Top Procurement Challenges Facing Businesses Today

We don’t have to tell you how important procurement is 

You already know that no business can function properly without procurement.

Another thing you probably know?

Procurement is challenging; there are so many responsibilities you need to handle, so many goals to achieve, and sometimes a strict budget to follow that it’s normal to feel overwhelmed and while there are certain aspects of procurement or your business that you can’t change, you can feel better prepared by knowing exactly what are the most common challenges affecting procurement nowadays.

Why do they happen? Are they connected with the struggles of the global supply chain? 

And most importantly…

What can you do to adapt?

‍

‍

‍

Understanding Procurement Challenges

Here’s the thing 

We live in a complex world that is still grappling with the aftermath of a global pandemic, dealing with the impact of climate change, and surviving in a quite volatile financial environment. Businesses now face client demands that can change overnight -hello, social media trends, so what worked up until yesterday, today is irrelevant. If we add to this mix the huge component that technology represents, it might seem as if unpredictability is the new face of procurement.  Because who doesn’t remember what happened at the Suez Canal some years ago? And let’s not talk about the consequences for trade of the Russia-Ukraine war. 

The good thing?

While the problems affecting procurement and supply chains might be unavoidable, there are some strategies your business can implement to let any of these risks disrupt your productivity. 

‍

‍

Top 8 Procurement Challenges 

Poor Risk Management

Yes, risks can happen at any moment, but won’t you fare better as a company if you were at least somewhat prepared? 

In procurement, risks can be found pretty much at every point; it could be that the prices in the market go up to the sky or that your precious supplier suddenly can’t deliver the goods to you due to bad weather, causing not only delays in your production but also damaging your reputation with your clients. 

While it’s logical not to want to think about all the possible what-ifs that could have a negative impact on your company, it’s a good idea to constantly monitor your supply chain so you can determine what sort of risks could hurt you the most. 

‍

Strategies to consider:

• Diversify your supplier base to reduce dependence on any single vendor or region.
• Implement predictive analytics tools that alert you to potential risks before they escalate.
• Develop contingency plans for common scenarios, such as supplier failures or transport delays.

‍

Stock shortages 

Remember what we said about volatility? Well, it’s certainly not a bluff. 

For all the reasons we mentioned at the beginning of this blog and for many more, finding that the material you need is no longer available in the market is no longer a strange scenario.  In some cases, it could be the logical outcome of not forecasting your demand correctly or the consequence of having problems with your supplier network. Whether it falls under your responsibility or not, the best approach you can take is to be 100% honest regarding your customers’ expectations and put on display products that you are confident in their reliability when it comes to arriving at a client’s door. 

‍

Strategies to consider 

• Build buffer stocks of critical items to mitigate the risk of shortages.
• Strengthen supplier relationships to improve delivery reliability.
• Use inventory management software to monitor stock levels and automate replenishment

‍

Inaccurate data 

Nothing here against an old-fashioned spreadsheet but as procurement departments still rely on manual data entry, the opportunity for mistakes arises. Outdated or inconsistent data can lead to poor decision-making, missed opportunities, and wasted resources. Imagine that instead of learning about a potential problem with an important supplier, you overlook that because the numbers looked good at first glance, or even worse, you don’t realize that your inventory is prone to a stockout in a critical season. 

Can you picture how bad the consequences for your business would be?

‍

Strategies to consider:

• Choose automated systems to reduce manual data entry errors.
• Use analytics tools to gain deeper insights into procurement trends and performance.
• Centralize your data into a single platform to eliminate inconsistencies.

‍

Supplier Issues

Surprise, surprise

Procurement cannot work without suppliers

The formula is simple, find the right suppliers for your company, keep them happy and you shall succeed. 

On the contrary if by some unfortunate chance, you didn’t select the right match for your needs or you did but later faced some bumps in your relationship, then you can be sure that you are going to feel the difference.  Most of the issues happen due to poorly settled expectations and an absence of clear goals and metrics, so neither of you has a full understanding of what needs to be done or fixed. 

Strategies to consider

• Keep consistent communication with your suppliers. Regular check-ins can help address issues before they escalate.
• Develop long-term partnerships rather than focusing solely on cost. 
• Use contract management tools to set expectations and track compliance

‍

Inflation 

We get it, nobody likes to talk about rising prices but unfortunate as it is, at this moment it's impossible to escape from it. It could be because of what COVID-19 did to trade or due to the constant conflicts happening across the world, or maybe it's related to the changes in the labor market, but costs are indeed rising. 

And it's not only on raw materials, areas like logistics, warehouses,s and salaries are becoming more and more expensive to afford.

Naturally, this is a huge problem for procurement managers because how the heck can you find cost-effective prices when everything is on the rise? 

Strategies to consider

• Procurement software can help you identify trends, monitor spending, and flag opportunities for savings.
• If rising costs are concentrated in one region or supplier base, consider diversifying to other markets or suppliers with competitive pricing
• Regularly review your spending to identify areas where costs have increased and evaluate their impact on your bottom line.

Talent shortage

Hard to believe?

Not completely 

These days professionals are searching for positions that prioritize work-life balance. An attractive compensation isn't enough, so you might be struggling to provide extra value to potential candidates. 

The result? 

Your team is overwhelmed by the amount of work that needs to be done, which in turn leads to massive resignations.  Such a vicious cycle, right?

Strategies to consider

Showcase your company as an excellent place to work by promoting your values and workplace culture.

Implement digital tools to streamline repetitive tasks, allowing your team to focus on strategic activities and reduce the burden.

Create a supportive environment by offering competitive salaries, benefits, and clear pathways for career advancement.

Supply chain disruptions

If there's one thing you can be sure about at this point is that supply chains have a lot to deal with. We've mentioned how the pandemic keeps affecting global trade, how the weather is violently changing, and of course, let's not forget about all the geopolitical conflicts. 

The result?

Transporting and delivering products is getting more complicated. 

For businesses, this means problems, highlighting the need for resilience in procurement.

Strategies to consider 

• Diversify your supplier base across regions to reduce vulnerability.
• Use supply chain monitoring tools to gain real-time visibility into potential risks.
• Establish strong relationships with logistics providers to ensure flexibility.

‍

Non-compliance

Regulations around procurement are constantly changing, especially when it comes to sustainability, anti-corruption, and data protection. Keeping up can be challenging, and the consequences of ignoring regulations can be dire, depending on their importance. Your business could be fined or you could lose a part of your customer base because maybe you are working with the wrong supplier. 

‍

Strategies to Consider

• Stay informed about regulatory changes by subscribing to industry updates or working with compliance experts.
• Audit your procurement practices to identify and address gaps.

‍

How Procurement Challenges Impact Your Finances?

Nothing to discuss here. 

It’s a fact that procurement challenges can significantly affect the financial security of your business by driving up costs and creating inefficiencies. Rising costs, stock shortages, and talent shortages, for example, increase operational expenses and reduce profit margins, poor risk management or supply chain disruptions, on the other hand, can lead to costly delays and revenue loss. Compliance failures may expose your business to fines or reputational harm, and rogue spending, coupled with a lack of transparency, can result in unmonitored expenses that undermine financial stability. 

To protect your organization’s financial health, addressing these challenges is essential through streamlined processes, advanced technology, and improved collaboration across every single procurement function.

‍