Major Procurement Issues And How To Fix Them With Technology
An efficient procurement process makes a huge difference for an organization’s supply chain. In addition to streamlining processes and speeding up their operations, it also helps them cut costs and minimize unnecessary expenses. That said, many companies still run into procurement issues due to inefficient processes and human error.
Common Procurement Issues
A lot of companies struggle to reduce material and service costs. This isn’t always possible, especially since you’re not in control of market rates and supplier charges.
High average supplier lead time can also be a major issue in procurement, along with low-quality incoming materials. Working with high-quality vendors can fix most of these issues, but finding them is a challenge in itself.
Companies also experience issues with communication and documentation, which is often a result of incompetent processes and ineffective tools. These issues further result in other procurement problems such as procurement fraud and duplicate payments, which can cost your organization.
Businesses in the U.S. are wasting 32 million man-hours every year because they’re using ineffective procurement tools.
The Cost of a Poor Procurement Process
A poor procurement process can be extremely costly for the organization, sometimes increasing costs up to 5X. No one wants to spend more money than they absolutely have so, so this is a major issue that needs addressing with more efficient practices.
Besides monetary loss, companies can also lose time and value because of practices and tools that aren’t up to the mark. Businesses in the U.S. are wasting 32 million man-hours every year because they’re using ineffective procurement tools. And 54% of companies are still relying on paper-based invoice processing, which can be extremely time-consuming.
Not surprisingly, inefficient processes and manual data entry are among the biggest challenges for 48% of those same companies.
Even in terms of fraud, inefficient procurement tools and practices put companies at a greater risk of becoming victims. The easiest targets of fraud are those companies that are less likely to use a centralized digital solution for accounts payable.
This means that small businesses and startups can be the biggest targets. So it’s no wonder that 29% of small businesses have been targets of billing fraud. 22% have been victim to payment tampering and check fraud.
The Need for Automation
It’s clear to see that businesses are facing many procurement issues that are costing them time and money. And many of these issues stem from ineffective tools and processes.
The obvious solution is to optimize your existing processes with more efficient practices. And of course, it’s absolutely necessary to use tools that will minimize human error and the risk of fraud.
Procurement management technology can make a huge difference in reducing these procurement issues. It can help you streamline your workflow and automate various repetitive tasks. It also organizes your data to make it easily accessible, which can prevent data duplication and duplicate payment issues.
Automating your invoice processing, for example, can reduce errors by close to 40%. It can also bring down your cost-per-invoice by nearly 90%. Plus, it could reduce your invoice exception rate to 10.7%.
To top it all off, automation can help you save significantly more. Automating your accounts payable can help you take advantage of up to 75% of available discounts.
To learn more about the importance of technology in tackling procurement issues, check out the infographic below.