Executive Briefings

Top Six Challenges Facing Procurement

The evolution of procurement means that the function's success is no longer just about sourcing services and reducing cost.

Top Six Challenges Facing Procurement

Nowadays, procurement teams face an increasing number of complex challenges, as reported by CASME members around the world during a series of roundtables. Here are the top six issues.

1. Risk management
Risk is always a key concern for procurement, with the primary focus on suppliers’ financial status, followed by health and safety and industry practices. It’s no longer good enough to simply engage with your tier-one suppliers. Emphasis needs to be paid to controlling the approach taken with tier-two suppliers, ensuring that the necessary obligations are passed down to subcontractors.

2. Reputation and brand image
It’s not difficult to recall allegations of child labour in the overseas supply chain of certain retail brands, or issues around modern slavery both at home and abroad. The knock-on effect can be disruption to brand and public image and ultimately an impact on profitability. The Modern Slavery Act goes some way towards addressing this, but issues remain around compliance.

3. CSR
Can procurement ever be sustainable? Organisations are making tremendous progress in the approach to direct materials, but indirect procurement is more complex. The level of auditing required to ensure that practice are sustainable, including those of first and second tier suppliers, is labour-intensive and time-consuming. Consider asking suppliers to complete detailed questionnaires and take positive action with the results. Many organisations now issue written codes of conduct, but the key challenge is acceptance and practical application in the supply chain.

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Nowadays, procurement teams face an increasing number of complex challenges, as reported by CASME members around the world during a series of roundtables. Here are the top six issues.

1. Risk management
Risk is always a key concern for procurement, with the primary focus on suppliers’ financial status, followed by health and safety and industry practices. It’s no longer good enough to simply engage with your tier-one suppliers. Emphasis needs to be paid to controlling the approach taken with tier-two suppliers, ensuring that the necessary obligations are passed down to subcontractors.

2. Reputation and brand image
It’s not difficult to recall allegations of child labour in the overseas supply chain of certain retail brands, or issues around modern slavery both at home and abroad. The knock-on effect can be disruption to brand and public image and ultimately an impact on profitability. The Modern Slavery Act goes some way towards addressing this, but issues remain around compliance.

3. CSR
Can procurement ever be sustainable? Organisations are making tremendous progress in the approach to direct materials, but indirect procurement is more complex. The level of auditing required to ensure that practice are sustainable, including those of first and second tier suppliers, is labour-intensive and time-consuming. Consider asking suppliers to complete detailed questionnaires and take positive action with the results. Many organisations now issue written codes of conduct, but the key challenge is acceptance and practical application in the supply chain.

Read Full Article

Top Six Challenges Facing Procurement