Procurement leaders are tasked with keeping the source-to-pay process running smoothly, from supplier sourcing, vendor management, invoicing, payment processing, and more. It’s a balancing act between strategic planning and operational efficiency.
Every day, procurement professionals face obstacles that test their skills and adaptability. According to a Deloitte survey, 76% of procurement leaders see digital transformation as a top priority, but only 32% have successfully implemented their digital strategy. 70% of CPOs have reported increased procurement risks over the previous 12 months.
Procurement teams must navigate challenges such as managing global supply chains, keeping up with regulations, and embracing digital transformation. The relentless push for efficiency and accuracy requires continuous adaptation and innovation.
This article explores key procurement challenges facing organizations and provides solutions for procurement leaders to overcome these complexities.
Why Is Procurement Difficult?
Procurement is challenging because it involves teams handling a wide range of responsibilities. The function is complex and high-stakes, from communicating with vendors and running compliance checks to processing payments and analyzing market trends. Procurement teams juggle hundreds of purchase orders, vendors, and suppliers simultaneously. A single mistake or a sudden market shift can disrupt daily operations and impact revenue generation.
Procurement today isn’t what it used to be. The landscape has shifted dramatically, bringing new hurdles that require fresh thinking. Procurement leaders now face unpredictable market trends, labor shortages, and political shifts. This means procurement teams must be more flexible and strategic to keep up.
Given these changes, 81% of leaders recognize the need to overhaul their operations. As they work towards building more resilient and efficient processes, we’ll look at the top challenges they are expected to face as they shift toward more future-ready practices.
21 Procurement Challenges Facing Organizations
- Contract management
- Source-to-pay transformation
- Resistance to e-procurement adoption for employees, suppliers, and vendors
- Reskilling, upskilling, and onboarding employees on digital procurement applications
- Talent shortages
- Inflation
- Budget constraints
- Managing global supply chains
- Supply chain disruptions
- Supplier and vendor onboarding
- Providing technology support for suppliers and vendors
- Dark purchasing
- Inaccurate data
- Poor internal communication
- Optimizing processes by identifying areas of end-user friction
- Risk management and mitigation
- Fraud risk
- Lack of transparency
- Compliance with regulations
- Cybersecurity threats
- AI transformation and adoption
1. Contract management
During times of inflation, procurement processes risk running into budget issues if they aren’t careful about how they buy their goods. Inefficient contract lifecycle management increases the likeliness of companies being locked into pricing changes 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’ve put in place to manage price increases based on pre-determined metrics.
To improve contract management, implement a centralized contract lifecycle management (CLM) system that allows for continuous monitoring and analysis of contracts. This system can alert teams to upcoming renewals, compliance requirements, and performance issues, encouraging proactive management and renegotiation of terms to avoid unfavorable pricing changes.
2. Source-to-pay transformation
Companies have transformed their procurement and source-to-pay processes with enterprise procurement software. Digitization introduces many benefits to the procurement function, like accelerated processes, increased transparency, and better decision-making. However, introducing new S2P tools and workflows is a significant organizational change that needs to be implemented correctly.
Successfully digitalizing procurement and S2P processes requires a comprehensive change management plan. Leaders should involve all stakeholders, provide thorough training, and communicate openly to address concerns and feedback. This approach ensures a smooth transition to digital tools and workflows, maximizing the benefits of digitization.
3. Resistance to e-procurement adoption for employees, suppliers, and vendors
When employees, suppliers, and vendors are used to conducting operations a certain way, getting buy-in for new initiatives becomes difficult. You may run into instances where individuals reject change because they think it would slow down their workflows and dampen productivity.
Managers need to ensure teams have enough time and resources to understand the benefits of this change—not just for the company, but also for their KPIs.
Overcoming resistance to change involves demonstrating clear benefits to all stakeholders. Managers should organize workshops and training sessions highlighting how e-procurement improves efficiency and productivity. Providing hands-on experience and showcasing success stories can help build confidence and acceptance among employees, suppliers, and vendors.
4. Reskilling, upskilling, and onboarding employees on digital procurement applications
Once your employees support digital transformation, the next challenge is helping teams familiarize themselves with new processes.
To ensure the training is effective without being too time-consuming, focus on three key areas:
- Reskilling: Helping employees move away from old habits and workflows.
- Upskilling: Teaching new processes to improve speed and accuracy.
- Onboarding: Introducing new software systems and their features.
An effective employee training program combines online tutorials, interactive workshops, and on-the-job training. Regularly scheduled sessions and easy access to resources help employees get comfortable with new tools and processes, leading to smoother transitions and higher productivity.
PRO TIP
With Whatfix DAP, enable S2P and procurement software users with in-app guidance and support in the flow of work to accelerate time-to-proficiency, drive task mastery, and maximize S2P transformation ROI. With Whatfix, onboard new users with Tours and Task Lists. Drive adoption of complex workflows and support employees on infrequently done tasks with Flows. Smart Tips provide additional context and nudge users to take specific action. Announce compliance laws, process changes, and new S2P workflows with Pop-Ups.
5. Talent shortages
Finding and keeping the right people becomes increasingly difficult as the need for skilled professionals grows. This talent shortage can lead to increased workloads for current staff, causing burnout and reduced efficiency. Without enough talent, procurement teams might struggle with complex processes, effective negotiations, and implementing strategic initiatives.
The competition for procurement talent is fierce, with many organizations chasing the same pool of skilled professionals. This makes attracting top talent difficult, especially for smaller companies with limited resources. Plus, the required knowledge of digital tools and data analytics adds another layer of complexity in finding the right people.
Invest in training and development programs to upskill existing employees and address talent shortages. Offering competitive salaries, benefits, and career advancement opportunities can help attract and retain top talent.
6. Inflation
As prices for goods and services continue to rise, sticking to budgets while keeping quality high becomes more difficult. The unpredictable nature of inflation means costs can surge out of nowhere, making it hard to plan and allocate resources efficiently. This often forces procurement teams to make tough calls, like renegotiating contracts, looking for new suppliers, or even compromising on quality to manage expenses.
Long-term agreements and fixed-price contracts are also hit hard by inflation. What seemed like a fair deal at the start can become untenable as prices climb. Suppliers might push for price adjustments, leading to potential conflicts and renegotiations. This instability makes it even more challenging to maintain strong supplier relationships and keep the supply chain running smoothly.
To handle inflation, adopt flexible pricing strategies and build adaptability into contracts. Regularly reviewing and adjusting agreements can help accommodate price changes. Using data analytics to monitor market trends and predict patterns can also support proactive decision-making. Building strong relationships with suppliers and collaborating on cost-saving initiatives can help mitigate the impact of rising prices.
7. Budget constraints
Staying within budget is a constant challenge for procurement teams. There’s often a gap between the budget and the actual costs needed to get quality goods and services, which can force tough decisions like compromising on quality or renegotiating terms with suppliers.
Budget constraints also make it harder to invest in new technologies and training, which are essential for staying competitive. Procurement teams need to be creative in finding cost-effective solutions, negotiating better terms, and using economies of scale without sacrificing quality or reliability.
To manage budget constraints, procurement teams can use strategic sourcing and bulk purchasing to get better terms and lower costs. Spend analysis tools can pinpoint areas for cost savings and streamline procurement processes. Encouraging collaboration across departments can also lead to more efficient use of resources and innovative cost-saving strategies.
8. Managing global supply chains
Global supply chains offer many benefits, but also come with their own set of challenges.
Coordinating with suppliers across different time zones, cultures, and languages can lead to communication breakdowns and misunderstandings. Geopolitical factors such as trade wars, tariffs, and regulatory changes can disrupt supply chains, leading to delays and increased costs.
To effectively manage global supply chains, use advanced supply chain management systems for real-time visibility and analytics. Regular communication and collaboration with key suppliers help build strong relationships and mitigate risks. Diversifying your supplier base also adds resilience, reducing reliance on any single region or supplier and protecting against geopolitical disruptions.
9. Supply chain disruptions
Supply chain disruptions can significantly impact procurement operations. Events like natural disasters, political instability, and global pandemics can halt the flow of goods and services, leading to delays, increased costs, and inventory shortages. Because global supply chains are so interconnected, a disruption in one area can ripple through the entire network.
Managing supply chain disruptions demands constant vigilance and quick responses to unforeseen events. Procurement teams need contingency plans to mitigate the impact of these disruptions. This means identifying alternative suppliers, keeping extra stock on hand, and having flexible agreements that can adapt to changing circumstances.
10. Supplier and vendor onboarding
The onboarding process sets the stage for what vendors and suppliers can expect when working with your company. It doesn’t just happen at the beginning of the relationship and when new processes and software are introduced— especially those affecting communication, order placement, and payment processing.
Managing supplier and vendor onboarding can be challenging, but digital tools can streamline the process. Typically, onboarding involves:
- Collecting documents
- Answering standard business operation questions
- Running compliance checks
- Setting up payment processing systems
- Reviewing communication guidelines
- Reviewing timelines, deliverables, and performance KPIs
Leveraging digital onboarding platforms can automate many tasks, such as document collection, compliance checks, and payment setup. Establishing clear communication guidelines and performance expectations from the start ensures a transparent and efficient onboarding process that aligns with your company’s standards.
11. Providing technology support for suppliers and vendors
Your suppliers and vendors should have access to digital tools to help them communicate better with your team. However, gaining their trust and confidence in your business can be challenging. They might hesitate to entrust their data to your technology systems or invest time learning new tools and processes.
To address these concerns, personalize your onboarding and training programs for vendors and suppliers. This involves analyzing different digital solutions and finding platforms that offer an easy-to-use experience at scale.
Enhance technology support by offering tailored onboarding and training programs catering to their needs. Whatfix can assist in creating customized onboarding flows, interactive guides, and in-app support to help vendors and suppliers quickly get up to speed with new systems.
Whatfix also provides real-time assistance and performance support, ensuring users can navigate and use the tools effectively. This continuous support through dedicated help desks or support teams builds trust and encourages technology adoption, ultimately improving communication and collaboration with suppliers and vendors.
12. Dark purchasing
Dark purchasing happens when purchases are made outside of the established procurement process. This lack of oversight can lead to higher costs, reduced bargaining power, and compliance issues. Dark purchasing often occurs when employees think procurement processes are too complicated or time-consuming.
The consequences of dark purchasing can be daunting. It can fragment supplier relationships, as purchases are made without leveraging the organization’s total buying power. It can also create discrepancies in inventory management and financial reporting, making it harder to track expenses and enforce budget controls.
To combat this, simplify and streamline your procurement processes to make them more user-friendly. Implementing procurement software that integrates with existing financial systems can provide better oversight and control. Educating employees on procurement policies and the importance of compliance can also reduce instances of dark purchases. With Whatfix, you can create interactive guides and in-app training to ensure employees follow the correct procedures, improving overall procurement efficiency.
13. 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.
Invest in automated data management solutions that minimize manual entry and reduce errors to combat inaccurate data. Implementing integrated systems that consolidate data from various sources in real time can improve accuracy, provide valuable insights for decision-making, and boost performance.
14. 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.
But companies succeed most 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.
Communication can lead to better spending divisions that impact financial health.
Adopt collaborative tools and platforms that facilitate seamless information sharing across departments to improve internal communication. Regular cross-functional meetings and updates ensure alignment between procurement and other business units, fostering a more integrated approach to procurement strategy and execution.
15. Inefficient processes
When procurement systems aren’t well integrated with the organization’s financial systems, it can lead to delays, errors, and increased operational costs. This misalignment disrupts various critical areas:
- Inefficient tracking of vendor performance, compliance, and relationships.
- Difficulties in managing contract lifecycles, ensuring terms are met, and minimizing risks.
- Errors and delays in the invoicing process.
- Inaccurate creation, tracking, and fulfillment of purchase orders.
- Slow and inaccurate approval processes.
Implementing automation solutions that streamline key procurement activities can tackle these inefficiencies. Automation boosts speed and accuracy, allowing procurement teams to concentrate on strategic tasks and improving overall process efficiency.
16. Risk management and mitigation
Procurement faces several risks, including product shortages, supplier issues, inflation, and a lack of digitization. These challenges can severely disrupt operations and reduce efficiency. Effectively managing these risks requires a strategic and comprehensive approach.
Procurement teams should use digital tools and thorough analysis to tackle these risks. These tools help create accurate forecasts and scenario-based pricing models, enabling teams to anticipate and address potential disruptions before they escalate.
By leveraging advanced analytics and digital solutions that provide real-time data and predictive insights, organizations can develop robust risk assessment models and plan for various scenarios. This proactive approach allows procurement teams to mitigate risks more effectively, leading to more resilient and efficient strategies.
17. Fraud risk
Fraud risk in procurement is a significant concern for many organizations, with the potential to cause financial losses, reputational damage, and even legal consequences.
Fraudulent activities can take various forms, including supplier overcharging, kickbacks, collusion between employees and suppliers, or the misappropriation of funds. Fraud is often difficult to detect, especially in complex procurement systems where multiple suppliers and internal teams are involved. If left unchecked, it can escalate quickly, leading to significant financial and operational consequences.
To mitigate fraud risk, organizations must establish a robust set of internal controls that includes regular audits, segregation of duties, and real-time transaction monitoring. Digital procurement platforms equipped with AI and machine learning can help flag suspicious activities, identify irregular patterns, and provide valuable insights into procurement behavior.
Beyond technology, creating a strong anti-fraud culture within the organization is equally important. This involves setting clear ethical standards, ensuring that employees and suppliers are aware of the consequences of fraud, and encouraging transparency and accountability at all levels. When fraud risk is managed effectively, businesses can protect their financial integrity and maintain trust with both employees and suppliers.
18. Lack of transparency
Lack of transparency between finance, procurement, and suppliers introduces significant risk, with 60% of business leaders acknowledging this issue. Poor visibility can directly impact cash flow and cost savings, with improved transparency enhancing savings by 11-20%.
To address this, leaders may need to restructure existing processes. Here are some initiatives to improve procurement transparency:
- Automating data entry reduces errors and increases efficiency.
- Incorporating analytics into core financial software enhances visibility and decision-making.
- Establishing new standards for data entry and communication ensures consistency and clarity.
- Educating employees, suppliers, and vendors on these best practices promotes uniformity and transparency.
19. Compliance with regulations
Keeping up with procurement regulations can be a major challenge for organizations. These rules vary widely not just from country to country but also by industry and are constantly changing.
Staying compliant demands a lot of time and resources because companies must continuously monitor updates and make necessary adjustments. Failing to comply can lead to hefty fines, damage to the company’s reputation, and lost business opportunities.
This complexity often requires specialized knowledge and expertise. Companies might need to invest in staff training or hiring experts to ensure they meet all legal requirements. This can be a significant burden, particularly for smaller businesses with limited resources.
To tackle this issue, set up a dedicated procurement compliance team that tracks regulatory changes and ensures all procurement processes are current. Compliance software can also help automate monitoring and reporting, reducing the risk of human error. Regular training for procurement staff on the latest regulations is crucial to maintaining compliance and avoiding costly penalties.
20. Cybersecurity threats
As procurement processes become increasingly digital, cybersecurity threats have become a major concern.
Cyberattacks can put sensitive information at risk, leading to financial losses and harming an organization’s reputation. Hackers often target procurement systems to access supplier and financial data for fraudulent activities.
Organizations must be proactive to protect against these threats—this means staying ahead of increasingly sophisticated cyberattacks and ensuring all stakeholders understand the risks.
Implement robust protocols like regular security audits, data encryption, and multi-factor authentication to boost cybersecurity. Providing cybersecurity training enables employees to recognize phishing attempts and follow best practices, helping minimize human error. Working with cybersecurity experts to create a comprehensive security strategy can also ensure the integrity of procurement processes and guard against potential threats.
21. AI transformation and adoption
Integrating artificial intelligence (AI) into procurement workflows presents both opportunities and challenges. AI can streamline procurement processes by enhancing supplier evaluation, optimizing spend analysis, automating routine tasks, and providing predictive insights to support better decision-making. However, organizations often struggle with understanding how AI can best serve their procurement teams and fit seamlessly into existing workflows.
Another critical hurdle is driving end-user adoption. Employees may resist changes due to a lack of understanding or fear of job displacement. Providing comprehensive training, addressing concerns, and demonstrating the value of AI tools in making their work more efficient is key to successful adoption.
Whatfix can further simplify this process by offering in-app guidance and tailored learning resources to empower employees with confidence in using AI-powered tools.
Overcome Common Procurement Challenges With Whatfix
Navigating the complexities of procurement is no small feat. From managing contracts and digitalizing procurement processes to dealing with cybersecurity threats and ensuring compliance with regulations, procurement teams face several challenges.
Effective risk management, efficient processes, and strong internal communication are crucial to overcoming these obstacles. As procurement evolves, innovative solutions are more critical than ever.
Whatfix’s in-app guidance and interactive walkthroughs make onboarding new suppliers and vendors easy, helping them quickly adapt to your procurement processes. It also helps in reskilling and upskilling employees with step-by-step instructions and contextual help, smoothing the transition to new digital tools.
With Whatfix’s real-time analytics, you get valuable insights into user behavior and process efficiency, allowing procurement teams to identify and fix inefficiencies quickly. Whatfix seamlessly integrates with your existing financial systems, ensuring your procurement processes are aligned and optimized, boosting overall productivity.
Partnering with Whatfix allows organizations to streamline procurement processes, enhance compliance, and improve overall efficiency, making it easier to meet the demands of a dynamic business environment.
Experience how Whatfix can revolutionize your procurement processes today.
