Evolution - Journey of Procurement Process

Throughout history, businesses have needed to procure goods and services to function effectively. While the methods used for procurement may change over time, the importance of this process has always been recognized. Initially a small part of business operations, procurement is now one of its most critical functions - enabling companies to make or break their profits. Even when ancient Egyptian scribes were forced by Pharaohs' orders to record all material on papyrus scrolls, it was still procured as part of any project requiring writing materials.

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Charles Babbage, the father of the computer, wrote a book in 1852 called "The Economy of Machinery and Manufacture." In it, he describes the importance of procurement functions in business. During the industrial revolution, clerical duties were more important than strategic ones for this function; but now it is increasingly crucial for any organization to have strong procurement strategies in place to cut costs and increase efficiency for profit. Although cost management is not part of the procurement department's responsibilities, they play a role in contract management, mitigation of risks from suppliers and other areas where operations might face challenges on a day-to-day basis from 1956 until 1990, the procurement function went through various stages. In the early years, materials management was one focus area; then suppliers and competition management took precedence.

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Later on, long-term relationships were established with key suppliers to secure necessary materials for the business; as this became more difficult, specialists were recruited specifically for this function to ensure that procurement ran smoothly across all areas of the organization.

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Haunting Challenges

There are several challenges facing procurement teams in today's business environment, especially as companies continue to evolve and adapt. The digital transformation age has helped the procurement function to be more thoughtful about how it approaches everyday tasks - even while dealing with redundancy in errors. But despite these existing difficulties, choosing the right platform for transformation is key if you want to stand out from your competition. Let's look at some specific examples of these challenges below

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• Sustainable Business Practices 

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As sustainability becomes more and more important to businesses, it is becoming increasingly important for the Procurement function to make sure they are doing their part. With sourcing being one of the most important functions within procurement, there is a lot of pressure on sourcing managers to find solutions that are both cost-effective and sustainable. This is a constant balance and trade-off between maintaining lower costs but also making sure that ample stress is laid on the organic way of doing business. More often than not, big businesses stress cheaper from overseas rather than ethically produced material. There are various ways for any business function, especially the Procurement function to be more sustainable like assessing and reporting on the existing supplier's labour practices, environmental impact through production, the inclusion of diverse local suppliers that organically produce the raw material or related goods, contracts with clauses on code of conduct for all vendors, judicial use of water, electricity, coal and such, focusing on minimizing the carbon footprint by monitoring carbon emissions, avoiding unnecessary shipments which will help not just in cost cutting but also a fossil fuel.

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• Risk Management

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The current pandemic has proven to everybody how inadequate the risk management practices were.

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The issues were not just around the basics of risk management but also around Sourcing the material, insurance, invoicing and Finance frauds, management of supply chain and its reliability along with transparency, and other legal and compliance issues. Risk management with accuracy would help in Sourcing the balance in tough Times. Many companies don't even look at their risk mitigation plans or update them as the need of the Hour arises. This has to change for the stability and long-term success of this function.

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• Inflation and Information

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Inflation is an issue not just with the procurement function, but with all other business functions. It refers to the increase in prices over a given period that causes a decrease in the purchasing power of money and is also reflected in the general entries of all the goods and services in an economy. When inflation occurs for the procurement function the variable costs that are acquiring the working capital or the raw material at the same prices become difficult. For uninterrupted production or trading, it is important to consider the market factors of inflation, not just for cost-cutting but also to remain competitive in the ever-changing dynamic environment. There are various methods used for buying during times of inflation and they may change over time as stockpile or spot buy, sourcing substitute products, weighing the supplier risk buy hunting in remote markets for lower prices and so on. There is also an important observation in terms of balancing the need to meet the challenges so that no one challenge takes over the other.

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The information and data accuracy aspect of the procurement function cannot be covered as a sub-head, and hence we have written a detailed blog about this subject matter. Check it out here. To ensure consistently high performance of the procurement department, certain imperatives need to be followed by the entire team working in this area.

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First and foremost, the procurement department needs to work hand-in-hand with advanced data mining and data analysis techniques to reduce costs while maintaining overall operational efficiency for the organization. With the plethora of data available, the landscape will have more traffic than present-day all the time and sustaining in long run would be possible only if data management and analysis are done effectively. Further, accurate data is extremely important because it can lead to huge losses for investors in case of the slightest error.

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• Going Digital

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The need to accelerate on having a transformation in all the digital aspects of how the procurement function operates is the need of every business today. It just does not help in steering the course of the entire business in the right direction but also reduces the process efficiency by eliminating the obsolete and conventional manual processes that lead to errors, biases, and delays. This is one of the most difficult challenges to overcome because any mistake can lead to a direct impact on the business's profits. Redefining the existing process is not an easy task and you need to follow a carefully curated process roadmap for having a successful digital transformation. Digital transformation is important more than ever now because we are in the dynamic era of change and issues like the pandemic lead to large losses that are not recoverable or sustainable for the business. Adopting a platform like a zipline not only makes it easier for remote teams to connect but eliminates the need for everyone to be present in the same room for training purposes. The seamless process makes sure that guidance is available 24/7 and innumerable Times unless the process is learnt. The speed at which a business adopts new technology and uses it determines whether it will stay in the business for the long run as every major business has had at least one major digital transformation in its course.

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• People and Transparency

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Even when a business has everything in place that is needed to invest in warehouse machines pay off, without the right people, it will still fail. The hiring process in today's world is radically changing and an infusion of an automatic application screening, resume writing and other HR systems are taking over the basic hiring process. The procurement function also needs to be understood for having greater clarity in adopting a new system to make the hiring process easier. The procurement function is unique because of the number of stakeholders involved in making it a success. Every new vendor that a company accepts would need training as much as a new employee who joins the system. The importance of having digital products in place for making hiring and onboarding easier cannot be stressed enough. This not only makes vendor management easier but also helps in the concentration of the procurement officer in taking care of evaluations, monitoring and Optimisation functions.

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Overcoming with Tech

Today, most of the procurement challenges can be overcome with careful planning, effective digital transformation and prioritizing. The transformation piece is not just required in the processes, but also for the reporting and analytical functions. For example, automating weekly reports and monthly reports would save a lot of time for the team. Time saved can then be utilized in making better decisions and having brainstorming sessions to improve the processes further.

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Adopting new technology interactive functions like training and reporting will provide the Treasure of data that can be analyzed and improved further for meeting the goals of the organization. Adoption of new technology will allow you to have more control over your data as well as provide more accurate reports which will help you meet your goals

Summary

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One of the biggest aspects that can make or break a procurement function, is how you operate it.

With all the new technology and platforms being adopted by companies today, there are many ways that procurement can be made easier. For example, by adopting new technology or platform that not only allows users to learn how to use the software/app but acts as an interactive medium for any website in helping it grow and making onboarding seamless for brand management.

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For example, Ziplyne is a SaaS platform that allows non-technical stakeholders to create a guided experience for end-users that navigates them on top of any software terrain or interface below from point or peak to peak. This functionality makes the user experience empowering because they are not just guided by some knowledge article or a video but are actually in the process while learning it. It is not just a tour of the product, but a step-by-step guide that leads the user to success throughout the customer lifecycle.

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Adoption of this kind of software is the future of making business processes more reliable, less time-consuming, more effective, having fewer surprises and remote-friendly. Now is the time and chance for every business to get it right.

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