3 Key Challenges in Procurement
In this rapidly changing era of disruption, organisations need to be able to adapt to changes quickly to reduce risk and take advantage of opportunities. Agile procurement is the engine that drives that adaptability. But what exactly is agile procurement, and how do you achieve it?
In this article, we take a deep dive at 3 key challenges facing the procurement industry in Asia – namely digitalisation, talent and supplier management – and how to attain agility.
Digitalisation
In a recent survey conducted with the CPOs and Heads of Procurement attending ProcureCon Asia 2018, we found that 54% of respondents confirmed digitalisation to be a major challenge in today’s procurement. Some issues faced with embracing digitalisation include how to effectively manage, automate and interpret all data; what is the right digital procurement roadmap; and lack of analytical skills and talent to successfully implement digitalisation.
According to the Hackett Group, 84% of procurement departments believe digitalisation is the next step for their industry. However, only a mere 32% has created a plan for getting there. This is a risky strategy, because we know a digital takeover is inevitable.
To deliver on new levels of procurement performance, CPOs and Heads of Procurement must discover which digital and advanced analytics tools are best suited to the needs of their company.
Talent management
Part of being agile is to develop and manage procurement professionals, for example:
- How to build your workforce that future-proofs your business
- Cultural change and diversity
- What are the skills needed for training your people
Talent management also means not losing your people along your digitalisation journey; sometimes when you are doing robotics or digitalisation, you tend to forget your people, and they too, are afraid of losing their job. What are these people going to do in the future when most of the functions are automated? How do you retain and upscale them?
50% of the procurement professionals we spoke to last year said they faced challenges with talent management, including local talent shortages, attracting and retaining the right talent, and improving the image of the procurement function within the organisation.
As procurement is increasingly tasked with pursuing a broader array of activities, the need for staff with a wider range of skills becomes increasingly urgent. Organisations need to be taking measures to strengthen procurement’s skills across the board. This means creating strategies for attracting and retaining top talent, as well as for managing and developing existing talent from within the organisation.
Supplier management
Supplier management is already a key part of business processes. However, digitalisation requires laser precision when it comes to supplier management. The use of business intelligence and analytics can help identify promising prospects. It can also be used to empower stakeholders and accelerate big decisions.
46% of our respondents agreed that supplier management is an ongoing challenge. Challenges include: compliance with standards, lack of strategic value beyond transactional relationships, achieving a better user experience with eCommerce, limited source of qualified direct suppliers, how to manage multiple suppliers effectively, and map out risks on logistics and commercial.
Research by RS Components and CIPS revealed that the largest concerns for many in MRO procurement are around innovation, inventory management and supplier knowledge. It also uncovered that the biggest challenge for procurement professionals is the need to reduce operational budgets (55%), alongside reducing inventory costs (52%) and improving asset performance (42%).
Among the biggest day-to-day challenges for respondents was ensuring contract compliance with preferred suppliers (47%), as well as maintaining ageing assets (46%).
Final Thoughts
What keeps the CPOs and Heads of Procurement awake at night are the different tools and technology in the market that promise digital transformation in procurement. Even with digital transformation, you need to keep in mind how to move the value chain further, future of procurement and what it looks like in terms of shared services, technology, category management and more. Each procurement organisation is perfecting their strategies not only to save money, but also to bring more value to the organisation.
ProcureCon Asia (9 – 11 July 2019, Singapore) will bring together CPOs and Heads of Procurement from different organisations to plan procurement strategies for growth in 2019 and beyond.
