Top 6 Procurement Challenges that Haunt Your Business
Procurement leaders wear multiple hats and manage an array of responsibilities—from needs identification to vendor management and payment processing. A day in the procurement department is never slow.
This makes a procurement manager’s job riddled with challenges and difficulties. It also means that identifying and overcoming procurement challenges is time, money, and effort well spent, since procurement has a direct impact on an organization’s bottom line. While procurement challenges can vary based on an organization’s size, line of business, etc.,
Here are six common procurement challenges that haunt businesses of all sizes
1. Risk mitigation
Supply risk is always a major challenge in the procurement process. Market risks, potential frauds, cost, quality, and delivery risks constitute the most common type of risks. Additionally, compliance risks like anti-corruption, policy adherence, and more keep your procurement leaders up all night.
2. Dark purchasing
Purchases that are made outside the defined procurement process fall under dark purchasing. Such uncontrolled spending can ultimately be expensive for businesses. When items purchased cannot be justified using capital outlay or material inventory, the resulting loss of revenue and control is a significant challenge for organizations of all sizes to tackle.
3. Long process cycle
Most often, products and services are procured with a sense of urgency in the last minute. As a result, the actual lead times and the procurement cycle tends to be considerably longer than that anticipated or scheduled. Listed below are the common reasons for delays in the procurement process:
- Delays in preparing technical specifications/TOR/SOW
- Overlooking the procurement schedule
- Extending the timeline to submit bids/proposals
- Failure to start the evaluation process on time
- Setbacks in contract negotiation
4. Inaccurate data
In order to make sound procurement decisions, organizations need accurate and reliable data. Making purchases based on inaccurate procurement data can lead to inventory shortages, excess inventory, and other additional procurement challenges that have the potential to impact an organization’s bottom line directly.
5. Strategic procurement
As the procurement process continues to become more strategic and collaborative, organizations are starting to realize the benefits of having a solid procurement strategy in place. However, understanding the strategic implications of every step and figuring out a way to implement it across all functional units of business is a distinct challenge.
6. Supplier-related issues
One of the greatest challenges in procurement is supplier management. From identifying the right supplier to keeping track of vendor performance and ensuring a stable supply of quality products, the whole process is filled with complications.
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Face your challenges with the right tool
As the market and technology continue to evolve, new procurement challenges are on the rise. Understanding the complexities in the procure-to-pay process, vendor management, and contract management will help businesses stay ahead of the competition and meet their procurement goals.
Are procurement challenges holding your business back? If any of these six common challenges in procurement looks familiar, it may be time to consider upgrading your procurement system. A comprehensive procurement software like Kissflow Procurement Cloud can help organizations streamline their procurement process and steer it towards sustainable success.
Take a look at Kissflow Procurement Cloud today and see how it can power up your procurement processes!