The 7 Procurement Challenges Impacting Your Bottom Line – and How to Fix Them
Procurement is no longer just about managing purchases; it has evolved into a strategic function that drives efficiency, mitigates risks, and unlocks opportunities for growth. Yet, as global markets evolve, procurement professionals face a growing list of challenges that can disrupt workflows and impact profitability.
To equip your procurement team for success, it’s essential to understand the major risks and obstacles they face. By addressing these challenges head-on, organizations can turn procurement into a powerful driver of efficiency and growth.
1. Navigating Supplier Risk in Procurement
Suppliers play a critical role in procurement, yet their reliability and performance can often be unpredictable. Supply chains can be vulnerable to a range of supplier risks, including:
- Financial Risk: Suppliers facing financial instability may be unable to fulfill orders, causing operational delays.
- Reputational Risk: Poor supplier practices can harm your brand if they don't align with ethical or sustainability standards.
- Cyber Risk: Data breaches or cyberattacks targeting suppliers can compromise sensitive procurement information.
- Legal Risk: Non-compliance with regulations or contract violations can lead to fines or legal disputes.
- Performance Risk: Late deliveries, inconsistent quality, or failure to meet contractual obligations can disrupt operations.
External factors like geopolitical tensions, natural disasters, or sudden regulatory changes can further amplify these risks, leaving businesses scrambling for solutions.
To stay ahead of these challenges, 90.9% of organizations report conducting regular assessments of third-party vendors. These evaluations are essential for identifying potential red flags, such as a supplier’s financial instability or operational inefficiencies.
Procurement leaders should combine regular assessments with robust vetting processes to evaluate suppliers based on quality, reliability, and ethical compliance. By leveraging Market Intelligence reports like Jabil’s, businesses gain deeper visibility into supplier risks, enabling them to diversify sourcing strategies and proactively mitigate potential disruptions.
2. Managing Procurement Costs Effectively
Cost control remains a top priority for procurement leaders, with 46% of Chief Procurement Officers globally focusing on cost savings. Procurement plays a critical role in maintaining profitability, enabling competitive pricing, and freeing up resources for strategic investments.
However, rising inflation and fluctuating raw material costs, exacerbated by global disruptions like the COVID-19 pandemic, have made cost management increasingly difficult. Inefficient spending and limited visibility into procurement data can further inflate expenses, leaving organizations vulnerable to missed savings opportunities.
Businesses can optimize spending by analyzing their procurement trends via spend analysis tools, pinpointing inefficiencies, and identifying opportunities to consolidate suppliers, improve contract terms, and manage tail spend more effectively. Leveraging procurement technology and data analytics, teams can also automate manual tasks, improve spend compliance, and unlock hidden savings, turning procurement into a powerful lever for profitability and resilience.
It’s essential to leverage procurement technology in today’s world. With 83% of CPOs prioritizing procurement digitization, adopting digital tools has become essential for streamlining processes, enhancing visibility, and driving cost savings.
Companies can also leverage consulting or outsourcing partners like Jabil to identify areas for improvement or implement new procurement processes to deliver cost savings.
3. Ensuring Regulatory Compliance in Procurement
Staying compliant with procurement regulations is no small feat. Ethical sourcing standards, environmental compliance, and trade policies vary widely across industries and regions.
Noncompliance can lead to fines, reputational damage, and operational delays that ripple across the entire organization. With new regulations and geopolitical shifts constantly emerging, the stakes have never been higher.
In fact, 70% of corporate risk and compliance professionals report a shift from a check-the-box approach to a more strategic focus on compliance in recent years. This evolution underscores the importance of proactive strategies.
To stay ahead of evolving regulations, procurement teams should regularly conduct risk assessments and implement compliance-focused software to monitor supplier practices, automate documentation, and streamline adherence. For organizations looking to strengthen their compliance framework, Jabil’s Procurement Consulting services offer expert guidance to establish best-in-class processes and ensure supplier oversight aligns with industry standards.
4. Tackling Lack of Visibility in Procurement Processes
Procurement processes often operate in silos, leaving businesses with limited visibility into critical areas like supplier performance and spending. In reality, only 43% of organizations report having adequate insight into Tier 1 supplier activities, highlighting a widespread challenge. This lack of transparency creates blind spots that can lead to inefficiencies, delayed decisions, and missed opportunities to mitigate risks or optimize operations.
The solution lies in adopting advanced technologies to close these visibility gaps. Centralized procurement platforms and supplier collaboration tools offer real-time insights, enabling organizations to monitor supplier performance, track spending, and streamline approval cycles.
5. Overcoming Inefficient Procurement Workflows
Inefficient procurement workflows can feel like trying to run a race with your shoelaces tied together. Manual tasks, slow approval processes, and miscommunication between departments create unnecessary delays and costly mistakes.
These roadblocks not only waste time and resources but also leave procurement teams struggling to keep up with the fast pace of today’s business needs.
To address these challenges, organizations should focus on simplifying and automating workflows. Here are key steps to optimize procurement processes:
- Map Out Current Workflows: Begin by identifying inefficiencies in the existing process, such as redundant steps or approval bottlenecks.
- Standardize Procedures: Create clear and consistent guidelines for procurement activities, from requisition to invoice processing, to reduce confusion and errors.
- Adopt Automation Tools: Use procurement management software to digitize manual tasks like purchase requisitions, approvals, and order tracking. This minimizes delays and improves accuracy.
- Ensure Adoption and Compliance: Implement policies and training to promote consistent use of procurement tools and improve cross-functional alignment.
- Monitor and Optimize: Regularly review workflow performance through key metrics and feedback, making adjustments to improve efficiency continuously.
6. Solving Data Management Issues in Procurement
Procurement produces an overwhelming amount of data but keeping it organized and useful is often easier said than done.
Disconnected data sources, inconsistent formats, and limited tools for analysis can leave teams struggling to find actionable insights. These roadblocks don’t just slow decision-making—they also hurt efficiency and lead to missed opportunities for saving costs.
AI and ML tools are revolutionizing how organizations tackle data challenges. These technologies make it easier to analyze large datasets, automate repetitive tasks, and identify valuable trends.
To tackle data management issues:
- Centralize procurement data: Consolidate all data into a single platform to improve consistency and accessibility.
- Leverage analytics tools: Implement AI-driven systems to monitor trends, forecast demand, and optimize supplier relationships.
- Focus on actionable insights: Use tools that turn raw data into clear recommendations for strategic decision-making.
With the rise of AI-powered platforms like ID8, businesses can turn procurement data into actionable insights, automate workflows, and strengthen compliance. By combining these advanced capabilities with traditional procurement best practices, teams can make faster, smarter, and more strategic decisions.
7. Bridging the Talent and Skills Gap in Procurement
Procurement is more complex than ever, and the demand for skilled professionals who can navigate modern tools and strategies is growing. But finding and keeping top talent isn’t easy. On top of that, many teams struggle to keep up with the training needed to adopt new technologies and stay ahead in today’s fast-paced landscape.
The solution? Invest in your people. Workforce solutions like upskilling programs and workforce planning tools can help bridge the gap. These tools don’t just identify where your team has room to grow—they help you create targeted strategies to build those skills.
It’s clear this is a priority for many companies. Nearly all (95%) surveyed manufacturers are boosting their investments in technology and automation over the next three years, with 40% focusing on workforce planning solutions. By prioritizing both tech and talent, procurement leaders can create teams that are ready to tackle today’s challenges and adapt to whatever comes next.
Strengthening Procurement for the Future
Procurement challenges aren’t just obstacles—they’re opportunities to build a smarter, more resilient operation. By proactively managing supplier risks, controlling costs, ensuring compliance, and adopting advanced technology, businesses can turn procurement into a competitive advantage.
Jabil’s Procurement & Supply Chain Services equip businesses with the expertise, tools, and proven processes needed to optimize procurement and streamline operations. Our solutions help organizations navigate complex supply chains with confidence, ensuring efficiency and resilience.
Contact us today to learn how we can support your procurement strategy.