*This is in partnership with BloombergQuint Brand Studio
According to a recent survey report by SAP, powered by the Indian Institute of Materials Management (IIMM), procurement leaders are now expected to be the driving force for innovation in a majority of organisations across industry lines. Read on to know more about the challenges in procurement processes and the key focus areas for procurement leaders in 2022 and beyond.
The Covid-19 pandemic has exposed the vulnerabilities in supply chains for many organisations, who were left grappling with imbalances in demand and supply, causing acute shortages of both goods and labour.
As economies tread the path to recovery and growth and India takes giant strides towards meeting its ambitious target of becoming a $5-trillion economy by 2024, a lot needs to be done to reverse the slump and power future growth–and the first step towards that goal is digital transformation.
According to a recent survey report by SAP, powered by the Indian Institute of Materials Management (IIMM), “procurement leaders are now expected to be the driving force for innovation in a majority of organisations across industry lines. In fact, more than 75% of respondents in the survey reported that one of the major barriers to growth has been resistance to adoption of procurement technologies, differential internal processes and headcount reduction.”
Procurement leaders across industry verticals are devising strategies to solve challenges which are plaguing this function, and which need to be urgently addressed. These include obsolete technology, improperly collated and confusing data, cost reduction and value generation, challenges in supplier management processes, quality and risk issues and a demand for sustainable alternatives. In such a landscape, it is imperative to set the priorities right for future years and leverage next generation solutions to overcome the challenges procurement leaders are facing today.
Let’s look at the top 5 priorities for procurement leaders in 2022:
1. Mitigating risks effectively
Since the pandemic, resilience and business continuity are no longer mere buzzwords but extremely business-critical and could mean the difference between a struggle for survival and growth. Organisations with well-designed risk management programmes weathered the pandemic much better than others. It’s more important than ever before for businesses to be agile and transform to thrive in the new normal. On the growth charter in 2022 and beyond, prioritising risk management needs to be an imperative to ensure business resilience and effectively monitor risks throughout the supply chain. This needs to be built even on the ESG front to enable procurement leaders to communicate business risks more effectively to the C-Suite.
2. Building stronger partner relationships
The procurement function is all about engaging with partners to get the best for the organisation. From raw materials that power factories to hand soap for bathrooms, everything is vetted by this team. One of the major challenges here is effective management of partner and supplier relationships to ensure that the supply of goods is uninterrupted, and the quality of materials is consistently good. Procurement teams also need to better partner with their counterparts within the organisation in functions like finance, marketing, production and sales to make the procurement process seamless and more effective.
3. Minimising information overload
A major problem faced by procurement teams is inaccurate data, which can lead to shortages in inventories or excesses, both of which can cause inefficiencies. As modern procurement teams evolve beyond their traditional role of being facilitators for the goods and services needed by the company, the aim now is to minimise wastage and downtime and generate overall cost savings by sourcing only what is needed within a defined time frame and achieving process optimisation at every step of the journey to build value across all levels of the enterprise.
4. Focus on cost efficiency
A well-planned procurement system steers towards strategic spends, avoiding last-minute buys that often come at a premium. For this, an efficient management of workflows and process development is imperative to assess future needs. Even as there is a major push towards sustainability and agility in post-pandemic India, as many as 40% of Indian enterprises have ranked cost reduction as their first priority, followed by sustainability. Towards this, creating circular supply chains by repurposing goods for multiple uses across the business at large is the end goal enterprises should be working towards.
5. Automation, automation, and automation
This can’t be stressed enough—getting automation right is key. In the Indian context, both the government and public sector are initiating steps to digitise the procurement function and are investing in a mixed bag of technologies, including Artificial Intelligence (AI) and machine learning that help manage suppliers more effectively and improve the overall efficiency of the procurement function. The big challenge here is internal user adoption of technologies—more than 87% enterprise-level organisations and 82% small and medium organisations said issues with user adoption caused impediments in the procurement function, according to the SAP and IIMM study.
For more detailed insights, ‘Digital Transformation of Procurement – Turning Procurement Challenges into Opportunities, An India Study’, powered by SAP in association with Indian Institute of Materials Management (IIMM), delves deep into the challenges faced in procurement across industry lines in the Indian context and suggests effective solutions. To read the full survey report, click here.
. Read more on BQ Brand Studio by BloombergQuint.