From the exposure of fatal working conditions in Bangladesh to horse-play across Europe’s food industry, how businesses go about sourcing supplies has come under increasing scrutiny in recent times. While procurement undoubtedly plays a major role in eradicating supply chain infidelities, what barriers do businesses face in achieving success?
Since February this year we have been asking for your opinion on procurement challenges in order to better understand how industry experts perceive procurement issues. We have used the results to establish the top three procurement pitfalls.
1) Planning proves to be a demanding challenge
Businesses today contend with a whole host of factors which could have a major impact on demand. As a result, it is not surprising that 42% of participants who took our recent procurement survey view demand planning as the biggest barrier to procurement planning success.
The demise of the DeLorean Motor Company (DMC) is a prime example of the how businesses can suffer major consequences as a result of poor demand planning. DMC ordered excessive levels of stock in order to meet their ambitious output targets. However, the manufacturer massively over estimated demand and redundant stock soon caused a financial crisis. While DeLorean became a victim to this particular procurement pitfall in the early 80s, such issues continue to plague businesses today. For example, maintaining constant availability of products has grown into a major competitive concern as failure to meet demand can leave businesses dangerously exposed to the competition. As a result, accurate demand planning has become more paramount than ever in achieving successful procurement.
2) Processing problems in procurement
At 31%, the second biggest procurement issue highlighted by our survey was related to procurement processes and procedures. While it seems supply chain experts in our survey perceived ineffective procurement processes as a major barrier to success, some businesses have already taken steps to improve supply chain performance by focusing on this area.
H&M, for example, has set the trend in textile procurement. In addition to their ethical sourcing policies which have helped them become the largest global user of organic cotton, the retailer has now made all of their supplier’s factory details available to the public, enabling more transparent procurement. However, the textile industry is not the only one to take advantage of improved procurement processes. The computer startup charity, Raspberry PI, have also reviewed their procedures in order to bring their supply chain closer to key markets and thus prevent supply bottle necks previously caused by foreign suppliers.
3) Taking stock of suppliers
The reputations of businesses across the entire food supply chain were left in tatters as numerous beef products sold across Europe were discovered to contain traces of horse meat. The complex nature of the food industry meant finding the true source of the contamination was much like finding a needle in a haystack. As a result there have been calls from both government and industry groups for every layer of the supply chain to review its suppliers and subcontractors to increase traceability
However, the horse meat scandal is not the only example of how unreliable suppliers have resulted in procurement nightmares. Rumors around the development of Amazon’s latest product suggest that ongoing supplier issuescould delay the launch of their debut smart phone. In both cases, supplier ambiguity has resulted in some major headaches as businesses struggle to achieve visibility across their second and third tier suppliers.
Considering how the much attention the topic of supply chain transparency has received in recent times it is surprising that only 4% noted how unreliable suppliers could have a considerable impact on procurement success.
Although our survey explored some of the most common procurement issues businesses face, can you think of any other problems which could present businesses with some real procurement challenges? Are there any other examples of businesses that have fallen victim to these or any other procurement pitfalls?