Just like the two sides of a coin, there are always two opposite edges to everything. While technological advancements have made things easier, at some point technology has also complicated things than ever before. And procurement in logistics management is witnessing the good and bad of advancements in technology, much like other business streams.
In this globalised world, procurement is no longer as simple as, delivering products and materials from one point to another. While the purpose of procurement practices remains the same, today’s logistic managers are required to focus on finding the best possible way to deliver products on-time, while reducing the costs incurred.
Given the amassed competition in the global market, it is imperative for logistic managers to maintain high quality, and impeccable standards of service delivery, despite the increasing prices of raw materials.
Not to mention, logistics managers are required to lead from the front as the guardian of the company brand. Legal issues, visibility, and sustainability are only some major concerns that need to be addressed by logistic managers. Be it good or bad, policies implemented during procurements practices, do exert its impact not only on the business’ bottom line, but also on the brand and public image in general.
What are the biggest procurement challenges faced by logistic managers today? Here are six of them:
- Cost reduction
Unsurprisingly, regardless of the business domain you serve, budget management is often the most challenging task for a leader. Given the fact that sourcing raw materials from global markets is expensive, cost reduction will always be a priority focus for logistics managers.
In order to carry out seamless procurement practices, strong management skills and dedication are some qualities that should be possessed by logistic leaders. They are required to invest efforts to avoid over-budget and risky overspend.
- Capital investment
Budget planning is not ‘the only challenge’ to be faced by logistics managers towards managing financial considerations during procurement of goods and services. To sketch out an ambitious saving and cost reduction plan, companies often fail to infuse capital investments on hiring a skilled professional to perform the function meticulously. Owing to which, managers are often unable to implement smooth workflow and strategize to derive tangible business returns.
- Risk mitigation
Uncertainty and security risk is a huge challenge in procurement. Welcoming the major shift in procurement in 2025, where risk mitigation will be the key strategy to improve on sustainability and transparency. Logistics leaders hence, need to develop a solid team that is capable to develop better approaches for supplier management decisions.
- Skills shortage
Even the best leader cannot bring about change in business, without an effective support system from coordinated team work. A logistics manager might have great vision and strategy, but it can actually become difficult to realise it, when the team lacks deep knowledge about the industry.
Oftentimes, a talent is placed in the wrong channel, which is not in accordance with their expertise. This results in inapplicable strategic sourcing.
- New technology
Technology has now become an inseparable part of modern life. It is crucial for logistic managers to seek ways on how to harness the power of new technology, such that it will enhance and improve procurement department functioning.
To stay abreast of the growing trends, the company should design a digital revolution strategy. Investing in technology for some key areas such as using analytics, tracking savings, budget planning, sourcing management, supply management, and other automation could be a great alternative for maximising efficiency and better visibility.
- Supplier relationship
For a business relationship to run smoothly, it takes equal efforts from both parties. Procurement operations are often poorly executed due to weak supplier relationship. In fact, collaborative and innovative relationship is the key to drive performance improvements. Therefore, logistic managers are required to invest in management systems that will improve supplier relationships.
In the near future, procurement department will see a major shift, the one that requires procurement leaders to take expansive role within the organisation. These changes would not only affect procurement function, but also will transform the whole business.
To tackle these challenges of tomorrow’s procurement operation, companies should begin today – by adapting new approaches and embracing broader perspectives. Only then, can they seize a competitive edge ahead.