Procurement was once considered an operational function for just executing orders. However, in the previous few years it has finally been awarded the top strategic role that it deserves. This has come with a handful of great responsibilities and, unfortunately, lots of pressure. Nowadays the procurement department is responsible for so many additional achievements within the company, from risk management to sustainability impact, surpassing its cost-cutter legacy by far.
With all of these responsibilities comes full spectrum of challenges procurement department can face including human errors, organizational shortcomings, inaccurate orders, damaged goods and poorly chosen suppliers.
To help you be better prepared, we took a look at top 7 procurement challenges an average procurer is facing on an everyday basis.
What are the biggest procurement challenges?
Among the numerous perils that every procurer is faced with on a day to day basis, these are the ones that seem to be the most common ones:
1. Finding the Right Supplier
Finding the best supplier is one of the most difficult and important tasks procurement managers are facing. Up to 31% of them stated this as their biggest challenge. It is important to check each supplier’s banking and business references in order to avoid unpleasant surprises such as bankruptcy, inability to meet quality requirements or unwillingness to keep the contract obligations. It is also necessary that your company (or the outsourced procurement company) participates actively in drafting the agreement and not leave it to the supplier so as to avoid any unwanted outcomes.
The best way to secure that you have chosen the right supplier is testing the supplier with approximately three purchases before signing the official contract. Building a lasting relationship with a supplier is important to insure all operations run smoothly with the same low cost and timely deliveries of high quality materials, and to provide peace of mind.
However if you want to avoid dealing with suppliers directly it is recommended to outsource your procurement to a procurement company who already knows the ins and outs of the process and has established a good relationships with wide range of suppliers.
2. Suppliers’ Flexibility
The right supplier must also be flexible to accommodate your needs and why a good relationship is important. Suppliers with best practices offer quantity discounts when available, are skilled at negotiating with various suppliers, and do not “nickel-and-dime” surcharges above the cost of the product. A flexible supplier should be able to meet your needs and generate greater procurement savings. Make sure you establish your needs and talk about them with a potential supplier up-front, before any official engagement.
3. Avoiding Accidental Orders
Orders that contain wrong items or wrong quantity of the right items are occurring with increasing frequency and can have a negative effect on production. To minimize the risk of inaccurate orders it is of crucial importance that work with a reliable and trustworthy supplier that has experience in order fulfillment with a proactive approach, with fail-safe systems in place to eliminate inaccuracies and mis-shipments.
4. Bypassing Over and Under Spending
Spending over budget does not happen due to reckless tail-end spending, but due to communication or coordination gaps within the procurement department as well as staff not trained well enough to pay attention to details. On the other hand, too little spending can can be a symptom of inadequate performance and can result in the company not meeting its business goals. To avoid over and under spending, the optimal solution is to set spending limits with automatic notifications set up as over-spending alerts.
5. Dealing With Damaged Goods
Damaged goods, poor quality, late deliveries and incomplete deliveries could be due to wrong choice of suppliers. To avoid these issues is to work with 3rd party procurement agencies who have long established relationships with suppliers and have already gone through the vetting process to determine which supplier for each type of commodity is reliable, trustworthy and offers good value.
6. Balancing Staffing Requirements
When there are many individuals involved in procurement, it is important to clearly delineate each individual’s tasks and scope of work so as to avoid confusion on roles and responsibilities and who is in charge of the decision making process. Otherwise there could be confusion, which drains time and creates more space for mistakes. You should also need to have “written trails”for every aspect of the ordering process as to make it as transparent as possible.
READ MORE: Using Technology In Your Procurement Process – Good Or Bad?
7. Aligning Your Suppliers With Your Company’s Policies
For example, how damaging to your reputation it would be if you were to cooperate with a supplier that uses non-spec materials? This is why you have to clearly lay out your policies, procedures and guidelines that your procurement agents must follow and closely monitor the process to make sure that no policies are being violated.
As long as you keep your procurement transparent and documented, your procurement agents educated and motivated and your policies clear and understandable you have procedures in place to solve problems that may be encountered. With all the complexities involved in making sure the procurement dept meets all its responsibilities you might consider partnering with a professional procurement outsourcing partner to ease the burden and create the highest level of efficiency.
Find out how TRIDENTCIRCLE can help you optimize your Procurement process by contacting us or by submitting your RFQ.