• May 23, 2022

What are the key challenges faced in the procurement process? How to manage them all?

 What are the key challenges faced in the procurement process? How to manage them all?

The procurement process is the backbone of your business operations. It holds a wide set of responsibilities in the procurement department. The process of procurement being of immense importance to the overall business function is complex when it comes to its execution.

In the new times, we better call it ‘strategic procurement’ than just procurement software, and the name speaks exactly of how it is going to be in 2022.

With strategic procurement, there are some key challenges in the procurement process that we shall talk about and discuss measures to manage them in the best way possible.

Let’s check them one by one –

Supply Chain Risks 

The supply chain is a long and highly dependent process on each level that is surrounded by so many risks that can be a constant headache to your procurement leaders. The more complex and large-scale buying, the more risks of conflicts among buyers and suppliers, in terms of policies, compliance, risks with prices, frauds, quality, and delivery. Such risks can be internal and external.

Internal risks involve those which are in our control like – workflow disruption, business process management risks, inaccurate forecasting due to lack of insights, having no risk mitigation plans at levels of the process, while External risks include those that are highly unpredictable and not in control on the organization’s side like demand and supply risks(poor calculation of material demand, and delivery issues with the supply), unexpected business amendments, environmental issues(like the one we are facing in terms of pandemic situations).

Direct or indirect risks, never spare the process at any time until the final delivery and payment in the procurement cycle.

How to manage such risks?

With the Direct risks, the control is mostly in our hands and we can manage such risks in the below 3 steps of supply chain risk governance and mitigation.

  1. Identifying possible risks at each major step of the supply chain and noting them to be reviewed.
  2. Have your risk management plan for each risk noted in step one.
  3. Closely keep a watch on each risk possibility and a call for an immediate action plan if the risk appears to exist.

Indirect risks are almost unpredictable and the best way to mitigate them is to have a preserving and control mechanism in a prior fashion during the process. The more alert your department is, the safer is your supply chain from the indirect risks. A strong team with proper responsibility shares, and with transparency and acknowledgment can help you build a robust supply chain cycle.

Lack of Transparency in the supply chain 

Experts always have a shoutout about transparency issues in the supply chain, but the major causes behind the opaque nature of the supply cycle are mostly not talked about.

Where do such transparency issues arise from? 

Even missing the most minute details at a point can lead you to hold your head on receiving the invoice. Incorrect or proxy data can cost you lose clients and deals and even hamper your relationships with the most trusted suppliers.

Dark Purchasing

When you lose control over your procurement function and the regular updating and monitoring of data at each level, then often you come across practices like dark purchasing.

Dark purchasing refers to all the transactions or goods exchanges outside your defined process through any means. Well, this has mostly to do with your loose ends in the cycle and which are initiated from the poor management of the supply chain data. The spend data is the most important to have thing in your hand as a procurement leader.

How to manage transparency issues?

Spreadsheets can be villains in your supply-chain film if it is long. Spend management and the data associated should be easily trackable at any required level and in any format. For this, you need to have a robust data management system that can promote data integration across departments and can produce it in the desired form from any end. The more integrated is your management system the more transparent can be your procurement process.

Poor Data and Insights –

As they say “Data is the new OIL” if you are a market player you must be aware of the importance of true insights and data.

To make clever decisions, you need to have relevant and reliable data. You should have an inside-out view of your inventory, the demands, the needs, and the challenges you have faced in the past. A trusted vendor data can become your greatest strength to grab on the best deals for your organization. Awareness is the key!

To have useful data to help you make conscious decisions, it becomes important to capture and track it through your entire procurement cycle. A well-processed data can not only help you with the right decisions but data clarity can also improve your intuitional approach towards this critical process.

How to tackle issues with poor data?

The answer to this lies completely in technology. The best you can do here is to get a centralized system for all the data updation and tracking in your procurement process. The procurement to pay software can be an on-premise or a cloud-based service based on your budget, scalability forecast, and requirements. Cloud-based procurement software is most feasible in this era as they are affordable, has less implementation time, and is highly scalable and hence good to go for growing enterprise business.

Vendor relationship 

A successful Vendor relationship management shows your strategic and organized mindset towards procurement. Vendor relationships are your ultimate saviour at the time of crisis. Stats from market researches shows how big firms have shifted from more vendor numbers to less and more trusted partners in recent times and how it proved to be a cost-saving strategic step to them.

The Nestle procurement shift is a great example to mention here. The data from supplychaindive shows how the Nestle Procurement team started to identify the more trusted and productive suppliers and reduced the overall supplier count by more than 10% since 2016, that is from 150,000 suppliers to roughly 132,000 in 2019 and this proved to be a great step towards their Procurement success.

Managing trustworthy Vendor relationships requires a perfect blend of both – Strategy and Vendor Data. While strategy is completely on the team experience part, Vendor data is something that we shall arrange for to encourage better and conscious decision making.

How does vendor data help your Procurement function?

  1. Correct Vendor data ensures billing mistakes & prevents fraud.
  2. An in-out view of the Vendor information helps negotiate better business deals.
  3. High trust and compliance compatibility are generated.
  4. All the above results in a flawless vendor relationship.

Getting Vendor Data?

This could be an issue while working on paper or with spreadsheets but not in 2022 when the business process is monitored by the smartest enterprise resource planning systems. These systems allow you with multi-level data inputs and fetch as required facilities which helps the best to manage your enterprise data at all levels of the business process. You will get to create Vendor profiles, can build a dashboard for them to get the information you want from their end, you can set up regular data updation programs, and whatnot!

Lack of Technology –

This is hard to believe but many organizations are still stuck with paperwork for this very delicate process and an ample number of businesses rally on excel sheets.

With reports from the business wire, a recent survey by independent survey firm Verdantix of environmental health and safety (EHS) claimed that 83% of executives find it worthy to use digital technology solutions for increasing overall visibility and 62% believe it helps reduce administrative costs. 

Apart from the above deductions, this is hard to believe from the same report that finds nearly half of respondents use spreadsheets for contractor reporting and analysis, and approximately 27% are still stuck with paper-based systems. Now, this could be something that can lag behind your business in terms of performance and efficiency.

Technology is the key to your procurement success for this decade. The procurement function is now a process that involves 360-degree sharp visibility at each step and can be a huge factor affecting your planned cost-cutting and savings structure.

If you already have a strong team and a fine process and struggling to have clear visibility and a streamlined process, then the next you need is to have procurement management software.

Managing the problems faced by the procurement process using procurement management software and the benefits of using it –

‘Strategy is driven with technology’ can be the success quote to your procurement process this year. An end-to-end Procurement to pay software may help your process to deal smartly with all the above challenges.

  • Procurement to pay software works on the plan, analyze, strengthen and monitor procedure which keeps your procurement process out of so-called risks and helps you have a robust mechanism to deal with the odds.
  • The procurement to pay software ensures full transparency with zero chances to allow dark purchasing by any means.
  • Clear data and insights are available at all levels and can be fetched in the way it is required.
  • Data is of immense importance and procurement software allows you to have ample of it, to run your business smoothly and smartly.

With its immense importance and application, Procurement to pay software can be the best INVESTMENT for your business in 2022.

Ranjith

2 Comments

  • Tremendous things here. I’m very glad to peer your article.

    Thanks a lot and I am having a look forward to touch you.
    Will you kindly drop me a mail?

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