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6 min read

Tackling the Most Common Procurement Challenges Facing Enterprises Today

There are a few obstacles that might be standing in the way of your team and a successful procurement system. The problems start when those involved in the procurement process are spending too much time on low-value tasks. From our experience, some of the most common include re-entering purchase requisition data back into SAP after it was filled out on paper and distributed manually, contacting team members when information on a purchase order (PO) or service entry sheet (SES) is missing from a submission and long and lengthy approval cycles. While these manual processes were once common, modern businesses cannot afford to miss out on savings or put their credit ratings or regulatory compliance standings at risk.    

A major area of concern for IT leaders is justifying additional investments into new procurement solutions after already investing heavily into upgrading their ERP systems. With a consolidated view of company data, it can only be natural to ask the next question, can some of this investment not be carried over into optimizing the procurement process? The answer is that these systems are powerful and provide the computing power necessary to manage data of this scope. However, a vanilla ERP system like SAP doesn’t come with targeted features to optimize the procurement process. It is the use of Fiori applications, analytics, or additions for specific procurement functions such as contingent labour that provide SAP with easy-to-use functionality.   

So, how does your business get from having an SAP system to creating a seamless procurement process? Start by understanding the most significant challenges facing the procurement process today. With this information, your team can begin initiating the necessary steps for improvement.   

Limited Visibility into Spend   

In most companies, different steps in the procure-to-pay process are split up across departments. As a result, management lacks visibility into the data available from each department and potential opportunities that would arise from consolidation. One of the significant areas in which this occurs is manual 3-way matching which is time-intensive and resource-heavy but can be streamlined when there is a centralized procurement system.    

Approvers Not Being Updated with Organizational Changes   

In a growing company or one that has recently undergone an acquisition, personnel changes may be frequent as employees get settled into new roles, and approver changes are not uncommon. If your HR structure is not the single source of truth for your procurement workflows, then management changes will not be automatically reflected, and documents that require approval may never make it to the appropriate party.   

Inefficient and Expensive Invoice Processing  

Inaccurate processing and lengthy completion times are often attributed to the various ways in which suppliers can submit an invoice. Among the most common include submission through a non-electronic format and will require manual data entry. In this case, storage costs may also need to be factored in if a paper copy must be kept on hand. Alternatively, an online format may be implemented to automate the invoicing process. This has also raised concerns in businesses that have implemented a solution but are now struggling to have their team adopt this new process of doing things. As a result, the combination of both paper and e-invoice processes may still result in manual processes and sign-off procedures that can slow down the procurement cycle. Without this connected set of processes, manual routing and high turnaround time can result in missed payment discounts, late payment penalties, missing payments and negatively impacted supplier relationships.  

Therefore, businesses are encouraged to take an invoice elimination approach. This is believed to reduce the cost per invoice from approximately $6.39 for a paper process to $2.13 for evoicing, according to the 2019 P2P Study from the Hackett Group.   

Lack of Ownership for Master Data on Suppliers   

Many organizations don’t maintain quality master data on the suppliers they are working with. This is typically attributed to unclear ownership between procurement and finance. The set of vendor master data might also include a lot of irrelevant information that has yet to be cleaned up. By creating an up-to-date master data list with pricing plans and possible incentives for each supplier, businesses can take advantage of the best deals available to assist with cost reductions in price negotiations. Organizations must continue to monitor this data for any changes in supplier information to ensure data in the master list is accurate.   

This is also true of Direct Spend catalogues which require frequent updating. Due to a time-intensive updating process, reviews are often infrequent, and information is out-of-date.  

Complex Paper Trails Make for Difficult Auditing   

Even if your team is using SAP, they may still rely on paper documentation that is manually entered into a computer, tablet, or mobile device after the fact. The resulting process can lead to human errors, missing information, and inaccurate data that will not stand against external auditors for regulatory compliance. There are typically limited resources for auditing and ensuring that all activities in a procurement system are being performed in accordance with company compliance policies. In the same survey conducted by the Hackett group, 52% of companies suggested among the most effective steps to improve their procurement experience was to streamline policies and procedures.  

Data Storage Across Multiple Business Systems  

Trying to remember what information needs to be entered into a Purchase Requisition header might be challenging with complex policies in place, so why not reference one that has already been created? Unfortunately, many businesses have quickly discovered that searching for a PR without a reference number is challenging. Most organizations have multiple ERPs and other business systems. In our own experience, we have seen even the smallest landscapes having over 90 business systems and larger organizations having nearly 3,000. With such a complicated landscape, it is no wonder that finding a single document for reference is time-consuming.  

Too Many Manual Touchpoints     

Currently, businesses still have many manual touchpoints, even in somewhat automated processes. Each manual touchpoint is another opportunity to introduce human error. Whenever possible, automation can eliminate these unnecessary touchpoints and streamline all processes and business rules in the procurement cycle. According to the 2019 P2P study by the Hackett Group, businesses still face what is called a “digital gap,” where despite having systems in place, organizations are still a long way from having 100% touchless processes.  

Lack of Analytics for Continuous Improvement   

Businesses who already have already implemented procurement solutions in whole or in part might think they have done their part in process improvement and can mark this project as done on their priority list. Unfortunately, this isn’t the case. Employees may continue to struggle with specific processes and avoid adopting these new solutions, instead favouring the manual processes they are familiar with. These insights can provide a business with the next steps for additional adjustments.   

Finding an SAP Solution to Common Procurement Challenges   

To overcome common procurement challenges, the ConvergentIS team leverages design thinking to help us determine how teams work. With this process, our team of design experts meet with your team, assess the situation, and propose a tailored and personalized solution to the problems being faced. The difference can be likened to sitting down at a restaurant and having a meal served to you, compared to a cooking class where our team helps your business understand how you can approach all future projects.   

This tailored solution often leverages a combination of our out-of-the-box applications, which are targeted to adhere to Byzantine procurement policies by using a simple, guided, mobile approach. Organizations can only become more efficient if teams are using the software that is purchased. Therefore, easy-to-use apps ensure that employees are adopting the proposed products. Our applications target specific areas in the procurement process like services procurement and purchase requisition creation. For any gaps, we leverage the SAP Procurement application suite to deliver a complete solution.  

To distill these challenges down into manageable optimization steps, we encourage you to download our free guide to procurement optimization.


 

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