As the procurement process continues to become more strategic and collaborative, organizations are starting to realize the benefits of having a solid procurement strategy in place. However, understanding the strategic implications of every step and figuring out a way to implement it across all functional units of business is a distinct challenge.
For modern procurement managers, identifying the purpose of the department is the first step. Unless you know the purpose of your departments, you will be unable to communicate effectively with your management team, leading to issues delivering on organizational goals.
Here are some common procurement challenges More4apps has seen haunt businesses of all sizes:
- Risk: Maintaining supply, potential fraud, cost, quality, and delivery risks constitute the most common type of risks. One example is the case of an organization that reduced its supply to one supplier, and this supplier has an issue in its own supply chain. The solution here is to know who an alternative supplier might be, and this information should be readily available in your procurement system. You may even choose to put a percentage of your supply through that supplier so they are always available to call on.
- Dark purchasing: Purchases that are made outside the defined procurement process fall under “dark purchasing.” Uncontrolled spending like this can ultimately be expensive for businesses. When items purchased cannot be justified using capital outlay or material inventory, the resulting loss of control is a significant challenge for organizations of all sizes. It also reduces the ability of procurement to negotiate better terms. In fact, one major online travel retailer found that only 8% of purchases were made through its Purchase Ordering system. Given a spend of $10 billion – alarm bells started ringing! Read their story here.
- Process cycle: Most often, products and services are procured with a sense of urgency. Just-in-time is the best way to reduce holding costs. In reality, the actual lead times and the procurement cycle tends to be longer, so buffer stock is required to allow for these delays. Increasing the buffer stock to allow for an inadequate procurement system is where you start to hold excess stock.
Here are some common delays in the procurement process we’ve seen:
- Delays in preparing technical specifications/TOR/SOW
- Overlooking the procurement schedule
- Supplier scheduling
- Delivery time frames
- Inaccurate data
- Time taken to input and approve Requisitions and PO’s in the procurement system
- Supplier-related issues: One of the greatest challenges in procurement is supplier management. From identifying the right supplier to keeping track of vendor performance and ensuring a stable supply of quality products, the whole process is filled with complications.
How procure-to-pay software can help fix these challenges and set your procurement manager free
Procure-to-pay software reduces risks, processing time, and overall cost, freeing up the procurement team to focus more on human-centric tasks. Irrespective of an organization’s size, it enables businesses to buy smarter, streamlines their purchase-to-pay cycle, and manage supplier relationships better.
Remove your barriers with the best tools
There are multiple barriers to changing habits:
- Time – “I’m too busy”
- Relationships – “I’ve always purchased from Bob”
- The PO system is complex and time consuming – “It’s too hard to use and too many steps”
Do any of these sound familiar? Are they holding your organization back?
With over 20 years of experience and more than 38,000 users, I’ve seen that when a procurement system is too hard to use, the purchasing process is ignored, and manual invoices and expenses become the methods of purchase. Costs escalate, negotiated terms of trade can’t be utilized and business efficiencies plummet. Who can afford that right now?
The good news is there are proven solutions to those challenges! Many have walked this path before you, and there are answers. In fact, addressing procurement process deficiencies can be actually be an easy win – and I’ll bet you’re overdue for one of those in 2020.
About the Author
John O'Keeffe is the proud CEO and founder of More4apps. John spent many years working with Oracle E-Business Suite and saw a need to help speed up data entry.
For over 20 years More4apps has been delivering services and software solutions designed with the end user in mind - simple straight “out of the box” solutions designed to get users up and running with no complex training or implementation processes. More4apps is the leader in data ingestion solutions for Oracle ERP.
John’s homeland is the luscious green countryside of Ireland, poetically known as the Emerald Isle but he has spent the last 21 years enjoying the New Zealand lifestyle. In his spare time, John enjoys tending to his orchard and has a rather large garage to complement his love and passion for restoring vintage motor vehicles. A 1972 Land Rover and a 1969 International Pick-up truck highlight his proud collection.
For more information: www.more4apps.com