6 reasons you’re still stuck in procurement 1.0

JulianHarris.jpgEvery business desires growth and success. They set targets to support the overall objectives of the GDP. However, it is natural to encounter many roadblocks along this journey and procurement is seen as an important area as it can block or support growth.

Procurement analytics provider Robobai surveyed 250 procurement specialists and asked them what their pain points are within a growing organisation. Sharing the results, Julian Harris, Robobai chairman and founder, shares the top-six reasons an organisation might be stuck in ‘procurement 1.0’.

1. Companies had outgrown their supplier base
79 per cent of the people we spoke to said that their businesses were not driving innovation in supplier relationships. The common theme being their existing suppliers were not adept enough to support their growth model and that they did not have the correct systems in place to evaluate potential new supply partners in an efficient and fast manner.

2. Current systems were inadequate
85 per cent of our survey respondents said that their overall procurement process was too complex and resource heavy. The existing systems and processes simply are not up to the job and as a result Accounts Payable is constantly battling to keep on top of the processing and payment of invoices.

3. Current systems are poorly equipped for investment or acquisitions
According to our results, 76 per cent of procurement specialists said that with their current systems and processes, they would not be able to provide the relevant due diligence to any potential investors. This is a massive barrier for any company that is looking to expand in any way.

4. Failing to manage rising costs
81 per cent of companies admitted that they do not challenge suppliers enough on cost or performance. The truth is, they are struggling with rising costs against income, which is affecting profits, but they have inefficient systems in place that do not enable them to manage their supplier contracts properly in these areas.

5. Ineffective supplier management
44 per cent of our specialists said that they need to manage their suppliers more effectively. They basically do not have access to enough good quality data on suppliers to allow them to effectively challenge and negotiate the best deal for them.

6. Insufficient control over spending
In our research, 40 per cent of respondents said that they need to improve their budgeting controls. There are compliance issues surrounding using approved suppliers. To fix this requires a change to their systems and culture to give the required visibility of spend.

Is data really the answer?
For optimum results, you need optimised data.

The benefits of good data are no secret. You will constantly read and hear about how powerful data can be with regards to driving efficiency, reducing costs and keeping customers within any business. But, in the world of procurement it is a must have. Why? Because with the right data you can massively improve your return on purchasing goods and services.

High quality, cleansed data helps to drive a more strategic view of procurement. It enables teams to make informed decisions, earlier in the procurement lifecycle. If you do not have it, then you can certainly still view total spend, but in a very inadequate way that does not allow you to understand the size of the cost saving opportunities that exist. These opportunities may include variance in pricing, contract terms, consolidation, payment discounts or duration.

You need cleansed, granular data to be able to provide good insights to make the right purchasing decisions. You simply cannot do this efficiently without having access to a platform that provides this quality of data in a timely manner.

Often, a big challenge in an organisation sits in the realms of data. Without good-quality data cleansing and data classification you will never have genuine spend visibility.

When a company has good spend visibility they get timely, accurate, complete and detailed data that offers invaluable intelligence and insight into their spending patterns, compliance and performance. These insights help them identify savings opportunities, drive compliance and develop purchasing strategies which reduce cost.

Originally published on Procurious

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