The Biggest Challenges in Operational Procurement

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Operational procurement processes are the heartbeat of any organization to keep their business running smoothly, drive sustainable growth, and stay at the forefront of competition. This crucial function ensures that the necessary goods and services are acquired in a timely, cost-effective, and quality-driven manner so that the day-to-day operations of the business are not disrupted.

However, like any other process, operational procurement is not without its challenges. These can include issues like supplier communication problems, inefficient data management, and poor internal communication, among others. These bottlenecks can slow down things and make processes less efficient. And, if left unaddressed, they can end up costing a company time and money.

For a business to stay competitive, it’s paramount to find smart solutions to these common procurement problems. Read on to discover the top six common procurement challenges, their impact, and how you can tackle them head-on to streamline your operational procurement processes.

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6 Challenges in the Procurement Process

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Now, this is the obvious question - what are the challenges in procurement? But before we get into that, let's first understand why the procurement function faces challenges. In the past, procurement was seen as an administrative task that ensured the timely availability of quality materials for a business. A simple job, right? But, as the business landscape evolved, so did the role of procurement.

Today, procurement teams don't just focus on simply purchasing goods and services; they are responsible for strategic decision-making that affects the business's bottom line. They must also manage day-to-day operations, like handling purchase orders, communicating with vendors, and running compliance checks. On top of that, procurement professionals now have to tackle newer responsibilities like cost optimization, risk mitigation, and supply chain management. It's a lot on their plate, and this complexity is what makes procurement a challenging function.

Procurement challenges can vary based on the organization's size, industry, and business model, but here are the top 6 most common procurement challenges that most businesses face:

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1. Lack of Process Automation

One of the biggest challenges in procurement process is the lack of automation. While back in the day, manual procurement processes may have sufficed, in today's fast-paced business world, they just don't cut it. Why? Well, it's because manual processes involve a lot of work: sourcing suppliers, requesting quotes, creating purchase orders, tracking orders, managing invoices, and the list goes on. These tasks not only take a lot of time and effort, but they are also prone to human error, like data entry mistakes or duplicate orders, which can be costly for a business.

Aside from these risks, the manual method of procurement processes also makes it difficult to track and analyze data due to scattered information and lack of data visibility. This can lead to inefficiencies in decision-making, missed prospects for cost savings, and difficulty in identifying areas of improvement. In simple terms, the lack of automation in procurement processes can be summarized as slow, error-prone, and inefficient; a massive roadblock to smooth operations.

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2. Supplier Communication Problems

Maintaining stable and positive supplier relationships is crucial to the success of a procurement function. However, it is not always smooth sailing. Communication problems with suppliers can arise due to various reasons, such as unclear specifications and requirements from the buyer's end, lack of transparency in the procurement process, or even cultural and language barriers. These communication problems can lead to delays, misunderstandings, and even conflicts between the buyer and supplier.

Also, without doing proper due diligence on vendor assessment and setting clear key performance indicators (KPIs), like delivery timelines and quality standards, it becomes challenging to manage supplier expectations and hold them accountable for their performance. As a result, strained relationships can lead to unreliable suppliers, disrupted supply chains, and ultimately impact the business's bottom line.

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3. Inefficient Data Management

In order to make informed procurement decisions, businesses need to have access to accurate and reliable data. However, most companies handle data entry manually. This manual method of data entry involves a series of repetitive tasks like extracting data from documents (invoices, purchase orders, etc.), verifying the information, and then inputting the data into a spreadsheet or legacy system for further processing. While it may seem like a simple copy/paste task, it is inherently time-consuming and prone to human error. Typos, missing information, and duplicate entries are just some of the common human errors that can occur during manual data entry.

These mistakes not only lead to inaccurate data but also make it difficult to track and analyze information effectively. This, in turn, can result in poor decision-making, missed opportunities for cost savings, and difficulty in identifying areas of improvement. Moreover, manual data entry also lacks the ability to handle large volumes of data in real time. This means that the data may not always be up-to-date, leading to outdated insights and hindering efficient decision-making.‍

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4. Poor Internal Communication

Poor internal communication is another major procurement challenge that can hinder the overall efficiency of a business. Procurement teams rarely work independently and are reliant on other departments for vital information, such as financial data and cross-functional collaboration, to make informed decisions. Without proper communication and alignment between departments, it can be challenging for the procurement team to understand the company's overall goals and objectives. This lack of understanding can lead to misalignment in procurement strategies and hinder the company's financial health.

Furthermore, poor internal communication can also lead to delays and errors in the procurement process. For example, if the procurement team is not informed of changes in budgets or project timelines, they may end up ordering materials or services that are no longer needed, resulting in wasted resources and increased costs. Effective communication between departments is crucial for the success of any procurement function. It ensures that everyone is on the same page and working towards the same goals, but without it, the procurement process can become disjointed and inefficient.

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5. Complex Compliance and Risk Management

Keeping up with procurement regulations can pose significant challenges for companies. These rules fluctuate widely depending on the industry and geographic location and are constantly changing. Staying compliant requires a substantial investment of time/resources, as businesses need to continually monitor updates and make critical adjustments to their processes. Failing to comply with these rules not only leads to hefty fines but also damages a company's reputation.

Another challenge in the procurement process is managing supply risks. Some of the most common risks include potential fraud, market fluctuations, pricing instability, supplier bankruptcies, and natural disasters. These risks can disrupt the entire supply chain and cause delays, shortages, or quality issues, all of which can have a significant impact on a company's bottom line.

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6. Contract Management

Contract management is a vital aspect of the procurement process. It involves the creation, negotiation, execution, and monitoring of contracts with suppliers. The contract serves as the legal foundation for the procurement of goods and services, outlining terms, conditions, and expectations from both parties: the buyer and the supplier. While contract management is crucial, it also comes with its own set of challenges that can lead to inefficiencies and complications if not handled properly.

These challenges stem from the need to ensure contracts are fair, transparent, and in line with your business goals while also complying with relevant laws and regulations. And if contracts are not well-managed, it can result in missed opportunities for cost savings, disputes with suppliers, or even legal issues. Also, without a centralized system for contract management, it becomes difficult to track important contract details and ensure that all parties adhere to the agreed-upon terms.

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How To Overcome Procurement Challenges with turian

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Now that we've mapped out the most common challenges in procurement operations, let's dive into the million-dollar question: how to solve procurement challenges? Well, if you're looking for a one-stop solution to streamline your operational procurement process, then turian is just the solution you need. Our AI-powered procurement assistant is designed to tackle these challenges head-on, transforming your entire procurement operations from chaotic to seamless.

turian is powered by the most advanced AI technology, including large language models (LLMs) with custom business rules and advanced data querying techniques to make sure that all your procurement tasks are handled in the most efficient and accurate way. Our AI assistant for procurement can automate data extraction from emails and complex attachments (e.g., scanned PFDs, Word files, etc.), validate purchase orders based on pre-set rules and policies, compare suppliers to determine the best option and handle any requests for quotations (RfQs) with ease.

Apart from that, turian can also intelligently determine the next course of action: updating your ERP and purchase order system, requesting missing information, or getting user confirmation before proceeding with any critical task. With turian, you can also set custom rules and policies to maintain full control over your automated procurement processes, ensuring precision with human review and approval flows for sensitive actions. This way, you can have complete confidence in every decision made by our AI assistant.

turian also offers built-in analytics and real-time insights via a user-friendly dashboard where you can track and monitor your entire procurement process from start to finish. If there are any discrepancies (e.g., data-entry mistakes or missing information), turian will flag them and send a notification to the responsible person for immediate action. Plus, turian adheres to all industry standards, like GDPR and data privacy regulations, to keep your sensitive procurement data safe and secure.

Our AI-powered email automation and PO automation solution can also draft personalized responses to supplier inquiries in a human-like manner, reducing your team's workload and response times. And with its advanced natural language processing (NLP) capability, turian can understand complex messages and attachments in any language or format. This means you can communicate with suppliers from all over the world without worrying about language barriers or misunderstandings.

From data entry and risk assessment to supplier communication, turian can handle it all. The best thing? Our AI solution is compatible with all leading ERP systems, like SAP, MS Dynamics, Netsuite, and ABAS. No need for extra hardware/software or coding. turian is a plug-and-play solution; within less than two weeks, you can have your entire procurement process automated.

If you're still unsure about how turian can help solve your procurement challenges, we offer a free Proof of Concept (PoC) to show you how our solution can revolutionize your procurement operations.

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