Common Challenges in Retail Procurement Management

Procurement is one of the most critical functions in a retail business. Retailers need to identify customer needs, analyze retail market trends, choose relevant vendors, manage the entire procurement cycle, and much more. Processes such as purchase order management, contract management, vendor management, goods and services receipt management, and the like are involved in the procurement cycle. These processes are very complex and require a high level of accuracy. Retailers come across various challenges during procurement.

In this article, we will share a few challenges in retail procurement management that retailers face and ways in which a technological solution would help tackle these problems. 

1. Supply risk of Late Deliveries or Partial Deliveries 

Supply risk is one of the significant challenges in retail procurement management that organizations often face. Risks such as fraudulence, shipment damage/loss, cost or quality tampering, and the like are a few among the numerous risks associated with any supply chain. Retailers also need to adhere to policies and government laws for procuring products from multiple vendors.  

ERP like Ginesys can help by integration of the supply chain management software like Digivend from Supplymint with Ginesys. What this enables is the ASN function or advanced shipment notifications. ASN or advanced shipment intimations, inform retailers of the POs which are marked as completely ready to ship. Once the goods are marked as OK to receive by the retailer, the vendor can dispatch the goods. This helps in three ways: 

• Goods are received in the warehouse as per the PO
• The processing of the goods at the warehouse is much faster when received as the invoice will match the goods marked as OK to receive
• The retailer comes to know when the goods will be coming to the warehouse 

2. Ad-hoc purchases

At times, employees could make purchases going outside the predefined set of purchases. Or alternatively, vendors could be dumping extra stock in your warehouse without approval.  

Both these situations can be avoided by raising a proper purchase order marking the items and rates clearly from the retail ERP. Spending uncontrollably makes it even more expensive for retailers to run their business, thus reducing their overall ROI. Since these purchases and purchase flows are often unrecorded, identifying them also becomes quite a task.

3. Goods not as per expected or agreed quality 

It is always a best practice to have a Quality check or Goods Checking station at the point of receiving goods from vendors in the warehouse. The goods that are failing the quality check should be marked in the ERP and returned to the vendor. This will save the retailer a lot of time and money as poor quality goods can have a huge impact on sales and returns could skyrocket because of this. Even if it is not possible to quality check every piece incoming into the warehouse, a random check for every incoming shipment can be intiated for a sampling of goods. 

4. Poor planning of the purchase

Data accuracy and high reliability is indispensable in the procurement process. Making purchases based on inaccurate data could lead to excess or shortage of inventory, unnecessary expenditure, and much more. This, in turn, impacts the organization’s operation. Normally sales trends are enough but it should ideally be compared to sales targets, quantity targets and open to buy figures to arrive at the final purchase quantity. All this information is easily available in the ERP or BI systems.

5. Supplier-related issues

For one retail business, product procurement is done from multiple vendors considering various factors such as cost effectiveness, ease, and the like. Managing and tracking data of multiple vendors and respective orders placed with each vendor is complicated.

Technology solutions would help retailers overcome all these retail procurement challenges. The procurement module of Ginesys retail ERP software helps retailers set certain limits for the total amount to be spent on different products, thus removing possibilities of any undefined purchases. Moreover, all the data is recorded and stored on their servers or on a cloud platform, so tracking and managing all purchases is easy and effective and there is no data loss. Since everything is automated, each retail procurement management cycle is shorter.  

Reports display sales trends based on factors such as seasons, festivals, and the like. With this information, retailers are able to strategize efficiently and place orders of certain products in bulk, thus making the business more cost effective and ensuring more sales. Ginesys’ procurement module is integrated with the Supplymint DigiVend and this  enables users to access a vendor portal, wherein they can store all vendor data and automate vendor management. Even vendors of these retail organizations have access to this portal and can easily upload the necessary data.