17 Most Common Procurement Problems and Their Solution

How many Procurement Problems you face in your day to day job? Would you be able to list them? And which ones will be the biggest pain points to resolve?

For me the biggest problem I see for any procurement function is to shifting procurement’s ‘traditional focus on short-term cost savings’ to a more holistic objective that includes strategic supplier relationships, giving preference to longer-term cost efficiencies, and working with suppliers to identify opportunities to develop more innovative products and services

In today’s businesses progressively see procurement systems as vital strategic contributors to their value plan and matching end-user goals. A dependable procurement system is one created to improve accuracy, efficiency, and speed. Due to this viewpoint observed by many, the necessity of standardizing business procedures within procurement and ensuring best practices becomes very important to the overall business plan.

But despite all safety measures taken in creating a standardized business strategy, procurement problems are still known to occur. Procurement Problems ranging from organizational inadequacies to human mistakes can again deliver adverse effects to a business procurement and purchasing capability. Below is a list of the Most Common Procurement Problems we encounter across various organizations & Their Solution offering simple ways to fix them.

17 Most Common Procurement Problems

1)   Allowing Poor Quality for Lower Costs

In today’s business world, cost still play a vital role in consumer products. We still see businesses hurtling down on cost even when the effects are detrimental to the product’s quality. In countless scenarios, the quality dimension gets altered with to save cost and management holds high optimisms the quality risk does not get discovered.

SOLUTION: The use of consumer feedbacks become helpful in striking a better balance, especially where an acceptable profit margin is reached.

LEARN STRATEGIC COST MANAGEMENT FOR PROCUREMENT AND SUPPLY CHAIN

2)   Providing Unclear Specifications & Requirements

Providing Unclear Specifications & Requirements during procurement does not always turn out well and fits the “help me help you” scenario. Usually, suppliers could offer a much better job in delivering what client requests if the organization make available clear and defined requirements during procurement.

SOLUTION: A clear details or specification of what your organization requires would go a long way in solving this Procurement Problem.

3)   Not doing Supplier Assessment Before Doing Business

Organizations habitually leave out Supplier Assessment and stick to what suppliers promise on paper. Keeping suppliers at arm’s length without any form of Assessment before doing business leaves room for irregularities and untrustworthy experiences. A lack of trust on any side of the deal leads to various procurement problems.

SOLUTION: Conduct thorough supplier evaluation criteria and/or assessment before you select any supplier. Once selected actively include major suppliers during problem-solving processes. It leads to positive outcomes for overall growth. Treat your supplier as strategic business partners.

4)   Not Fully Understanding Supplier Capabilities

If you do not have a clear understanding of supplier capabilities, then it is a sure way to get dissatisfied when possible procurement problems arise. Placing high expectations on a supplier to swiftly complete a procurement deal beyond his capability usually tends to be disastrous at the end. This procurement problem is amongst the biggest challenges facing procurement professionals when related to suppliers. The process, from identifying the best to ensuring stable and quality delivery, can be vital in seeking much more from your suppliers.

SOLUTION: Along with the usual procurement process, procurement professionals need to continually monitor suppliers to ensure all delivery demands and standards are met. Start with gradual increment with timelines in place and quality agreed. In other words, hold a regular supply review, discuss key performance KPI, and agree on action and improvement ideas.

5)   Not Agreeing on Important KPI

Following the above point, important KPI’s are vital to executing best practice procurement. Best practice in supply chains function using five essential dimensions (variation, variety, velocity, visibility, and volume). Many procurement experts do not appreciate the need for critical questioning that addresses what a new supplier brings into the balance. Factors like purchasing price variation, percentage cost reduction, quick delivery, etc. can be valuable, but not enough. Additionally, these measures often result in conflict with significant strategic actions that offer a real and sustainable impact.

SOLUTION: Once KPI’s are agreed they should be the main agenda item for regular supply review. The management system should employ measures involving procurement system that offers a balance between cost, customer value, quality, and speed.

6)   Lack of Transparency

The withholding of crucial information by organizations tend to create procurement problem that limits suppliers from offering jam-packed values to clients. Critical Data like market trends, product changes, and sales forecasts, generate unwanted surprises that may hamper your relationship with suppliers.

SOLUTION: Ask for supplier’s demand or details required to offer quality services. Keep a request line open about these demands and also updates whenever there are new requirements.

7)   Lack of Trust

In cases of zero trust for a supplier, such organizations usually hold suppliers at arm’s length. The treatment is also similar to one filled with zero confidence. The show of lack of trust towards suppliers may not go down well with some, and this could lead to a variety of procurement problems. But still, maintain safety first, do not trust blindly.

SOLUTION: Show some level of trust towards your key suppliers. The light show of confidence would aid your problem-solving methods and yield positive improvements.

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