Challenges in Procurement
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Challenges in Procurement
One major challenge facing leaders in the field of procurement is the adoption of technology. The desirability of internet features and other web-based technologies have the ability to support procurement activities, while providing improvements to the whole process of procurement. It is on this ground leaders have, in recent years, adopted e-procurement as a way of reducing costs significantly as its ability to manage the inventory and decrease transaction costs is more efficient compared to the paper-based process. E-procurement, in its most basic definition, is the process of stream- lining purchasing processes through the elimination of paper-based documents like purchase orders, invoices, requisitions forms, among other documents and their replacement with a paperless, electronic process. It is an extremely powerful tool, with the ability to revolutionize an organization’s purchasing function by automating the labor-intensive routines. The former enables the staff to gain access to the supplier’s system in order to view price points, product pictures, as well as detailed product description while confirming the technical specifications of each product. Nevertheless, the adoption of e-procurement is not without obstacles. Such barriers have been a major setback for many leaders in the procurement industry (Davila, Gupta, & Palmer, 2002).
These barriers can be categorized as technical, organizational, and governmental. In most businesses, the hindrances make adoption and full integration of e-procurement impossible. The individual challenges include poor technological infrastructure, risks, inadequate money for capital investment, shortage of technical knowhow, unsupportive legal framework, incapable suppliers, shifting the mind-set of people, as well as a change of responsibilities. Additionally, little technical support, poor network infrastructure, security of data transaction, as well as unstable power supply also contribute to making adoption of technology a pipe dream. In most institutions, the employees have an interest of operating electronically, but the progress made so far is very limited. They communicate with their suppliers via telephones, faxes, and e-mails, thus, e-procurement is remaining at infancy stage in these companies. Meager financial resources have been singled out as influencing the failure of e-procurement.
If this challenge is addressed effectively, leaders will make satisfactory progress towards applying e-procurement in their companies. One way to address the problem is making sufficient capital investment on the respective company’s technological infrastructure. The reason is that the application of e-procurement calls for an efficient and supportive, hard and soft technological infrastructure for its effective working. For example, there ought to be stable power supply, e-procurement software, undisputed network infrastructure, as well as adequate servers and backups. One report on e-procurement readiness indicated that only a few exist in organizations, but many leaders are trying to introduce changes as the installation of broad bands. Therefore, adequate finances should be set aside in any company’s budget that will be utilized for capital investment on technological soft and hard infrastructure for e-procurement. In theory, managers believe a direct relationship exists between the use of e-procurement and supportive technological infrastructure. Hence, priorities are channeled towards the construction of technological infrastructure for e-procurement. It is good for the leaders in the procurement industry to divert their capital investment from unnecessary uses in order to spare enough for technology.
Any capital investment made to enhance online procurement has to be utilized well. First, even before the organization undertakes to identify purchases requiring electronic transactions, it must first ensure it is fulfilling its responsibilities. Engaging in procurement policies that seem to be responsible will integrate the business, environmental, and social objectives into the whole process, and produce the potential to speed up positive change in the supply chain. Consideration of the socio-economic and environmental impact of products purchased may enable organizations to reduce risks, expand the sphere of influence, as well as enhance the overall reputation of the business. As leading companies move towards responsible procurement, more and more questions come up each day. These concerns entail the attitude leaders adopt as unscrupulous procurement personnel embezzle the funds of the business (Davies, 2012).
Leaders must endeavor to reduce the misuse of funds allocated to procurement is developing the capacity of every organization to direct and monitor the use of such investment. Many businesses, despite boasting to possess highly trained advisors on capital investment, do not have a mechanism for auditing so that the procurement experts can be accountable. Mistake should say such an opportunity because that very organization may have the resources and intelligence to identify and report any misuse or wrongful allocation in the procurement process. The rolling out of the training should involve audit, finance, projects, risk, as well as compliance staff whom ensure the approach used is consistent. In addition, leaders should develop a central point of intelligence in order that there is only one center of power for detecting the vice within the company. Unscrupulous employees often go undetected in large companies where there is nobody to oversee the potential risk of fraudulent activity. To reduce the opportunity for leakage of pertinent information, intelligence information gathered by the audit team is often not shared with any other member of the organization.
Leaders will also require developing specialists of e-procurement. Any implementation of techniques of e-procurement requires employees that are experts in all issues of e-procurement at the organizational level. This is necessary for both the supplier and procuring entities. Hence, to achieve success in e-procurement application, there is a need to identify professional e-procurement experts in supplier companies who will be in charge of the harmonization and daily implementation activities of the e-procurement system. Because most procurement organizations have inadequate experts, efforts ought to be taken by the respective entities to develop and train such experts in order that they become conversant and competent. In turn, these individuals will take an active role in the whole process of the installation of e-procurement infrastructure (Albrecht, Dean, & Hansen, 2010).
Among many other competencies, these e-procurement staff should be able to detect fraud in the online transactions. The fraud in the procurement is not on the agenda of the boardroom, and there often lacks anti-fraud strategy in any procurement initiated in an organization. For an anti-fraud strategy to be successful, it would comprise the identification, prevention, investigation, as well as detection of risk. Most companies, today, have one form of an anti-bribery strategy but need anti-fraud strategy for supply management and procurement. This is a high-risk area because many firms carry out many transactions of procurement each year. There often lacks formal guidance in businesses of the way of mitigating and reducing the risk of fraud in procurement processes. Mitigation has been linked to the failure to adopt a good strategy. It is not possible to get whether a fraud in the procurement can be eliminated, but if the group focuses on decreasing the chances for one fraud to happen in the first place, there will be a positive result. So is the increase in the likelihood that all the fraudsters be identified.
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