Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

Procurement Issue — The Ultimate Guide for 2024

How do you avoid procurement issues?

Procurement is the process of acquiring goods and resources needed to run a business smoothly. However, it comes with its fair share of challenges that can hinder operational efficiency.

In this article, we’ll tackle common procurement issues, provide solutions to these issues, emphasize the impact of sound procurement management, and highlight tips for achieving excellence in this crucial aspect of business.

Procurement Issues

Procurement management involves the systematic process of identifying, sourcing, acquiring, and managing the resources necessary for your business operations. Because of its intricate design, it encompasses a lot of issues when you mismanage the entire process.

Let’s take a look at 15 common procurement issues you may or may not encounter, and their solutions to help you navigate through them:

1. Supplier Reliability

Your suppliers may fail to deliver what you have agreed on. There can be issues of unsatisfactory product quality and inconsistent deliveries which fall in the hands of your suppliers.

This is not a case that happens to all businesses, however, there is a huge chance that this may happen when you don’t know how to properly manage your procurement processes.

Solution: Thoroughly evaluate your suppliers from the get-go–before entering and forming contracts. It’s important that you consider their financial stability, track record, and reputation, and you may also opt to ask references about their performance.

You should also avoid over-relying on a single supplier for the raw materials of your products. Instead, consider multi-sourcing especially for critical raw materials.

2. Inadequate Supplier Evaluation

At some point, you may be tempted to choose suppliers without a thorough assessment. It’s time-consuming and may cost you a lot. However, you cannot overlook this issue because it can bring you a lot of ripple-effect challenges than you think.

Due to the lack of this assessment, there’s a higher risk that you will receive subpar products and services, miss cost-saving opportunities, create conflicts in your relationship with them, make your supply chain vulnerable, and damage your company’s reputation.

Solution: To save time, establish a supplier evaluation framework by defining clear criteria for evaluating potential suppliers–including the price, quality, reliability, delivery times, financial stability, sustainability, and compliance with regulations.

Make sure to track their performance as well by establishing schedules for ongoing supplier performance reviews and specifying KPIs for them to adhere to.

3. Poor Communication

A lack of clear communication between your procurement teams and your suppliers can bring disputes and failed relationships. More than that, it can also lead you to miss deadlines, poor product quality, limited innovation, issues in compliance and legalities, and procurement inefficiencies.

Communication should be a great key to streamlining your procurement processes, but without it, it can jeopardize everything including your whole supply chain.

Solution: Establish transparent communication channels and protocols for both your procurement teams and suppliers to follow. It may involve using emails, texts, calls, and other communication platforms.

You can also schedule regular meetings with your suppliers to discuss the progress of ongoing and upcoming projects. You may also include in your contract terms that emphasize that both parties should ensure good communication throughout the process. 

4. Price Volatility

This refers to the unpredictable rapid changes in the prices of products and services in the market. Moreover, this can be influenced by several factors like market conditions, economic trends, and even your own supply chain disruptions.

This is a critical issue in procurement because it directly impacts your budget and finances.

Solution: Conduct a thorough market analysis to identify trends and potential risks that may factor in price volatility. With that, you may also implement risk mitigation strategies like hedging and making long-term agreements with suppliers so that you can lock in prices and reduce the exposure to price fluctuations.

You may also create a more flexible budget model that solely accounts for price fluctuations and also allocate a contingency budget to accommodate unforeseen cost increases.

5. Inefficient Processes

Inconvenient procurement processes lead to delays. These are steps and methods used to acquire goods and services that are not optimized for speed and effectiveness. So, when your procurement processes become inefficient, your entire supply chain will be slow, vulnerable, and prone to unnecessary complications. 

Solution: Assess your current procurement processes by identifying bottlenecks, redundant and unnecessary steps, and areas where delays mostly occur. Provide training to all people relevant to the procurement process; by doing this, you can ensure that they are and will be well-versed in any revised procedures should they change.

Lastly, you may consider centralizing procurement activities to maintain consistency and standardized procedures. You may also streamline workflows through automation and digitization.

6. Maverick Spending

Unauthorized and uncontrolled purchases disrupt budget plans. These can be made by employees or departments outside the umbrella of your procurement process. Although you may be smartly allocating budgets for business operations efficiently, purchases made without proper authorization can leave other critical projects underfunded.

Solution: Enforce strict purchasing guidelines and approval systems. Make sure to also put trusted employees in higher positions to avoid corruption within your internal departments.

Moreover, you can also invest in procurement software and tools that can automate your entire procurement process, including approval workflows, to make it easier for your employees to follow the established procedures.

7. Lack of Data Visibility

Procurement decisions greatly rely on data-driven insights. That is why, when you’re unable to access real-time, comprehensive, and accurate procurement data, it can be a huge problem. Because of this, you are unable to track your progress and in which areas you need to improve strategies.

You may also struggle in identifying and mitigating potential risks within your supply chain which can cause you to lose your competitive advantage.

Solution: Integrate with your suppliers to establish data-sharing mechanisms like setting up electronic data interchange (EDI) systems to enable real-time data exchange. You should also pay special attention to data security to safeguard sensitive procurement data to maintain integrity within your systems.

Then, embrace technology and implement procurement software for more automated data visibility and analytics.

8. Ethical Sourcing

Ensuring your suppliers adhere to ethical practices can be out of your control, especially when you’re dealing with international ones because they may have more regulations and standards than your own. In addition, they may not always prioritize ethical practices, especially when they are looking for cost-reduction opportunities.

Furthermore, if your supply chains are global, it may also be challenging for you to trace and track labor conditions throughout the entire chain. 

Solution: Make sure that you choose suppliers that align with your ethics and values from the get-go. However, when they seem ethical before and they become inefficient with ethical practices, remind them of the agreement terms stated in your contract so they can make changes.

Moreover, you may also encourage them to obtain certification that demonstrates commitment to ethical and sustainable practices.

9. Sustainability Concerns

It is hard to strike a balance with maintaining sustainability to your procurement needs. You may want to do things faster, but the methods do not necessarily represent sustainability. Moreover, a big factor that impacts sustainability is the clash between short-term procurement goals and long-term sustainability objectives.

While your procurement decisions optimize cost savings, they can lead to negative effects on the environment and society. This can tarnish your brand’s reputation over time.

Solution: It still boils down to finding the perfect balance between maintaining data-driven procurement decisions and establishing sustainability efforts. Always integrate even the smallest sustainability principles into your procurement policies and procedures.

Don’t only consider immediate cost optimization but also the environmental and economic impact of your products and services.

10. Lack of Supplier Innovation

Other times, your suppliers may not care about you. Rather, they only care that you purchase from them. They may show a limited interest in fostering collaboration with you and would primarily and solely be concerned about securing consistent orders and revenue.

With that, they disregard the potential benefits that innovative solutions could bring to both parties. Thus, this issue can hinder your ability to stay competitive in the business industry.

Solution: Build strong relationships enough to foster collaboration and innovation with your suppliers. Befriend them and make them your partners in maintaining good procurement processes. In addition to that, align and include performance bonuses and profit-sharing agreements.

So, you must also learn to embrace the concept of open innovation by actively seeking input and ideas from suppliers even if they are not the normal and traditional approach to innovation. This may lead to fresh perspectives and creative solutions.

Impact of GoodProcurement Management to Your Business

An effective procurement management can yield significant benefits for you including:

1. Cost Savings

Good procurement management helps you save hundreds and thousands.

By becoming more efficient and maintaining the entire supply chain flow steady, it fosters cost optimization that minimizes expenses and miscellaneous fees. Thus, it promotes better fund allocation as well.

2. Quality Assurance

Keeping great procurement tactics ensures great product quality. Because of regular assessment and quality control inspection, you can make sure that the delivered products are top quality and can satisfy your customers.

This also means that you keep your product value intact and at an advantage against your competitors.

3. Strategic Insights

Data-driven procurement decisions provide insights for strategic planning. By being able to recognize patterns and emerging trends, you get to plan ahead of time and guarantee smooth operational functions.

Moreover, you can produce more accurate and favorable results should you have appropriate gathered data as well.

4. Risk Mitigation

Concerning the previous point, using insights for strategic planning also involves identifying risks. Since you have determined potential risks, you can also plan and strategize on how to alleviate them as soon as possible.

Ultimately, even if those risks do happen, you would not be negatively affected since you come prepared.

5. Innovation

Good procurement management nurtures healthy relationships between you, your internal departments, and your suppliers. You develop working in a team and invite collaboration and innovation for overall business excellence.

Conclusion

The procurement process is the backbone of maintaining a great supply chain and efficient business operations. However, we could never run from procurement issues that come with it.

By recognizing and addressing these issues, you get to understand how to overcome them. Moreover, upon leveraging the benefits of a good procurement process and adopting best practices, your company can optimize its processes.

In addition, you can save costs and elevate overall business success. 

Remember, mastering procurement processes is an ongoing journey to your business’s excellence and success.