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
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 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.
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.
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 that visibility. Access to real-time data across the supply chain is very crucial to an organization.
To ensure that all spend categories are managed as effectively as possible, automating spend management is the best step that a procurement department can take. Using DocuCollab`s end-to-end Procure to Pay solution helps procurement professionals to gain control over indirect spend. It can track complex pricing structures and show exactly where unwanted spending is happening. With all transactions taking place in the same system, it is possible to follow up and ensure there is compliance with the purchasing policy of the organization.
Inaccurate data is one of the major procurement challenges. With the procurement process becoming automated, there are a number of independent platforms and programs to manage this process. As these programs are not linked, data entry is mostly done manually leading to errors. With inaccurate and unreliable data, organizations cannot make sound procurement decisions or create purchase orders as this can result in excess inventory, inventory shortages, approval workflows may stagnate, and other supplementary procurement department challenges with the potential to directly impact the organization`s bottom-line.
Having a centralized data solution can help in analytics, planning, macro-scale decisions and ensure smooth workflows at all stages of procurement. Organizations can overcome the challenge of inaccurate data by using DocuCollab`s customized reporting systems that will help gain better data accuracy for financial reporting in a quick, easy, and accurate manner.
Another challenge in procurement is suppliers’ compliance to contract. With so many different suppliers, it`s difficult to check whether the suppliers are fulfilling their obligations. Reports say 29% of businesses state that compliance must improve.
Using software like DocuCollab`s will help with key performance indicators, to record supplier performance details, easily check whether suppliers are meeting expectations and keeping up the terms of contract. In its purchasing module, it displays clearly the general information about suppliers, their contracts and terms, thus making it easy to order from the right suppliers and have compliance tracked into the process.
The challenges in procurement department can be solved with the right tools and technology. Automating the procurement processes frees the professionals from low-value tasks and allows them to focus on strategic concerns. With automation, manual processes are eliminated; human error decreases, overall procurement efficiency increases, and businesses can ensure the procurement department is building value and a strong bottom line.
If procurement challenges are holding your business back, it`s time to consider upgrading your procurement processes. By using a comprehensive cloud-based enterprise management tool like DocuCollab, businesses can asses new suppliers, onboard them, gain a view of all supplier-related data, track and maintain supplier relationships, reduce risks, have complete spend visibility, rule-based processes, automated processes and data-driven insights in a single platform.
Click here to discover how you can automate every step of your contract management lifecycle through DocuCollab’s seamless contract lifecycle management tools