Top Procurement Challenges for SMBs to Know

20/09/2021

What is Procurement and What Importance Does it Hold for SMBs?

Starting your own business can be a daunting task, especially when the COVID-19 pandemic has hit global markets hard. However, if you closely understand every critical aspect of running a business, making profits may not be as complex as it seems to be even during this unfavorable market scenario.

Procurement is one such critical aspect of a business that requires careful understanding and analysis, whether you are a beginner or a seasoned corporate player. Procurement refers to the entire process of sourcing goods or services. Though it may appear to be a simple process, it involves several other complex activities like:

Selecting the right vendor/supplier
Fixing the best and appropriate rates for goods
Negotiating contracts
Finalizing mode of payments
Purchasing goods

Here is why procurement is a vital business function:

Upholds Brand Loyalty - Customers are often loyal to companies that can offer the best quality product at the right price. Thus, quality assurance and smart pricing both serve as important determiners of business success. Done right, procurement can help businesses get the best quality goods at competitive rates, which ultimately helps ensure that the end-user gets the right product at the right price.
Allows you to Meet Your Business Targets - Regularly assessing your procurement process may help you bolster your order fulfilment process and inventory management. Meeting targets on time can speed up the entire chain of business activities and may increase the chances of steady cash flow.
Boosts Productivity – Seamless business functioning can result in higher revenue. Deriving maximum value from the procurement process can be one of the best ways to boost productivity since an efficient procurement system is likely to keep other business activities on track. This may help ensure that you get the best return of investment ("ROI") by timely fulfilling orders.

Top Procurement Challenges that SMBs should Know:

Every business has a unique way of working. Though the challenges they encounter may vary, there are often similarities. For instance, small and medium-sized businesses (SMBs) may face procurement challenges similar to large companies. However, SMBs often find it harder to overcome them due to financial constraints. If SMB owners are more aware of the kind of roadblocks they can meet in their procurement journey, the chances of overcoming them with ease are higher. Here are a few of such major procurement challenges and solutions that SMBs should be aware of:

Fulfilling High Customer Service Expectations

Good customer service forms the basis of all successful businesses. When businesses source and deliver customer-centric solutions they likely enjoy a competitive advantage. However, fulfilling customer-service expectations round-the-clock is a tricky affair. The needs of customers are dynamic. If you attempt to understand what exactly they expect from your product and service, you may likely be in a better position to provide them the same.
One of the best ways to understand customer behavior is to strike a one-on-one interaction with them. However, this may not always be possible when your target base is wide. Thus, the easiest possible solution could be to invest in data analytics to glean actionable insights about customers’ preferences and expectations. Based on these data-backed insights you may be able to deliver customized solutions to your customers.

Reducing Transportation Costs

From sourcing your product to delivering it to your customer, the entire product journey can incur huge transportation costs. Higher transportation costs will in all likelihood impact the final price your customer pays for the product. A good way to bring down transportation costs can be by monitoring your fuel consumption and taking shorter routes during product transportation. Smart devices like digital fuel trackers, fleet management software, advanced digital maps, and GPS trackers may help in the above.

Replacing Legacy Solutions with the Latest Digital Solutions

The transition from legacy solutions to advanced digital solutions can land your employees in unfamiliar waters. One of the best ways to deal with your employees in such situations could be to train and guide them. Implementing digital tools in your procurement process also requires a one-time investment. Though investing in warehouse automation for upgrading capabilities may be expensive, it may help you save a significant amount of money in the longer term.

Reaching Global Markets

Selling your product or service globally may bring with it better growth opportunities, reputation, and most importantly, good ROI. However, targeting global markets may additionally require international expertise. It could also bring with it a series of challenges like language differences, travel costs, and product customization requirements to survive in the foreign markets. It is possible to overcome these challenges by registering as a seller on a reliable e-commerce marketplace like Amazon and potentially get a global reach.

Maintaining a Steady Cash Flow

Delayed payments, lack of favorable credit terms, and reliable funding sources are some of the big challenges for SMBs. SMBs can increase chances of positive working capital by implementing digital solutions that are high performing, efficient, and accurate. Click here to know more about effective working capital management!

Ensuring Skilled Human Resource Availability

Besides managing cash, having access to skilled human resources is another major challenge for SMBs. The adoption of automation tools to streamline procurement can serve as a reliable alternative for skilled human resources. These tools are easy to use, cost-effective, and work tirelessly. Click here to know more about some of the best e-commerce procurement platforms in India!

Real-Time Tracking

Keeping a track of all the complex activities involved in procurement can at times be difficult. Digitizing the key processes and adopting analytics can help you get real-time updates on sourcing patterns, inventory and warehouse management. Software applications can work wonders if you are looking to gain visibility about the product journey.

Reducing Delays

On-time deliveries can emerge as a major challenge when several silos work in collaboration. SMBs can choose to reduce supply chain lead times by using software solutions to leverage sales forecasts, increasing order frequencies, or simply by collaborating with suppliers.

Handling Crisis

Unexpected turns of events can often lead to disruptions in supply chains. Such a crisis can be easily solved if there is a pre-planned contingency backup in place. In addition to this, training employees, making calculated decisions, and taking responsibility for the disruption are a few options that can help companies quickly restore normal working conditions in the event of a crisis.

Keeping the Entire Procurement Process Connected

Ensuring that all the business units associated with procurement work together harmoniously is a critical requirement for enterprises. Digital tools can serve as viable solutions for managing procurement projects and keeping the workflow connected.

Conclusion

Overcoming the procurement challenges is crucial for the survival of your business in the longer run. With few tips in hand and digital support, it is possible for you to sail ahead in your business journey.

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