Leaders Opinion

Sourcing & Procurement in Supply Chain

June 03, 2025 5 min read

PIYUSH SINHA

KEC International Ltd., Chief Manager- Procurement

Procurement

While most people think that Procurement is limited to Offers and Comparision sheet, the shift towards strategic sourcing and its importance in large scale projects has challenged this mindset. The Increasing complexity of Global trades and Immature decision of world leaders has changed the importance of this tiny looking department from a corner in the office to the front desk.

Having worked with both The Domestic vs International market, I would say that Challenges in Sourcing in Domestic market is no less than International Market. Major Challenges are:

Working Capital: Both Client and the supplier are in deep pressure to increase their working capital days. Simple reason everybody wants free flow cash to improve their business and meet the needs of their business Operation. It is very hard to come on a common ground as the quest to achieve more in never ending for both the parties.

Risk and Reward: In domestic Contracts the hardcoded Contract clauses are rarely taken into considerations because of which one of the participating party is exploited leading to breach of trust and hence affect material availability. Mind it that it is not beneficial for any of the party as it may be Quick wins but in the longer run a “degenerative loss”. There is no reward to other party in case of potential gain which again restricts the relation to transactional.

Lack of Automation: Due to sheer nature of repetitive task of Procurement, there is huge Attrition in this function in almost every company. I have seen the whole team gets renewed every 2 years or so. You bring new people ,train them, spend your energy and resources on them and the moment you are expecting something out of them the resignation letter reaches to your mailbox. No one to be blamed here except our focus on bringing digital initiatives to minimize the repetitive tasks which should not require human intervention. The Focus of human minds should be on Strategy to bring down the Cost, Risk and TAT rather than Follow ups and unproductive activities. Major challenge in adopting Digital Transformation is the mindset which needs to be changed before implementing these digital tools in your Organization. When I was explained why digital transformation in required in modern day businesses by my professor, my perspective towards my last company got changed. They were right and I was a fool to resist bringing SAP ARIBA, RPA tools in the system but was it only my Fault or the Implementalist fault to not expose me/others to the idea behind this strategy. I would like the readers to think and Judge about this.

International Sourcing and Procurement is very different from Domestic:

Liability of Foreigness and Liability of Origin: If the product is German made ,people trust the material and if the product is from China there is always a doubt on the credibility/performance of the product. This hinders the Sourcing team to bring down the cost as “Price vs quality graph” of European Vendors is exponential. I am not Judging that their quality is superior or not but the price vs life expectancy should definitely be considered before judging the Country of origin of the products or in simple terms consider TCO analysis in every International procurement.

Complex Logistic and Supply chain Management: International Supply chain is highly complex when it comes to material delivery. Even if the Purchaser has done the best deal chances of demurrage and additional cost are very common which puts extra burden on management and businesses. The complex Customs Regulations ,tariffs and documentation requirements enhances the probability of these extra burden. In one air shipment we were imposed with a penalty of 0.25cr only for a letter missing in the AWB.

Longer Lead times: Considering we as Indians always work on last mile, it is very difficult for supply chain professionals to bring material on time. International suppliers have different culture and laws due to which their production is limited and hence their lead time Is high. Balancing the requirement and their delivery plan is a huge task in case of International sourcing and Procurement. The planning that is required to achieve what we intent is missing in our culture and way of working. This is a big gap that I have seen while taking care of International Procurement.

Working Capital: Here the challenges in working capital is more compared to dealing with domestic vendors. Here mostly the Importers are on high risk and most of mode of payments is on Letter of credit basis where either the funds are transferred immediately or blocked for payment in future as per the Usance period. The necessity to pay immediately and get a long lead time is a great challenge for Procurement to convince the management and often they are asked for their credibility in such cases.

In a Nutshell my experiences highlight challenges like working capital constraints, contractual complexities, and the need for digital transformation in Strategic Sourcing. International procurement adds layers of complexity, including cultural perceptions, logistics, and financial risks. Embracing digital tools and fostering strategic supplier relationships are essential to navigate these challenges. By shifting focus from routine tasks to strategic initiatives, procurement professionals can drive value, mitigate risks, and contribute significantly to organizational growth. It's imperative to recognize and adapt to the evolving landscape of procurement to remain competitive.