It’s a well-known fact today that procurement officials and sourcing team do not have it easy. They have to face an increasing number of complex challenges, and with all the regulatory changes that are happening around the globe, it can be a daunting task. With technology constantly evolving at a rapid pace, procurement practices too, need to be regularly updated, as procurement trends are always changing. The fact of the matter is that, procurement today is not just about sourcing services or reducing costs anymore, hence, in this blog we’re going to talk about the top 5 Procurement Challenges that companies will face this year.

1. Risk Management:

Every business process faces its fair share of procurement challenges. However, managing them effectively is where the actual struggle lies. Effective risk management hence, becomes a key concern for the department, and with most companies now looking at business expansion, implementing a strategy from the very beginning is the way to go.

It is no longer adequate or good enough, to engage just with your Tier-1 suppliers anymore. Along with focusing on the basics such as the supplier’s financial status, health and safety along with industry practices, more emphasis now needs to be laid on how you deal with your Tier-2 and Tier-3 suppliers as well and also ensuring that all the obligations that are necessary are passed on effectively to the subcontractors.

Thus, the implementation of strategies like a risk-analysis of each supplier, gaining a comprehensive understanding of their supply chain and keeping backup plans in place, incase of things not working out as planned, is quite essential now.

2. The Effects of Globalization:

Numerous technological advances have been witnessed in the 21st, which have been beneficial in overcoming certain communication challenges that were a result of globalization. Today, e-procurement systems have helped in standardizing procurement processes, and with the real-time updating of data, retrieval of reports from anywhere in the world has become a reality. While this helps in fostering collaborations globally, it also has increased the need for evolving and adapting to the technology landscape which is rapidly evolving as well. The inability to do so, makes it difficult for companies to be able to establish any amount of regional control as they are unable to control costs centrally.

3. Supply-Chain Complexities:

When it comes to direct procurement, companies worldwide have made strides in creating a sustainable procurement process and reducing supply-chain complexities, but when we talk about indirect procurement, that where the real problem lies. The truth is, that there is too much extra time and labor required to audit indirect procurement processes, in order to ensure that they become sustainable.

Imagine having to ask all your suppliers to partake in surveys/questionnaires and then after perusing through them all, come up with an actionable business plan that can be implemented – sounds like a resource-intensive nightmare doesn’t it? Hence, businesses are now issuing standard written-codes of conduct, that can be implemented in the supply chains, which can help in reducing complexities to an extent.

4. Elimination of Unmanaged Spend and Cost-Reduction:

Some of the most common procurement challenges that companies face today, pertain to cost reduction and managing spend-tail. The only way to deal with this, is diligence by the procurement teams. This implies sincerity and perseverance when its ones seeking quotes, selection of proposals and suppliers and of course the overall management of the procurement process in its entirety. This is co-related to unmanaged spend as well, since, if the purchasing process is not an effective one, then the opportunities to save time and money will not present itself.

5. Accuracy in Reportage and Analysis:

Big Data is becoming a common addition to most businesses nowadays, however it becomes exceedingly difficult to realize the full potential and meet expectations if your data and reportage are not accurate. Having the right business intelligence tools is an essential pre-requisite for overcoming procurement challenges pertaining to the accuracy of reportage, and being able to factually determine the success or failure of a procurement process.

While 2018 does present an ever-growing list of risks and challenges for Procurement to deal with, it also presents an opportunity for Procurement to expand its influence and establish itself as a trusted business advisor. So now is the time for Procurement leaders to welcome new takes to talent as well as innovative technology that could serve them not only in 2018, but well beyond.