At present, procurement companies are facing many challenges. A majority of them have come to the fore, especially after the outbreak of the Covid-19 pandemic. Most companies that sit in the middle of the supply chain encounter various challenges that include cost management, business compatibility with compliance requirements, promoting corporate social responsibility, and improving the quality of products or services.
In addition, procurement companies are also experiencing several structural challenges. For instance, they feel the need to transform their unstructured business model into a structured one. While supplier relationship management teams of top companies do their best to gain a competitive advantage, these days, the fact remains that they also have several other challenges other than the ones mentioned above.
Some top challenges related to supplier relationship management include the ones given below.
Strategizing supplier relationship management
For any business venture to become successful, it must have a strategy. It is all the more important for companies that deal with supplier relationship management. Unfortunately, instead of being proactive with an actionable strategy, the majority of them follow a reactive course of action. As a result, such companies fail to generate consistent outcomes due to the lack of a proactive strategy.
A well-documented supplier relationship management strategy can be of great help for companies. With the help of it, a company can identify suppliers that are more strategic than others.
1 – Risk Management
From public health concerns to environmental factors, many aspects can add up to influence the supply chain. When considered as a whole, they constitute risk factors for the supply chain. When it comes to mitigating them, a lot depends on how one perceives and identifies them.
Following the outbreak of the Covid-19 pandemic, there was a sudden rise in the price of raw materials. This abrupt rise in prices adversely affected operations in the subsequent phases.
For professionals who work under modern supplier relationship management teams, it is a challenge on its own to successfully address or mitigate the aforementioned risk factors.
2 – Promoting Corporate Social Responsibility
Nowadays, businesses must integrate environmental and social factors into their operations. Also, they must consider these aspects while interacting with internal stakeholders. In management terms, this element is called corporate social responsibility.
To encourage volunteerism among employees and also lower environmental externalities, companies need to deal with the challenge of corporate social responsibility while managing their relationships with suppliers.
3 – Meeting compliance requirements
Fulfilling compliance requirements is necessary to ensure smooth operations as well as the movement of goods. It enables better visibility and control of goods. In addition, it also helps with the mitigation of risk factors. For these reasons, companies seek ways to meet compliance requirements.
However, it might not be as easy as it seems on the surface. From the formulation of an SRM strategy to aligning priorities, there are many factors that a company that sits in the middle of a supply chain needs to fulfill to meet compliance requirements. This makes the latter a major challenge for such companies.
4 – Priority Alignment
Some companies have both tacit and stated goals. Oftentimes, they tend to differ from one another. This poses a challenge to professionals who work in procurement teams. Generally, such professionals look for cheaper supplies. In doing so, they tend to overlook the importance of quality stuff and the need to align themselves with suppliers to foster long-term relationships with them.
The leadership of a company can easily tackle this problem by sending the right message to the staff members who work under the procurement team. It needs to ensure that it sends a clear message to staff members in the procurement team. This will not only help avoid any confusion but also improve the ability to make decisions at all levels.
5 – Maintaining communication between buyers and sellers
Keeping in mind the complex nature of the supply chain, maintaining clear communication between buyers and suppliers is of paramount importance. This is the best way by which both parties can build trust between themselves.
Technology can come in handy in promoting a trustworthy relationship between buyers and suppliers. With the help of tools, buyers can share their data with suppliers.
It can benefit suppliers in two ways. Apart from helping them send their supplies at reasonable prices, it can also help suppliers find the right direction to improve their relationship with buyers.
6 – Inventory management
At present, supply chain companies are needed to keep an eye on their inventory. This is important as they must ensure that they neither overbuy nor underbuy essential items. Both these possibilities can affect the budget as well as the outcomes of companies. So, companies need to strike the right balance between them.
This becomes simple and easy when a company maintains a good business relationship with its suppliers. By sharing data with its suppliers from time to time with the help of a software program, a company can manage its inventory in the best possible manner.
7 – Integration of technology with industrial practices
Integrating the ERP portfolio with supplier relationship management has become a necessity for companies these days. Without a dedicated ERP software program, it is next to impossible for companies to work with real-time data and utilize it to manage daily activities. Thus, integrating technology with industrial practices is a must for companies that are associated with supplier relationship management (SRM) in some way or the other.
New technologies are replacing the traditional ones. So, the evolution of technologies is also one of the reasons for which technology integration is necessary with industrial practices. Notwithstanding its importance, the fact remains that it is nothing shorter than a challenge for companies these days.
8 – Ensuring quality
Supplier relationship management teams make for the first line of defense. As such, they face multi-dimensional challenges. The majority of them emerge when they make efforts to meet the recommended quality standards. These challenges include minimizing issues and incidents involving suppliers, quality-related issues linked with packaging and the materials, making the processes of production management more efficient and structured. The solution to these issues lies in working closely with suppliers.
To sum up, companies face the aforementioned challenges while managing their relationship with suppliers. The ones listed above are the most common challenges they face in the current scenario. To achieve its targeted objectives, a business organization needs to find out ways to overcome them without compromising its operational outcomes.