Procurement is increasingly becoming a crucial function of an organization’s strategy to cut costs and increase efficiencies. The procurement departments being responsible for contract management, risk mitigation, supplier relationship management, have a variety of challenges to face every day.
In this article, we will focus on the key challenges faced by procurement teams and the ways to overcome these obstacles by optimizing procurement processes
Poor supply chain transparency
Lack of visibility of supply chains is one of the major procurement challenges. Visibility across the supply chain is an important tool for meeting regulatory requirements and mitigating risk. According to the 2018 Deloitte`s Global CPO survey, 65% of procurement professionals have no visibility beyond their tier-one suppliers. Leveraging technology can help these professionals deliver value and reduce costs while achieving a robust view of supply chains.
Use of software like DocuCollab`s track to trace solutions provide visibility over the entire supply chain. Supply chain management can be easily updated in real-time. Workflows are added automatically of urgent reorders and contingencies for critical shortages. Successful supplier contracts are created with legally-reviewed boilerplate clauses, reviewed and approved easily.
Need for better risk management
Another major challenge in the procurement process is supply risk. Some of the huge risks that follow along the supply chain include managing sole supplier contracts, market risks (availability of products, price volatility), potential frauds (theft or invoice fraud), cost, quality, delivery risks, maverick spend, and dealing with compliance risks like policy adherence, anti-corruption issues.
Procurement professionals have to identify the best suppliers to ensure the stable and quality delivery of goods and services. They also have to continually monitor the suppliers to ensure that all delivery demands and standards are met. Risk mitigation being a key concern within the procurement function is often overlooked and all these risks exert a significant impact on the bottom-line.
These risks can be best managed with a centralized, efficient, transparent data and supply management. Procurement department by implementing Procure-to-pay software like Cloud-based DocuCollab Solution can reduce risks, processing time, streamline their purchase-to-pay cycle, and manage supplier relationships better.
Control & visibility of spending
Uncontrolled spending is one of the toughest challenges faced by procurement professionals. Accidental orders, rush orders, purchases (from suppliers selling additional items) made outside the company`s established procurement procedures is indirect spend resulting in loss of revenue and control. As these purchased items cannot be readily accounted for in financial and inventory records, it complicates procurement strategy, department budgets, inventory management, and financial audits.
Reports say 39% of firms find it very important to increase control of their indirect spends. The only way to harness control over corporate spend is by visibility and data helps to achieve.