Describe the risks associated with procurements.
The risks in the supply chain have very many repercussions in any organization, such as creating delays in projects and products. The following are some of the risks that are associated with procurement.
Poor internal need analysis (Hong, Lee, & Zhang, 2018). When the organization does not conduct appropriate need analysis, it may lead to overstatement and understatement of the requirement, creating unrealistic schedules, inadequate budget, and poorly designed needs. These situations create a waste of time and unnecessary expenses.
The other risk is the wrong vendor selection and management. When the vendors are not dependable, the requirements will become unfulfilled, and the projects become delayed even in large firms.
The other risk is maverick purchasing. There are extra costs that the firm incur when it purchases products outside the normal process. This, in return, creates compliance risk, general lack of control, and incomplete audit trials. The business also faces financial risks, and this reduces the profitability of the firm. Maverick purchasing also creates brand reputation risks.
What steps can be taken to address these risks?
In addressing the above-stated risks, the following are some of the ways to keep in mind. Raise procurement to a strategic level. Firms need to understand that procurement is also a vital business activity and think beyond the bottom line.
Firms should also deploy the modern technology of automation (Hong, Lee, & Zhang, 2018). Large firms should ensure that they use e-procurement systems such as SAP to provide the correct solutions. Such solutions provide everything needed to automate the process of procurement, speeding the process, and lower time wastage and delays.
Businesses should also ensure that they improve communication. This will ensure that there is no misinterpretation and that the firm will procure the correct products.
Finally, the firms should ensure that they build excellent and legitimate relationships with the suppliers. This will assist in lowering the disruptions to the supply chain.
Reference
Hong, Z. 1., Lee, C. 2., & Zhang, L. 3. (2018). Procurement risk management under uncertainty: a review. Industrial Management & Data Systems;, 118(7), 1547-1574. Retrieved from https://search.proquest.com/docview/2113088568?accountid=151051