, trading partners, and even local governments.
The complexities further escalate with the involvement of a range of business partners, the types of transactions, and the flow of financial assets. To gain detailed insights into the direct procurement and indirect procurement, request more information here!
In direct procurement, a long term financial planning is imperative for a successful supply chain. Although logistics do not have much role in indirect procurement processes but in direct procurement management, it directly impacts customer experience and business success. Proper management of the extensive amount of data among different parties is must to ensure that the suppliers are packing, producing, and shipping orders correctly to ensure the safe delivery of products in an efficient manner.
Visibility into inventory, purchase orders, shipments, and payments, will help in developing a robust supply chain. Also, improving transportation procurement will enable companies to prevent goods shortages and build a positive customer experience.