Whether we’re peering into big or small companies, leadership will always have high expectations of the members of its Procurement Team.

After all, those in charge of the company purse are expected to be agile, quick to pivot and respond and always ready to implement process improvement when needed.

Here are 7 possible situations that require your company to rethink its processes.

Cost Creep

The problem with not immediately addressing department inefficiencies is that they may eventually harm the entire company. Studies by McKinsey & Company have revealed that poorly optimized processes can waste as much as 5-20% of company spending.

Moreover, problems caused by flawed processes and breakdowns incur costs when corrections need to be implemented.

Bottlenecks

Whether through automation or AI technology, there are now more efficient ways of addressing issues that are often seen as bottlenecks in the procurement cycle.

Take the time to identify problem areas that tend to stall your deliveries and frustrate your vendors. Get your team together to identify which of your tasks are repetitive and may be streamlined or, better yet, handled by automation.

Being open to innovation’s wonders may reduce man hours, free up company resources, and improve overall efficiency.

Risk Management

Just as unnecessary costs and bottlenecks may take you farther from your company’s ideal, so do quality and compliance issues.
A solid grasp of vendor or supplier risk sources is always a good foundation in any procurement team.

This level of understanding helps when you look at how market risk influences supply/demand dynamics. Political risks impact even the reliability and cost of materials coming from a particular region. The Total Cost of ownership and the Total Cost to serve will have a degree of impact on both suppliers and buying organizations.

Communication Silos

Efficient communication between departments, vendors, and suppliers is always important. A breakdown may spell the difference between getting your organization’s right goods and services at the right time to keep operations running.

Whether the matter at hand is pricing discussion, negotiation, contractual remedies, or even escalation issues that are at the communication center stage could benefit from regular process improvement checks to ensure an optimal channel is always in place.

Market Agility

The lack of market agility can have several detrimental effects on any procurement team. It may cause you to be less responsive to market changes. Your inability to quickly adapt to disruptions such as supplier issues, geopolitical events, or natural disasters may result in delays and shortages that may significantly impact your bottom line. Even worse, with rigidity and slower adoption of new technologies, your team may find itself lagging behind others.

Data Overload

When a procurement team has to contend with data overload, it can lead to decision-making paralysis that harms the company. It may also increase errors, contribute to unnecessary resource drain and, in some cases, prevent the team from identifying a way to extricate itself from a rut.

This may be the right juncture to consider process improvement.

Compliance

Failure to observe procurement regulations, policies, or ethical standards can severely affect a procurement team.

Don’t wait until you face fines, legal proceedings, or penalties. Routinely evaluate your processes to spare your company from future reputational damage and erosion of trust and credibility. It will not be easy to recover from these setbacks and may even lead to difficulty attracting and retaining suppliers, customers, and business partners.

Don’t let outdated processes hold you back. Invest in your team, invest in training that introduce process improvement, and unlock the power of optimal procurement! Remember, small improvements can lead to big results.

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Published On: January 2nd, 2024Comments Off on 7 Situations When Your Procurement Team Needs Process Improvement
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