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Challenges Involved in Procurement Process and Ways to Manage

Challenges Involved in Procurement Process

In today's competitive and ever-evolving world of technology, procurement managers are facing many challenges to maintain an error-free end-to-end procurement process. This makes the procurement analysts focus on the increasing challenges which organizations often have to face in the procurement space.

To minimize the challenges in procurement, organizations have to focus on leveraging the procurement process by implementing new strategies which include supply chain management with an increased number of contacts to avoid errors in the management.

In addition to cost reduction and procurement services delivery, procurement managers should also concentrate on making the process error-free. As the role of procurement is becoming significant at a fast pace, organizations should mainly focus on the challenges that need to be handled effectively to carry the procurement processes successfully.

In this article, we will understand the top and most common procurement challenges faced by the organizations and how to tackle them to achieve flawless procurement management

Top Challenges in Procurement:

  • Vendor Management
  • Invisible Spend
  • Risk Management
  • Inaccurate Data
  • Centralized Procurement

Vendor Management

One of the biggest challenges in procurement faced by organizations is Vendor selection. It is not only difficult to find qualitative suppliers, but it is equally important to qualify them with the most rigorous procurement process. A vendor should be selected keeping their level of flexibility in mind to maintain a long-term relationship.

Vendors should understand your business needs and their role in driving your business into profits. So before selecting a low-cost vendor it is better to check for other negotiable options that you have.

After successful selection of vendor, here comes a tricky and difficult part, the vendor management. It is the responsibility of the procurement manager to create open lines of communication between the vendors and companies to drive them into the lines of profitability. For this, it is important for the procurement management team to regularly monitor the progress of the vendors by keeping track of the vendor's output based on the quality and consistency of the goods they deliver.

Invisible Spend:

A well-known procurement challenge seen in many enterprises is to cut down the procurement costs and maximize savings. To achieve procurement savings, the purchasing departments should identify the invisible or indirect spending of the organization so that they can outline the overall corporate spending. This will help the management to eliminate inappropriate spending and identify possible cost-saving opportunities. Also, while negotiating with the vendors, the purchase teams must focus on how to get the goods for a reasonable price to achieve high procurement savings.

In addition, for better decision-making, review the following aspects before final approval:

  • How many orders are placed accidently on a monthly or quarterly basis?
  • Is your order timing correct? How often an order is rushed and paid extra to retain your vendors in the warehouse?

Going back to procure to pay process flow and revising the above-mentioned prerequisites can help you save more money and thereby lead to great procurement savings.

Risk Management

Risk management is essential and plays a vital role in influencing procurement and supply management. Identifying the potential risks and taking appropriate steps to eliminate them is one of the challenges in procurement. The possible risks in procurement include order delivery risks, cost and quality risks, market risks, and chances of fraudulent activity. While planning a strategy for procurement management organizations should also focus on risk mitigation to avoid potential attacks and ensure protection.

Inaccurate Data

Access to accurate and updated data enables management to make informed decisions for better inventory management. With the increase in Big Data and AI, procurement managers should focus on implementing the advanced tools that help in getting the most accurate data. Inaccurate data is a very big flaw and can have a negative impact on the bottom-line growth of the business.

Organizations relying on manual procurement solutions will not be able to trust the data that is used. Consider upgrading the process and implementing procurement best practices like using e-procurement services for online data analysis and reporting. It helps the management to stay updated with the real-time data improves the quality of planning and procurement execution.

Centralized Procurement

The best approach to organize the centers of excellence structure and work responsibilities is to focus on moving towards centralized procurement management. A complete e-procurement solution is required which works beyond the capabilities of MS Excel and provides a centralized procurement approach for recording the center of excellence activities.

A key approach to overcome all the above-mentioned challenges in procurement is the automation of the procurement process is by using eProcurement services. This approach links the buyers and sellers into one single and easy purchasing platform. E-procurement services play a crucial role in time-saving as they automate the lengthy and repetitive operations associated with procurement manager approval, contracting, negotiation, and discussion.

e-procurement services enable the different departments to record every minute change or development they have done and ensure data accuracy. They also improve the procurement process visibility by consolidating users, procurement managers, and suppliers onto one single procurement platform. It also ensures a simple approach for an end-to-end audit trail using a complete online procurement process to provide valuable information and resolve the situation quickly and secure a win. This approach helps your organization to stay on the list of best procurement companies to work for and drives you towards maximum profitability.

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