The Top 3 Procurement Challenges Every Business Should Be Aware of

procurement challengesProcurement is a critical part of any business. But it can often be time-consuming, costly, and inefficient. It’s also a difficult process to control based on both the number of people and platforms involved.

From finding the right tools to managing the expectations of stakeholders, there are a number of different procurement challenges to be aware of. Here are the top 3 biggest procurement challenges that you’ll encounter.

Supplier-Related Issues

One of the biggest procurement challenges is supplier-related issues. Not only is it difficult to find high-quality suppliers, even with the most rigorous process, it can be equally difficult to qualify them.

One of the key components to vendor selection should be their level of flexibility. Far too often, suppliers are selected on price alone. Keep in mind, a supplier relationship should be a long-term relationship.

Partnering with a vendor that understands the needs of your business and understands their role to help maximize your performance is critical. Before opting for the low-cost provider, check on other negotiable fees.

Do they offer volume discounts that will meet your needs? Are they open to pay for shipping? Negotiating these items, and seeing what the supplier is open to negotiating, is an important step in the process.

Once you’ve gone through the process of vetting and selecting your suppliers, managing them can be equally challenging. It’s important to create open lines of communication so you can manage common challenges as they come up.

Whether you’re experiencing issues with a stable supply or quality, if you’ve built a solid communication channel, you’ll be able to work through these obstacles.

Reducing Costs and Achieving Savings

The primary procurement mandate is to lower costs. If you’ve negotiated with your supplier well up front, it can be difficult to try and lower costs through negotiation alone. It can also be one of your bigger procurement challenges if you’re past the point of increasing your economies of scale.

These are common problems for most buyers and procurement departments. Taking a deep dive into operations is the next best step to take.

How many accidental orders are placed on a monthly or quarterly basis? Do you need to review your approval protocol to prevent those accidents from happening in the future?

Is your order timing correct? How often are you having to rush orders and pay an extra fee to get your supplies into your warehouse on time?

Going back to review your operational flow and min/max levels and adjusting them can help to continue to reduce cost and achieve greater cost savings.

Accurate Data

The procurement process is becoming more automated. There are often a number of individual platforms and programs used to manage the process.

In many cases, these programs are not linked. Data entry may be done via a swivel-chair process which can lead to mistakes. Inaccurate data is one of the procurement challenges that plague many buyers.

Challenges with data accuracy are commonplace in many procurement departments. Consider updating your software to help bridge these gaps, whether they be for spend analysis, benchmarking, or market research.

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