Challenges of Corporate Procurement (And How Technology Can Overcome Them)

Let's face it, corporate procurement can be stressful. It can feel like a never-ending cycle of RFPs, negotiations, and contract management. Procurement teams often struggle with rising raw material costs, complex regulations and compliance challenges. Limited visibility into the supply chain, inefficient processes and manual tasks add to their woes. 

If any of these challenges resonate, you're not alone. 

Many procurement professionals are grappling with these issues on a daily basis. But thanks to technology, there are better ways to deal with these challenges and make procurement truly impactful. 

Let’s begin by understanding a few basic aspects of corporate procurement. 

What is Corporate Procurement? 

Every business requires some goods and services in day-to-day operations. The job of corporate procurement is to identify what’s needed and then acquire these goods and services in a timely and cost-effective manner. This includes identifying suppliers who can provide quality goods at a reasonable cost. It also includes negotiating with suppliers before finalizing contracts and delivery timelines. 

Corporate procurement includes: 

• Sourcing: 

This involves identifying potential suppliers using a strategic approach. It can include market research, referral or requests for proposals (RFPs). The next step in sourcing is conducting assessments to evaluate supplier capabilities and then negotiating contracts. 

• Supplier management: 

This includes the ongoing management of supplier relationships to ensure contractual compliance. It includes monitoring performance, fostering collaboration and addressing any issues. 

• Cost management: 

This comprises of the strategic management of procurement costs to optimize expenditure. It can include price negotiation, demand management, waste management and other techniques used to strategically manage costs.

Types of Corporate Procurement 

Corporate procurement broadly includes two categories: 

• Direct procurement: 

This involves acquiring goods and services needed for the production of a company’s final product. It includes raw materials and components that are directly used in the production process. 

• Indirect procurement: 

This category involves a wide range of items such as office supplies, IT equipment, utilities and maintenance services needed to support day-to-day operations. Procurement teams tend to overlook indirect procurement, which often leaves a significant amount of spend unmanaged. 

Why Everyone is Talking About Procurement 

In recent years, corporate procurement has witnessed a rapid evolution. Procurement teams in many businesses today need to deliver on multiple goals. From savings and cost efficiencies to diversity, sustainability and ESG, the scope of work has expanded manifold. 

It’s no longer just a question of buying goods and services at the right price. But where are you buying goods from? Do the shortlisted suppliers comply with environmental regulations? What are the risk management measures in case of a supply disruption? 

With all these additional responsibilities, corporate procurement has an opportunity to go beyond its routine tasks and contribute in more strategic ways. 

Key Focus Areas of Corporate Procurement 

The key focus areas of corporate procurement relate to: 

• Cost management: 

Managing costs has always been the top priority for procurement. This requires procurement to negotiate favorable contracts, secure competitive pricing and aim for volume discounts. 

• Risk management: 

Increasingly, procurement teams need to proactively act to identify potential risks such as supply disruptions and compliance breaches. Regular dealing with external suppliers and third-party vendors means that procurement is ideally placed to identify potential risks. 

• Sustainability management: 

With sustainability and ethical concerns emerging as a top priority for enterprises, procurement needs to pay special attention to these aspects. This can align procurement with larger business goals and contribute to building stakeholder trust and a positive brand image. 

How Technology Can Overcome Procurement Challenges 

The procurement landscape is undergoing a significant transformation, driven by factors such as globalization, digitalization, and sustainability. To stay competitive, organizations must adopt innovative strategies and leverage cutting-edge technologies. 

There are multiple benefits of deploying technology. With advanced procurement technology, businesses can: 

• Simplify sourcing: 

Technology can simplify sourcing by quickly identifying, evaluating and qualifying new suppliers. It can also aid in supplier negotiations to help you achieve best-value agreements. Once prices and terms are finalized, it can automate contract creation and management. 

• Make the best use of data: 

AI-powered procurement software can collate data generated from different source systems. More importantly, it can break down this data to derive actionable insights, which can be used to improve processes. Procurement can use all the data and insights to improve decision-making. 

• Improve spend visibility: 

Advanced procurement software can provide real-time visibility into organizational spend. It can analyze spend patterns and trends across different categories and suppliers. With the help of spend analytics and benchmarking, it can also identify potential savings opportunities. 

• Get a single version of truth: 

Procurement technology ensures that all stakeholders look at the same data in real time. Not only does this foster collaboration, but it also prevents confusion and aligns different functions. 

• Enhance efficiency: 

Leveraging digital tools and platforms can streamline processes and improve efficiency. It can ensure compliance with set budgets, policies and contracts. By automating manual tasks, procurement can focus on more strategic tasks such as building strong relationships with suppliers. 

• Ease supplier management: 

Procurement technology offers a full set of supplier management tools. Supplier dashboards provide comprehensive supplier intelligence such as total spend, proposals submitted and active contracts. You can also look at quantitative and qualitative supplier scorecards to evaluate their performance during a period. 

• Engage in continuous improvement: 

With procurement technology, you can regularly evaluate processes, identify areas of improvement and implement best practices. This helps to create a culture of continuous improvement. 

The Future of Procurement 

The rapid evolution of corporate procurement has made it vital for professionals to stay informed and adapt to emerging trends. By embracing digitalization, leveraging cutting-edge technologies, focusing on sustainability, and fostering strong supplier relationships, organizations can unlock the full potential of procurement and drive business growth. 

Learn how GEP’s procurement software can enhance your corporate procurement capabilities.