10 Challenges Faced By A Sourcing Manager
Building a great rapport with suppliers, and delivering satisfactory services are vital skills for a procurement manager to have. This is because a bond with the suppliers is the most beneficial relationship a business could have.
As such, gaps, delays, and miscommunications can hamper the process of deliveries, worsening your performance. Furthermore, keeping a hawk-eye on every process is not enough because dealing with third parties is not as easy. There are always some unknown gaps that your business will come across on a daily basis; toughening the procurement manager’s job.
In keeping with the above-mentioned ideas, let us look at ten challenges faced by procurement managers.
10 Challenges Faced By Procurement Managers
- Availing Quality Products At Low Costs
The ability to avail good quality raw materials at reasonable prices is one of the keys to running a successful business.
Lower prices are not reason enough to compromise on the quality, since it drastically affects the end product. If the finished product does not live up to the planned standard, it can lead to customers growing dissatisfied, while also impacting the image and goodwill of the business.
Apart from this, many companies are still struggling to cut down on their expenses, which include aspects like delivery cost, freight cost, lead time, and trade adherence problems. The procurement manager must assess the importance of these things, as it is impossible to keep the price low every time.
Furthermore, the company should take advantage of consumer feedback, since this provides one with a good framework to modify their work, eventually earning them a reasonable profit margin. It is also wise to opt for various softwares which compares the quality of raw materials provided by different suppliers before making a choice.
- Ambiguous Specifications And Provisions
Vague specifications and requirements provided during the procurement agreement can also create problems. These problems not only affect the relationship with the suppliers, but can also hinder the payments. Moreover, these specifications need adequate financial budgeting that aligns with the corporate strategies of the company.
To avoid encountering these situations as a procurement manager, you can take help from professionals appointed to clarify problems that may occur. These professionals oversee suppliers, find out deadlines, and also carry out a continuous assessment of quality.
You can also carry out a periodic supply inquiry yourself, and examine important performance and development ideas. Another way of tackling vague clauses is managing the payment cycles. You can delegate this work to trained professionals, who will negotiate with suppliers to handle the payments.
- Wrong Supplier Assessment Before Starting a Business
Companies tend to sometimes overlook supplier assessments, and simply assume that the latter will keep their word. For instance, a company orders the dress raw materials from the suppliers on a fixed amount and does not assess the actual quality before generating payments. Later, while making a dress, the company might face a shortage of the material, creating a problem.
Thus, an absence of faith and miscommunication on each side of the agreement leads to many procurement issues.
Online platforms can be valuable in having a clear view of supply and logistics. They provide a brief idea about the demands in the market and the quantity supplied. They are also useful in assisting the sourcing executives in avoiding risks. Thus, they efficiently provide valuable products at low costs.
Furthermore, conducting detailed supplier assessments before selection leads to positive outcomes. This, in turn, assures comprehensive growth.
- Absence Of Transparency
The invaluable information provided by company procurement managers does not illustrate the internal information in detail. This leads to a procurement crisis, which limits distributors from offering customers good service.
Furthermore, critical data such as market trends and sales forecasts produce undesirable changes, in turn affecting your connection with suppliers.
Likewise, suppliers must possess proper knowledge about the company’s strategic objectives. The absence of reasonable understanding leads to unfulfilled supply requirements. Maintaining good contacts with suppliers can benefit the organisation in a big way. You can keep records by using an online purchasing order and invoice management tools. One of these tools is Invoicera.
Using these tools will enable you to ask your suppliers to give detailed information that is useful in maintaining transparency. You can also take help from a request line to see whenever new requirements appear.
- Inadequate Confidence in Suppliers
Zero confidence in all supplier organisations can make you lose loyal buyers. As you lose customers, the procurement problems tend to increase as a result of which supplier reduction, procurement function indiscipline, and underdevelopment usually occur.
But, you can do miracles for your company by providing top level security and maintaining safety. Moreover, a clear display of faith in your suppliers would benefit your problem-solving strategies and result in favourable developments.
- Conducting Business Without A Legal Agreement
There are still some companies that have more than 40% of suppliers on their list, with whom they do not enter into a formal agreement. Legal agreements and paperwork may be time-consuming and cumbersome, but in their absence the procurement crisis could increase exponentially. This can further delay the requests made for several things including expressions of the interest quotation, etc.
Furthermore, managing it all together takes up a lot of time. Also, such systems need to be fair, straightforward and rightly implemented. So, the need to select an excellent stake of procurement teams is important. It will not only reduce the chances of problems but also will help in the smooth running of other production activities.
- Wastage Due To Accidental Orders
Ordering the wrong and excessive items can also drive procurement managers to face problems. Yet, you can keep a record of all transactions online, leaving little room for mistakes.
Though, small businesses that do not own online services can cause such errors. The resulting wastage could create an imbalance between stocks throughout the year. Thus, it is essential to keep track of such orders.
You can protect the company from such mistakes by supporting reversals. You can also maintain a good rapport with your suppliers, allowing you to follow-up with them frequently. Good connections will protect you from critical difficulties in the long run.
- Operating a Business With Limited Suppliers
We all make many procurement developments alongside the risk management policy. Stuff like low expenses better indicates the impact of business activity.
Also, some suppliers may not allow or offer discounts. And add some surcharges or fees on products. But, keep in mind that you can hire a skilled procurement professional. That often discloses space for bargaining with the suppliers.
Furthermore, while selecting the suppliers, see what dealing options they will provide you. Observe how much they are offering you after including the discounts. It is beneficial to stick to the suppliers to identify and adapt according to your business desires to improve performance.
- Inadequate Development Plans
Most companies face hurdles because of their inadequate development plans. Furthermore, they reject a lot of suppliers that do not have good monetary support. This is one of the ordinary procurement troubles. Apart from this, other concerns that procurement managers might have are:
- The financial instability of high-spend and big suppliers
- Problems that can incur reputational damage concerns
- Breaches to data protection and security regulations
- Uncertainties relating to supply chain
- Corruption and bribery
You can avoid such troubles by being open about your possible risk options, and putting in place necessary measures to compete against all unnecessary risks. Likewise, there are a lot of procurement courses, blogs, and books that can help in several ways.
- Absence Of Accurate Data
Buying orders based on false procurement data can result in leftover inventory, or inventory deficits.. The occurrence of these decreases the business potential, thereby affecting your company’s bottom line. Thus, when you make procurement decisions, make sure you use only factual data.
Apart from this, procurement managers also need to identify the needs of suppliers. As such, the design of a provision for essential support is compulsory. And effective for continuous expansion.
Several companies face a variety of procurement problems and challenges. But by implementing the best practices and procurement systems you can combine various high-performing business processes. That solves the problems of all procurement managers to a great extent.