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Jun 17

The Major Benefits and Challenges in the Procurement Process

Reading Time: 4 mins

The procurement process involves all the complex procedures that can lead a business person to get services or goods. Such processes include the requisition processes, the purchase orders, and the invoice approvals. Procurement, therefore, differs from purchasing. Purchasing simply involves obtaining the desired services on behalf of a company. On the other hand, procurement entails all the activities that companies must engage in to obtain certain services and goods. The procurement process must always involve paperwork, the people, and the processes. The process outlines the reviews, ordering, obtaining, and paying for the services.

The people are the stakeholders involved in initiating and authorizing every procurement process. The paperwork includes the documentation of all the stages of procurement. Therefore depending on how much goods a company needs to procure, the company may involve many people and more paperwork. This makes the procurement processes both simple and complex. Organizations must streamline their procurement processes by automating them. However, before that, these are the major benefits and challenges in the procurement process:

 

 

Reduced Expenses

Procurement processes can save you money. They can reduce duplicate spending, and help you leverage on volume purchases. When you digitize your procurement processes, you can make your processes more effective. As stated by the procurement officers at MRPeasy, you can use suitable procurement software to foretell your sales. You can also use such software to run inspections on your firm and take stock of all the stock lots you’ve received.

Some software also has RMA and quality control capabilities. This way you can enjoy all the procurement processes using a single software. You can increase efficiency and save on unnecessary costs. Procurement processes also make it easy for you to be transparent in spending. You can easily analyze all your procurement policies and align them to your organizational policies.

 

Enhanced  Productivity

E-procurement can save you a lot of time. You can store your records electronically and retrieve them urgently when you need them. This way you can also readily submit your tenders online. As you reduce the paperwork, you can fill out the templates faster and hence save yourself some time. You can retrieve your old tenders faster when the need arises.

Electronic management of tasks also speeds up the transaction processes and makes them more simplified.  Procurement processes also promote better relationships with the suppliers. Additionally, e-procurement gets rid of all the unnecessary activities and hence enables you to focus more on the valuable tasks that can speed up the procurement activities. Having more than two procurement departments can encourage redundancy and slow down procurement processes.

However, e-procurement makes it possible for an organization to merge all its procurement departments and run them electronically. This further speeds up procurement decisions and enables organizations to set specific procurement standards for uniformity. Accountability also becomes easier. Organizations also eradicate procurement errors that come from printing.

 

Procurement processes also have some disadvantages that you must strive to avoid and overcome. These are some of the disadvantages of procurement processes:

 

Culture Shocks

You can find it difficult to obtain both the figurative and lateral investments out of e-procurement. The procurement software can have some limitations. Your employees can also lack the relevant knowledge and skills to manage procurement processes. This might force you to incur some extra costs of training your employees.

Your organization’s corporate culture can also be too rigid to move from the traditional models of procurement to an e-procurement strategy. Furthermore, procurement processes require some situation-specific integration of activities. These can be impossible with insufficient planning. Poor understanding of the goals of these processes can also sabotage the efforts and burden your organization with unnecessary costs.

 

It Requires A lot of Research and Planning

Before you engage in the procurement processes, you must update all your company workflows. You must research all the available features of the procurement software you choose. Research all the possible details on the scalability of the processes. Don’t forget to put down all the costs of the solutions you intend to implement. Take some time and research how you can reduce the costs of your organizational procurement processes.

Without enough research, you can implement e-procurement processes that are not equipped to handle all the procurement activities you need. This can deny you the benefits you would enjoy with all-in-one procurement software. You must acquire the software with custom development features. This can enable you to add all the activities you would want to include in your procurement strategies. Remember that different organizations have unique needs. Also, ensure that the cost of customization is reasonable enough.

In addition, over-customizing your procurement platforms can complicate the procurement processes further. This can negate all the advantages of using these systems. However, you can overcome this challenge if you choose more flexible, simpler, and cheaper systems. Research all the strategies you need to systematically move from one system to another.

 

Supplier On-Boarding May Be an Issue

As much as you may be all ready to change your procurement processes, your suppliers may not be ready and willing. There are different methods of procurement processes which you can choose. However, since procurement processes involve many stakeholders, all of them must be willing and skilled enough to use whichever process your company chooses. Unfortunately, most suppliers are uncomfortable with many procurement software. This may strain your relationships and water down your efforts.

Some online tools that you must use in the procurement processes are also uncomfortable for some stakeholders to use. Therefore, as you research the procurement processes and software you want to adopt, think about the comfort of all your stakeholders. Ensure you always update all the supplier lists. Opt to trade with tech-savvy companies that will readily accept your technology advancements.

Procurement is a complex process that involves many stakeholders. E-procurement is more efficient and can save your company lots of money. It can help you cut down on all the paperwork costs and fasten the process. You can also reduce the number of employees you hire to run your procurement departments. Procurement processes can give you better results only when you’ve researched enough to identify the most suitable software. You also need to train your employees so choose processes that do not cost a lot to facilitate.

 

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.

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