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Key Considerations for Mitigating Procurement Crisis

Everyone has something to lose and something to gain by taking a risk in any term. Life will be boring if all individuals spend days doing the same thing over and over. But from the procurement angle, predictability and overcome all conflicts are essential to create an effective and successful firm. For beginners, delays and mistakes in the procurement process are common, and they can lead to spending hours chasing documentation or correcting errors. It is crucial to manage all these issues to reach the value as well as reducing the costs of organization. Before mitigating the risk of the procurement process, identify the factors and examine ways to control them. This article discusses the key considerations for mitigating procurement crisis.

Lacklustre Communication and Collaboration

Contract management requires easy and potential teamwork between the employees. The absence of communication will lead to some disagreements between teams and the organizations. It also introduces complications to make a legal contract process. Therefore, the proper collaboration between people who sign up the legal terms and condition will give an output in the contract that effectively represent the user’s requirements. The real challenges that stand in at purchasing department is strong communication and visibility. Sometimes contract has manually transmitted internally, and it does not allow it to be accessible for everyone who needs it. So, it only involves the right team members were the top priority list, especially when the single owner can deal with the proper information.

Lacklustre Communication and Collaboration
Image taken from SIPMM: https://publication.sipmm.edu.sg/essential-techniques-manage-machine-parts-inventory/

Material Scarcity

Insufficient materials have been lacking since the pre- and post-pandemic. Due to the sudden rise of customers’ requests, their demand like never happen before. Till now, the huge number of companies and vendors are in struggles to meet their target for the availability of products after manufactures.  Later, they have encountered manufacturers facing a bundle of shortages, not able to deliver to their requestor, and losing payment terms due to being maxed to component suppliers. With all these shortage inputs, a brand’s capacity to keep its growth is highly dependent on the global pandemic that out-of-control. Identifying shortages by internal inventory is the most impactful method in the supply chain. Understanding the root cause, can be reduced the issue of material shortages in the future. This practice makes sense, and it should be pursued by procurement firms inorder to deal with material scarcity that is coming based on current demand, or falling short on an order.

Inefficient Contract Management

An individual who always along with purchasing department is used to practice their method of doing everything in terms of the contract through simple agreement to buy. Making a contract is a strategic technique to form mutually benefits for both parties with vendors and buyers who share different ideals and goals of an organization. Without an effective way to handle, sacrificing both cost savings and exposing business in difficult situations.

By using a centralized document management system, terms and conditions are automatically connected to approve vendors and good transactional data that able to turn into reports for finance, marketing, and other internal stakeholders to make negotiations much simpler. Review and get approval by the legal management team which means the contract information is precise and up to date, and staff can create new tender from pre-approved templates for easy review and get approval.

Fraud and Corruptions

Procurement fraud always occurs when there is intentional deception within the “Procedure to Pay” process that results in financial gain or loss. Precisely, some company loses when a powerful vendor has gotten powerful business at an above-market scale and then the employee who has been dealing with them and received a kickback. Therefore, the procurement chain with others will break and be ripe for fraud. Unwell management and opaque procurement function rob against the ability to spot red flags. Good explanation and automated procurement functions, limited index list from approved vendors, and clear transactional data information with documents to avoid the potential fraudsters that submit fake particulars that not approved invoices and do business under the table. Thus, a full audit for every transaction and original document approval process increase protection.

Inadequate Data Analysis

Without appropriate analysis, it will end up the whole win-lose game or the good and services altogether at sub-optimal prices or without the good discounts. Foolishly spending is major trouble for both the finance and purchase departments. Building budgets to actual prices is also serious, and it could damage both profit and unable to reach expectations, as well the company reputation within the competitive partners if the quality, quantity, and availability of goods and services that offers have been affected. Reducing the effect, huge data and ever-growing information technologies evolving on the palm of our hand, and it transformed the way view at everything in their ways to provide the process of giving profit to numbers of companies and industries. So, good procurement software gives tools that can collect and analyse transactional data of the purchase. It may allow clarifying more about usage patterns and external information that make easier in and out to grow in way of smarter of strategies and chances to negotiate a mutual contract that benefits both or more parties with potential suppliers.

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Brian Tu. (2020). “Top Four Aspects of Supply Chain Management”. Retrieved from https://www.skubana.com/blog/supply-chain-management,accessed on 15/09/2021.

Chris Lim Siao Yian, DPSM. (2020). “Spend Data Analytics for Effective Procurement”. Retrieved from SIPMM: https://publication.sipmm.edu.sg/spend-data-analytics-effective-procurement/, accessed 15/09/2021.

Global, USA (2019). “The Primary Problems of Poor Contract Management”. Retrieved from https://www.lexology.com/library/detail.aspx?g=2f6d1544-66cf-4d48-a11f-3fc1ba369ea8,accessed on 15/09/2021.

Lee Meng Yin, DPSM. (2020). “Mitigating Global Sourcing Risks in a Pandemic”. Retrieved from SIPMM:https://publication.sipmm.edu.sg/mitigating-global-sourcing-risks-in-a-pandemic/,accessed on 15/09/2021.

Liong Sze Pei, DPSM. (2019). “Fraud Prevention Strategies for Construction Procurement”. Retrieved from SIPMM: https://publication.sipmm.edu.sg/fraud-prevention-strategies-construction-procurement/,accessed on 15/09/2021.

Willy C. Shih. (2020). “Global Supply Chains in a Post-Pandemic World”. Retrieved from https://hbr.org/2020/09/global-supply-chains-in-a-post-pandemic-world/ accessed on 15/09/2021.

Sharmilan Shunmuganathan
Sharmilan Shunmuganathan
Susannah Lawrence has substantive years of experience in the food and beverage industry, and specifically in the field of operations, shipping and logistics coordination. She currently handles ERP consulting and quality assurance issues, and she is a member of the Singapore Institute of Purchasing and Materials Management (SIPMM). Susannah completed the Diploma in Logistics and Supply Management (DLSM) on September 2021 at SIPMM Institute.

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