The Biggest Procurement Challenges Faced By The Private Sector

Goals

To perform a preliminary analysis of the biggest problems/challenges procurement in the private sector is facing according to Spend Matters, and procurement-related associations and publications.

Early Findings

Below, there is a preliminary list of 6 problems/challenges procurement have to face according to an official procurement source:

Risk Management

  • Risk is a major concern for procurement, with a primary focus on suppliers’ financial status, health and safety, and industry practices. Approaches should be taken into account tier-two suppliers, ensuring obligations reach subcontractors.

Reputation

  • For example, allegations of child labor in the overseas supply chain in certain retail brands, or slavery both at home and abroad can disrupt brand and public image and impact profitability. Some policies address this but yet some compliance issues remain.

Corporate Social Responsibility (CSR)

  • The level of auditing required to guarantee that practice is sustainable is labor-intensive and time-consuming. Though organizations are writing CSRs, the challenge is acceptance and practical application in the supply chain.

Becoming a Customer of Choice

  • Supplier innovation may become a customer of choice. The most successful approach is to agree on payment terms, and listening and responding to suppliers’ ideas.

Centers of Excellence (CoE)

  • Centralized organizations supporting the procurement function are rising but a complete software package might be needed for centralizing and registering CoE’s activities.

Stakeholder Engagement

  • Prioritizing stakeholders and their requirements is fundamental. Some tools are used to track the relationship-building activities. Using the right terminology can gain credibility and demonstrate knowledge. Aligning the procurement activity to the stakeholder’s objectives can be more valuable and productive.

Strategy

During our analysis, we found out that there is no such agreement in terms of common challenges/problems among the different sources analyzed. Hence, we rely on the information provided by the official publications of the Chartered Institute of Procurement & Supply (CIPS).

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