Within any business process it is too easy to highlight how others may do things differently, more so in the world of Procurement. However, there is doing things differently and maintaining procurement processes to where they should be with what is a hugely complex legacy environment with the addition of the most non-compliant factor, people. Technology can do many things but often the weakness is processes reliant upon people, not only doing things incorrectly but not willing to change, accept new ways of working or simply wanting to take time off, the good news hear is that a combination of those key people skills and procurement technologies can cover all bases if understood correctly. Here we are highlighting some of the key procurement inefficiencies that give us procurement challenges in 2023, while this list is not exhaustive it is designed to help advise and highlight there are solitons out there for many of the most complex problems currently being faced.
Non-compliancy – over the past few decades since the Sarbanes-Olexy Act of 2002, the need for compliance has dominated relationships and processes through procurement. Whether it be the need to ensure your supply chain is behaving in accordance with regulations or that they adhere to your organization’s guidelines, these are generally put in place to avoid fraud, corruption, coercion or collusion that may affect procurement processes and procedures. Compliancy is also a factor for internal company procedures and systems must be in place to ensure that employees and representatives are aware of these policies and procedures and just as importantly any changes that may affect them ongoing.
Bureaucracy – Hand in hand with compliancy, this can also hinder the ability for an organization to operate efficiently, indeed Forbes stated in Feb 2021 after investigated 120 companies that “35% of time is swallowed by bureaucratic red tape, bad excuses and corporate bs”. The two worst sectors are Governmental and the IT Sectors whose level of unnecessary bureaucratic restrictions far excel those of other sectors, strange when one is paid for by the people and efficiency would reduce cost and the other is designed to be more efficient but seemingly isn’t! Bureaucracy is not just about levels of signing off becoming excessive but paper invoicing, data entry, overly complex signing off and the departments who silo and fail to communicate at every level. Getting the right level for each organization is paramount as these steps are correctly or incorrectly repeated throughout.
Vendor Management – CPO’s/Buyers used to state that this was products or services just not turning up where and when they should or at a standard below expectation, however this has come much more complex in recent years as we must ensure our vendors are Compliant where it counts and treat their staff and sub-suppliers with a standard level of consideration. Globally we face the effects of the pandemic that hugely disrupted the supply chain both in sourcing materials and getting them to where they were needed, however this is worse in Europe due to the further disruption caused by the war in Ukraine. On the customer side of procurement, we also have companies still believe paying smaller suppliers 60 days end of month (120 days/3months) from receiving of goods is a good business practice. The key is to work with your supply chain as when things get tougher, they can be one of your best allies to internal stake holders and customers. Especially when you can submit orders into the workflow of the supplier achieving great time and cost efficiencies all round.
Maverick Spend – When you need something urgently chances are “procurement” will do all they can to stop you getting that item, but the good thing is you can go out and buy it yourself and claim the money back in your expenses. For someone who lacks understand of how procurement works this is the answer, however we all know that doing this is simply a bad call as it is outside of the procurement process (lack of transparency/high purchase price/contractual agreements/weakening of buying power etc.), often this gives any organization an amount of additional cost and risk both in buying items outside of the existing process but not supporting negotiated vendor contracts in place not to mention the additional administration needed to support such an action. With good vendor management, correct products can be supplied to correct vendors in the most efficient way often allowing considerable savings with automation and contractual agreements.
Lack of transparency – One item linked to all others is transparency, the CPO/Buyer needs to know what has/is and being procured within the organization as this supports good purchasing, compliance and vendor management whilst helping to eliminate tail end and maverick spend. Transparency is the lifeblood of good purchasing practice, the key feature of successful procurement.
Tail end spend – Accepted as only around 20% of unmanaged (unmanageable) spend within an organization but realistically this can be as high as 50% (“often 80%” Capita 2019). These are items that tend to be complex or of lower value across the business procurement landscape that are invisible due to the organizations procurement system lack of managing. Tackling tail end spend can seem daunting to the best CPO/Buyer due to the number of suppliers, stakeholders and diversity of products it covers, often this accounts for a spectacularly large number only seen in management accounts. The key to resolving tail end spending (see summary) is transparency and a system that can manage process ensuring this area of procurement is correctly accounted for.
Failure to Adapt & Change – Over the past three years we have been forced to embrace change at a faster pace than the ten years previously, effecting all areas and as a CPO/Buyer we have the added complexities of customers, stakeholders and vendor management. We must now accept and address change that includes all of the above and more, 2023 remains a year yet to unravel and “match fit” is key!
It goes without saying that all these factors contribute to process inefficiencies and lack of transparency. However, solutions are available that can assist any organization and none so more than Corvolo. As an eProcurement plug-in or standalone solution, Corvolo can regulate ordering to the correct vendor even for the most complex of products into the vendor workflow, this eliminates maverick spend and promotes transparency. Tail end spend can be locked down, and policed by the CPO/Buyer, streaming lining the bureaucracy that was in place for an efficient process that supports hybrid globalization, compliance and transparency. While 2023 and beyond will continue to offer us more challenges ahead, at least there is a solution that supports the ones we know about now.
