Procurement 

is a highly collaborative function that sits at the intersection of

internal and external operations. 

It puts leaders and teams in a unique position. Not only do they need to be great
communicators, but they also need to think about:

 Being great market researchers

 Having visibility into every department’s financial health and needs
 Aligning daily operations with high-level strategy
 Building expertise in detecting and managing risks

In this blog, we explore the difficulties of wearing so many hats and how
procurement leaders can build a strong crisis management strategy.

Top 11 Procurement Challenges for 2023

1. Contract management
2. Digitalization of procurement and S2P processes
3. Resistance to e-procurement adoption for employees, suppliers, and vendors
4. Reskilling, upskilling, and onboarding employees on digital procurement
applications
5. Supplier and vendor onboarding
6. Providing technology support for suppliers and vendors
7. Inaccurate data
8. Poor internal communication
9. Inefficient processes
10.Risk management and mitigation
11.Lack of transparency

Why is Procurement Difficult?

The procurement process is challenging because it involves teams who manage
various responsibilities. From communicating with vendors to running compliance
checks, processing payments, and analyzing market trends, a lot goes into running
a function with such high stakes.

The procurement function can even be forced to simultaneously manage hundreds

of purchase orders, vendors, and suppliers. A negligent mistake or sudden market
change can impact your day-to-day operations and your ability to generate
revenue. 

To avoid this, procurement leaders ensure that their teams are equipped with the
right tools and strategies to overcome predictable and unexpected challenges.
Top 11 Procurement Challenges Facing
Organizations in 2023
The past two years have shuffled the priorities of many procurement leaders. The
COVID-19 pandemic introduced companies to an onset of challenges, like sharp
changes in demand,  labor shortages, and political changes. Procurement teams are
cracking down on their ability to be more proactive, adaptable, and analytical to
combat volatile supply changes. 

In the coming years, 81% of leaders agree that procurement needs to reimagine its
operations. We’ll walk you through top 11 challenges procurement teams are
expected to face as they shift toward more future-ready practices.

1. Contract management
Consumer prices in June 2022 were up 9.1%, breaking a 40-year record. During
times of inflation, procurement processes risk running into budget issues if they
aren’t careful about how they buy their goods. Inefficient contract management
increases the likeliness of companies being locked into pricing changes that they
can’t afford. 

Procurement teams often make the mistake of not checking up on contracts after
they’ve been signed. When this happens, companies can remain unaware of their
ability to cut off poor-performing vendors and suppliers or the terms they have put
in place to manage price increases based on pre-determined metrics. 

2. Digitalization of procurement and S2P processes

Most companies are turning to digital solutions to transform their procurement
and source-to-pay processes. 69% of leaders say digitization has become even
more valuable after COVID-19. 

Digitization introduces many benefits to the procurement function, like accelerated

processes, increased transparency, and better decision-making. But introducing
new tools and workflows is a major organizational change that needs to be
implemented correctly. Procurement leaders and team managers will be
responsible for building change management plants to guide employees and
partners toward success.

3. Resistance to e-procurement adoption for employees,

suppliers, and vendors
When employees, suppliers, and vendors are used to conducting processes a certain
way, it becomes difficult to get buy-in for new initiatives. You may run into
instances where individuals reject change because they believe it would slow down
their workflows and dampen their productivity. 

Managers will need to ensure teams have enough time and resources to understand
the benefits of this change — not just for the company, but for their individual
KPIs.

4. Reskilling, upskilling, and onboarding employees on digital

procurement applications
Once you’ve got buy-in from your employees for digital transformation, the next
uphill battle is helping teams familiarize themselves with new processes. You’ll
want to take a training approach that isn’t time-consuming and inconvenient for
employees. Digitization efforts will focus on three areas: 

 Reskilling: Helping employees move away from old habits, processes, and
workflows when completing tasks
 Upskilling: Teaching employees new processes that can help them complete
their work faster and with more precision
 Onboarding: Introducing employees to new software systems and their
features

5. Supplier and vendor onboarding

This onboarding process shows your vendors and suppliers what they can expect
when working with your company. Onboarding doesn’t just happen at the start of
your relationship,  it also occurs when you introduce new processes and software,
especially those that alter how you communicate, place orders, and process
payments.

Managing supplier and vendor onboarding for more than one supplier and vendor
can be challenging, but it can be streamlined with digital tools. The supplier and
vendor onboarding process typically involve a few things: 

 Collecting documents 
 Answering standard questions about their business operations
 Running compliance checks 
 Setting up payment processing systems 
 Going over communication guidelines
 Reviewing timelines, deliverables, and performance KPIs 

6. Providing technology support for suppliers and vendors

Your suppliers and vendors should also have access to digital tools to help them
communicate better with your team. Getting this technology support can be
challenging if your suppliers and vendors don’t have complete trust and confidence
in your business. They might not want to entrust their data to your technology
systems, or might be hesitant about dedicating their time to learning about new
tools and processes. 

You’ll want to personalize your onboarding and training programs for vendors and
suppliers so it best meets their concerns. Finding a way to do this at scale will
involve analyzing different digital solutions and finding platforms that can deliver
an easy-to-use experience.

7. Inaccurate data
50% of procurement processes run on spreadsheets. 

This manual form of data entry is both time-consuming and inconvenient. It’s also
a big source of human error. Most of the time, employees are locked into this cycle
of repetitive work that doesn’t contribute to their performance goals. This lowers
your employees’ productivity and causes them to make mistakes. 

Not to mention, employees can spend hours looking for information in disparate
systems before analyzing them, and keying them in. Even if you have shortcuts,
they can’t be scaled to automatically process large volumes of data in real time —
which will ultimately give you the most accurate data.

8. Poor internal communication

A survey by McKinsey found that one of the highest-impact use cases for digital
solutions is accelerating internal collaboration. 

Procurement teams aren’t like most organizational departments. They aren’t

historically tied to a particular department because it used to be defined as a
transactional function. 

However, companies find the most success today when procurement leaders take
on a more strategic role in shaping how companies can mitigate risk and ensure
business continuity. This means they must be aligned with financial data and
growth projections from all business departments. Poor communication can lead to
poor spending divisions that impact financial health.

9. Inefficient processes
Your procurement processes should work in tandem with financial systems that are
in place across the organization. Teams use automation so they can maintain the
speed and accuracy of the following processes: 

 Vendor management
 Contract management
 Invoice management
 Building and tracking purchase orders
 Applying for and approving purchase requisitions

10. Risk management and mitigation

A variety of risks can impact procurement processes. A report by McKinsey
groups these risks into three primary sources: 

 Product shortage risks

 Supplier risks
 Inflation risks

Today, the lack of digitization can also be considered a risk. Deep analysis is a key
component of many procurement risk-management strategies. With digital
solutions, teams can build more accurate forecasts and scenario-based pricing
models.

11. Lack of transparency

60% of business leaders say the lack of transparency between finance and
procurement functions and suppliers introduces risk. This poor visibility can
directly impact cash flow, with leaders saying transparency can improve cost
savings by 11-20%. 

To improve procurement transparency, leaders may have to restructure existing

processes completely. Here are a few examples of initiatives that you can
implement: 

 Removing manual data entry 

 Integrating procurement analytics into core financial software 
 Implementing new best practices for data entry and communication
 Training employees, suppliers, and vendors on these best practices