What are Procurement Pain Points? Full Procurement Analysis
In collaboration with Chandrasekar Koneru, Assistant manager – content
Market intelligence enables procurement organizations to play a strategic role and helps them to sustain cost optimization opportunities. However, as per CEB research, only 32 percent of category managers currently maintain comprehensive category intelligence documents rest are suffering from Procurement Pain Points.
Besides helping save costs, on-demand intelligence tools would solve five common "Pain Points" encountered by procurement teams.
1. Supplier selection – finding the right-fit supplier
While there are multiple suppliers in the market, identifying and selecting the right supplier who can fulfill the organizational requirement is time-consuming for procurement professionals. In a survey conducted among 40 ProcureCon Pharma conference attendees, it was revealed that “83 percent of supplier searches take one to six weeks (or more) to identify the right suppliers.”
With on-demand market intelligence tool, choosing the right-fit supplier becomes easier as it is a focused-approach with relevant inputs already in place. For example, procurement decision makers looking for suppliers related to blister packaging can use Beroe LiVE, an on-demand market intelligence platform, to access region-wise supplier details at the click of a button.
2. Curtailing maverick spend
Maverick spend is an unplanned or uncontrolled spend, which increases the overall cost of procurement. A department may be prompted to buy materials or services independently, without involving the procurement teams. And such lack of centralized procurement system often leads to this problem.
For a large manufacturing company, maverick buying accounts for 30 to 45 percent of all indirect purchase value. For a smaller company, it may account for more than 80 to 90 percent of indirect purchase value.
Ardent Partners said in a research report that for every dollar that’s spent off-contract, there’s an average loss of between 12 and 18 percent to the enterprise.
A market intelligence platform that provides easy access to vendor details and product/service prices could be handy as the information can be shared internally with business stakeholders in order to avoid maverick orders. Also, use of on-demand market intelligence empowers procurement managers to negotiate with suppliers for better pricing and save costs through consolidated purchases.
3. Measurement of supplier performance
Assessing supplier performance is an essential element of procurement operations. More often than not, Key performance indicators (KPIs) and benchmarking data are not commonly available, which makes measuring supplier performance a tough task -- especially in several categories that fall under Indirect spend.
Organizations can benchmark their suppliers against industry peers to identify problem areas by effectively using market intelligence. This helps them to make informed decisions on supporting the suppliers in improving their performance and competitiveness.
Procurement teams also adopt technology-based solutions for performance measurement. It helps them to create as well as track scorecards for an in-depth reporting and analysis of supplier performance. This data coupled with market intelligence can help in effective supplier management.
4. Simultaneous tracking of multiple marketplaces
While generic category intelligence is widely available in the alleyways of the internet, it’s not always easy to locate relevant, reliable and specific intelligence that would fit the buyer’s sourcing context. On-demand market intelligence provides the necessary inputs such as market size, market potential and supplier coverage for businesses looking at market expansion. Since each market varies in terms of demand and supply, procurement teams can adopt market intelligence to make decisions that suits both their global as well as regional operations. For instance, the U.S. and Europe market are matured markets for ATM services, while APAC has the potential for growth as the market is mostly cash-driven and ATM deployments are high. Hence, the procurement strategy for ATMs would, for example, vary across regions.
5. Effective utilization of time
Procurement teams always run a tight schedule. And amidst the constant factor of time-crunch, gathering intelligence will not be a priority as it is both labor and time-intensive effort. Also, not all organizations have a full-sized market intelligence team to be constantly surveying the markets and suppliers.
Market data is not only collected and analyzed at rapid frequency but also is constantly referenced for predictive analysis. While it’s essential for procurement teams to use real-time flow of insights to shape and inform the entire decision-making process, they may often encounter multiple challenges, including:
- Identifying how, where and when to source high-quality data for procurement category intelligence.
- Using available data to predict and understand the effects of global trends and political turmoil. For example, the speed at which the Brexit vote took place caught the entire business community by surprise. Such a situation could have been avoided by preparing a reliable scenario analysis.
- Developing in-house procurement knowledge, which often involves reading through large volumes of expensive industry journals and relevant online information. As such it’s tough to build a full-fledged, in-house market intelligence team from scratch.
There are dedicated service providers with required expertise and well-trained personnel to perform the complex tasks of data-gathering and market analysis. Procurement managers can hire specialists to track global marketplaces for them. Or they can use on-demand intelligence tools that cover most of the frequently requested datapoints. They no longer have to invest their time in gathering intelligence on key markets or categories they are interested in.
- Market intelligence can help solve procurement pain points for procurement organizations and can help save money in the process.
- According to CEB research, a mere 32% of people have correct category intelligence-related documents with them.
- Organizations find it challenging to find the right supplier because there are so many available. Sifting through the options is a time-consuming process.
- According to a survey which was taken at the Procurecon pharma conference, it was found that 83% of the time it takes between 1 to 6 weeks or more to determine the right suppliers.
- Market intelligence can help cut the time it takes to find a supplier that is appropriate for the organization.
- When a proper procurement system is missing, maverick spend can increase which can spell trouble for an organization.
- As per the Ardent Partners report, indirect spending can have a profound impact on the organization as every dollar spent equates to up to 18% loss on average.
- Market intelligence can help curb maverick spending as important details such as vendor information, product prices, services prices, and more can be shared with stakeholders.
- On-demand market intelligence has the added benefit of cost savings because procurement managers can better negotiate with the suppliers.
- Supplier performance needs to be measured but this is easier said than done. On paper, KPIs can sound wonderful but they are difficult to measure especially when there is indirect spending in various categories.
- Market intelligence can offer organizations the opportunity to determine problem areas after comparing suppliers with others.
- Once problem areas are spotted, it will become easier for organizations to pinpoint the same to suppliers so they can then improve their performance.
- Other solutions can help procurement teams measure how suppliers are performing. This can help them report and analyze the performance of each supplier effectively.
- Market intelligence enables organizations to have in-depth information about various marketplaces.
- General category intelligence is easily available but the specific intelligence is scarce and even if it is present, it is unreliable.
- Market intelligence allows the buyer to have thorough information about various market details such as size, potential, and suppliers.
- The demand and supply of different markets vary and so when procurement teams have data about them they can make informed decisions that can benefit them locally and globally.
- Procurement teams are pressed for time as there is a lot to be done in a small time frame and so gathering information isn’t a priority as it takes effort and time.
- Every organization does not have the privilege of having a dedicated team that is responsible for surveying markets and their dynamics.
- It is difficult to get high-quality data that makes sense and is useful for procurement teams. Moreover, it is another challenge to determine how to get data
- Only using the data available to make careful predictions is a challenge for organizations as sometimes trends happen suddenly
- Building a market intelligence team is another challenge because building knowledge is tough to start from the bottom up. It requires committing time by reading up online and spending time reading industry journals.
- Procurement managers have two options to select from to make it easier for taking the right decisions.
- They can use on-demand market intelligence which can allow them to know the frequently demanded data.
- They can hire specialists who can get insights into the various marketplaces and analyze important trends.
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