3 Key Challenges To Procurement and The Solution

3 Key Challenges To Procurement and The Solution

Identifying areas of improvement in procurement has always been a difficult task. Before cloud, procurement planning wasn’t expected to make a notable difference to outcomes. Procurement agendas were created, but rarely improved upon.

The scenario has changed with information becoming easier to avail and use. Data plays a vital role in altering procurement agendas these days. Cloud technology connects value chain partners for the all-important data feed.

Some organizations face difficulty adopting cloud-based procurement. It may be due to lack of understanding about the complexities—which have to be translated into an application. But it simply worsens the blur on financial returns and the company fails to make a difference with procurement agendas. Developing an application to accommodate the complexities is vital.

Difficulty in Demonstrating Value

Procurement complexity in a supply chain grows with the number of players or transactions in it. But decision makers have to identify how much finance is worth the process. It may be impossible to find out if any value for the finance has been delivered. That is especially true once procurement-related information is spread across diverse functions. Data is humongous and there are strict deadlines to meet. Without some degree of automation, regular analysis of work and reporting is likely to suffer. That is why some businesses compromise on final review of projects.

The attempt of every business is to defend its cost structure. Whether cost is reduced through direct or indirect procurement, the attempt is always focused on optimizing expenditure. If procurement is direct (e.g. the food industry), the focus is on making long-term relationships with suppliers. This helps in building better business terms, stability, trust, and process endurance. In case of indirect procurement, supplier loyalty is not as high a priority.

Lack of Knowledge Among Suppliers

When one is dealing with the complex process of procurement for a vital project, the work required is specific and specialized. The main issue with specialized service is that only few suppliers have heads with knowledge about the process or willing to accept modern needs. Although large companies have influence over their suppliers when it comes to collaborative technology, one must accept the fact that some suppliers are simply incapable of using cloud technology or sophisticated systems.

More Complexity Means Greater Risk

Any business going for penetrative reach inevitably finds itself within a complex process. Once a business has a complex requirement, it will increase the chances of risks like purchasing the wrong item or wrong quantity. This obviously results in losing value for money. Increasing complexity also brings the fear that suppliers will fail in delivering the right quality goods or services. The chances of fraud for such processes also stand high.

To handle a complex e-procurement process, suppliers need the innovative edge. Usually, complexity makes it difficult to explain precise requirements with feasibility and specifications. Additional uncertainties bring more risk to the process.

A Solution

The concern about suppliers can be eased with supplier registration. A sourcing application for suppliers to register themselves and share detailed information can be deployed on cloud and it will ensure better understanding between parties. The suppliers can also respond to pre-qualification questions the buying organization puts on the site. There are configurable workflows that analyze responses, making the registration a completely automated process.

Author Bio:-

Amy Jackson is a lead technology writer and she has an array of experience in Technology and software industry. Currently, she has been writing about Supply chain optimization solutions, analytic and procurement solutions.  Follow her on Google+ and learn more about the latest tech trends.