It’s no secret that procurement departments everywhere have a growing set of responsibilities. As the role of the procurement department continues to evolve and expand, procurement teams face a spectrum of challenges and they must be dynamic, agile and forward-thinking to handle an increasingly complex environment.
Driving down the cost of procurement remains one of the top objectives of chief procurement officers, but is no longer the only main focus – procurement key performance indicators are more diverse than ever, and with a growing remit comes a growing set of challenges that must be managed.
The digital revolution, and inevitable digitalization of the procurement process, provides a range of tools and solutions that can enable and assist procurement departments to achieve their complex objectives and overcome problems.
In this blog, we assess the key procurement problems that affect your business and their technological solutions.
The Problem: Risk Management
Market conditions can change at any moment, whether that is due to legislation, natural disasters, global conflict, economic climates or consumer demand. Being able to respond to changing conditions requires flexibility, and it requires insight. Third party risk leaves your business vulnerable. One kink in the entire supply chain can derail an entire project, and lead to financial losses or damage to relationships and reputations, and even litigation.
The Solution: eTendering and Contract Management Software
Supply chain risk management strategy should be built into your supply chain process from the very beginning. Your bid and contract management processes should include supplier vetting procedures, and supplier performance management criteria. Data analytics is an integral part of your SCRM strategy, and you need standardized, reliable data to interpret. A tender and contract management solution will help you address your supply chain risk.
The Problem: Globalization
The most important problem businesses face when it comes to globalization is communication between suppliers and stakeholders across different continents, time zones, languages and cultures.
The Solution: A cloud-based Procure-to-Pay solution
An eProcurement software solution, hosted on the cloud, provides an opportunity for real-time collaboration, communication and access from anywhere at any time. Reporting can be accessed in the field, or at home, even at unsociable hours. A cloud-based Procure-to-Pay solution enables centralized control, with global access.
The Problem: Cost Control
As touched on in the last point, globalisation of the supply chain and of the customer base leads to greater logistics and freight costs. Fuel prices are rising, as are commodities and labor costs – this means overheads are increasing. Procurement teams are under pressure to control costs and protect the bottom line, despite these challenging market conditions.
The Solution: Strategic Sourcing
Cloud-hosted e-Sourcing software that gathers and compares vendor capabilities can streamline your processes and cut down operational costs, as well as provide you with insights into potential cost-savings and value adjustments that you might otherwise miss when manually collating and comparing data.
Online reverse auction software, too, provides an opportunity for you to efficiently manage the bid process for your contracts. It also serves to put downward pressure on prices and ensure a transparent and efficient bidding system that can appeal to both buyer and supplier.
The Problem: Tail Spend Management
Most procurement functions focus on large and regular spend categories, and on careful management of the top 80% of spend. Research shows that unmanaged tail spend can lead to attrition of margins. Tail spend is classified as anything from maverick spend to misclassified spend and indirect spend that is too small or too sporadic to go via the procurement department.
The Solution: Spend Analytics
Studies have shown that organizations can actualize 7.1% savings through better tail spend management. These savings come from streamlining processes and reducing time spent per purchase. The only way to ensure you know exactly where your corporate spend is going and gain insight is through data. But not just any data will do. Your procurement team needs rich, accurate, well-categorized, clean data. To achieve this level of insight, a comprehensive spend analytics process is imperative to visualizing what your organization’s tail spend looks like and where control measures can be implemented.
ProcurePort’s suite of best-in-class eProcurement software can help your organization to take control and gain the insights and streamlining necessary to truly achieve agility and efficiency across your entire organization. To see how we can help you take control of organizational spend, why not schedule a free demo.