How to overcome procurement management system challenges?
Oct 13, 2021·5 min
Procurement management is a crucial part of any business. It refers to the entire process that begins with evaluation and ends with contractual agreements to sign up and renew existing vendors for your business. Everything from managing the inventory to ensuring a smooth sail of the supply chain depends on procurement management.
In most businesses, the process is defined, and best practices are enlisted that allow the procurement practitioners to ensure proper management. However, some gaps exist between the expectations of the procurement software and the reality of how it all works.
Let’s look at some of the challenges that come into play when dealing with procurement regularly and how you can bridge the gap between expectation and reality.
#1 The undefined dark purchases
This is one of the most significant gaps that exist between expectation and reality for the procurement systems. Dark purchases are anything that lives outside the defined processes enabled at your organization. If these purchases don’t exist in the plan, they will not be part of the process.
It could be an impulse buy or something that led to an uncontrolled purchase. These purchases cannot be defined or justified using your capital or the inventory you have set aside for your business.
These dark purchases can lead to significant losses for your business. In addition, it can cost you a lot. You don’t have control over this spending, which means you cannot efficiently tackle it. The best way to handle it would be to plan your inventory. This would help you know what is essential and what you need to purchase. You can ensure that your vendors know the inventory you are looking for, and they make the same available for you.
With this, you can tackle the added costs and also manage the revenue expectations for your business.
#2 No proper planning
The expectation from a procurement platform to be managed with end-to-end planning seems to be far from the truth. You will note that several procurement practitioners tend to start late, so you don’t get all the inventory on time. There are instances when the contracts get delayed, vendors wait for renewals, and the whole process goes for a toss.
With proper planning and assured management, you can resolve this issue. As a procurement manager, you should ideally start early. Plan when the vendor contracts are due in two months. This way, you can ensure that the inventory management is defined and all the contracts are renewed. You can even plan your way through the new agreements. You should ideally use a solid procurement software that makes it easier for you
#3 The supplier and market risks
This is a significant challenge that distances expectations from reality. Of course, you expect a smooth procurement process once you have set up the systems and defined the practices. However, the complexities in the actual procurement market can lead to discrepancies in expectation vs. reality.
The quality, delivery, cost, and even the potential fraud can add to the risk factors associated with procurement management. Compliance risks are also something that most procurement managers have to deal with. You need to emphasize the vendor-buyer relationship. It should be strong. Make informed and well-educated decisions.
Make sure you are aware of who the suppliers are and what they offer. When you walk into a market dominated by lesser-known suppliers and those who aren’t aware of how things are done, you may not be able to mitigate the risks involved. Ideally, a procurement platform would make it more visible to you.
#4 Process is not transparent
Earlier, you used Excel to track data. However, if you are not a pro with Excel, you might not have the proper sheets and accurate data. In addition, with the increased amount of information that you want to track, these spreadsheets may not match the scope.
That’s why it becomes challenging to keep track of the data or handle the multiple things you need to get done. Additionally, your spreadsheets may pose a risk to the data you have so nicely accumulated.
How can you close this gap? First, you should invest in good tools to help with data management and ensure your data is present safely. Tools should be able to store accurate information while ensuring that all the data duplication is removed. It will eventually help you save your deals and ensure smooth partnerships with the vendors.
#5 No proper procurement management technology
Businesses, even today, happen to use traditional systems to manage vendor relationships. This can lead to issues in managing data, storing the records, or even maintaining the contracts. With everything going digital, it is time to adopt new technologies that can help you streamline procurement operations.
Your team expects to ensure all the inventory is stocked up and your contracts are renewed on time. However, the reality, owing to traditional systems, is that you miss the due dates for the contract. Your inventory is not well managed. You are late in ordering the raw materials.
This can be processed if you handle the expectations using the right tools. First, incorporate a procurement management solution that will take care of end-to-end processes. It will let you know when you need to procure new inventory. These alerts will help you stay at the helm of ordering and ensure you are never late on orders or renewals.
#6 Your supplier is not fit for your business
Often, procurement companies make the biggest mistake of signing up the wrong supplier for their needs. Either they don’t have the stocks required, or they delay in delivering the orders. It could be anything, the fact being they are not best suited for your needs.
If you have already signed them up, it might be difficult for you to let them go, and it can hamper your procurement processes. In the future, make sure to check the credentials, understand how the supplier works, and communicate with them before making the hiring choice.
To sum it up
There are several challenges that you might face while setting up your procurement management systems. The idea is to:
1. Keep the procurement management process simple
2. Bridge the gap between expectations and reality by proper planning
3. Mitigate the risks involved
Adding the right tools, technologies and processes can help you champion procurement and also enhance the offering. Invest in a good procurement platform that gives you complete visibility into your procurement processes.
procurement software procurement management procurement management systems
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