Top Current Challenges in Procurement

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Supply Chain Digest, June 2019

By SCDigest Editorial Staff

There’s no lack of current challenges in supply chain generally and procurement specifically.

Procurement professional organization CASME, headquartered in the UK but with offices in the US, Asia and Australia and some 13,000 members, recently conducted a series of roundtable discussions with its members across the globe to get their take on the top challenges in supply management.

As reported on the pages of SupplyManagement.com, Graham Crawshaw, services director at CASME, identifies what he says procurement professionals are telling his organization in terms of their biggest management concerns:

1. Risk management: 

   Risk is always a key concern for procurement, and it appears to SCDigest a growing one. Crawshaw says the primary focus is focused on the financial status of suppliers, followed by health and safety and industry practices.

   “It’s no longer good enough to simply engage with your tier-one suppliers,” Crawshaw says. “Emphasis needs to be paid to controlling the approach taken with tier-two suppliers, ensuring that the necessary obligations are passed down to subcontractors.”

2. Reputation and brand image:

   Crawshaw says there have been a number of recent allegations of child labor in the overseas supply chain of some retail brands, or issues around modern slavery both at home and abroad. That kind of negative PR naturally can have major negative effect a company’s brand and public image, and ultimately an impact on profitability, Crawshaw argues.

The UK’s Modern Slavery Act goes some way towards addressing this, but issues remain around compliance, Crawshaw adds.

3. Corporate Social Responsibility (CSR):

Can procurement ever be sustainable, Crawshaw asks?

Organizations are making tremendous progress in their approach to direct materials, but indirect procurement is more complex, Crawshaw observes. That’s in part because the level of auditing required to ensure that practices are sustainable, including those of first and second tier suppliers, is labor-intensive and time-consuming, and thus expensive

Crawshaw suggests companies should ask suppliers to complete detailed questionnaires and take positive action upon reviewing the results.

“Many organizations now issue written codes of conduct, but the key challenge is acceptance and practical application in the supply chain,” Crawshaw says.

4. Becoming a customer of choice:

Innovation is often included in an RFP sent to potential suppliers,, but does not necessarily specify what is really needed, Crawshaw says.

He believes supplier innovation is more likely if you become a customer of choice. Interestingly, a recent CASME survey highlighted that a simple constraint to achieving this innovation partnerships is late payment of invoices.

“Innovation is a two-way process; don’t just write it in a contract and expect the best ideas from suppliers,” Crawshaw writes. “The most successful approach is to abide by agreed payment terms, and demonstrate a partnership approach by listening and responding to suppliers’ ideas.”

5. Centers of Excellence (COE):

The strategy of having a centralized organization to support the procurement function is on the rise, with an emphasis on provision of spend data and analysis, plus RFx e-sourcing support, Crawshaw says.

What is the best approach to organizing the CoE’s structure, work responsibilities and operation to ensure the business is supported? A virtual CoE may be an appropriate solution, Crawshaw say, but adds that a robust software package, beyond the capabilities of Microsoft Excel, is needed for centralizing and recording the CoE’s activities.

6. Stakeholder engagement:

   Crawshaw notes that at almost every one of CASME’s meetings held each year, the discussion includes procurement’s need for achieving greater connections with stakeholders.

He says recent benchmarking studies show that more CASME members are now profiling and prioritizing stakeholders and their requirements, in order to plan the right type of communication.

An example is whether a particular stakeholder needs an occasional meeting over coffee, or a formal monthly one. CRM tools can be used to track the relationship building activities and supplier onboarding. Credibility can be gained by using the right terminology, and by demonstrating knowledge of the category, suppliers and market trends, Crawshaw adds.

“By aligning procurement activity to the stakeholder’s business objectives and selling the benefits of collaboration, the overall result can be more valuable than cost savings alone,” Crawshaw notes.

That’s a pretty good list. SCDigest would add to the list of top issues the need for digitization is procurement, along with the opportunities and challenges in advanced analytics and artificial intelligence to the list.

Finally, other surveys have found quantifying procurement’s value-add to the organization remains a perennial challenge.