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Procurement strategy

Top procurement challenges and how to overcome them

Procurement is asked to cut cost, cut risk and move faster at the same time. Here is where each pressure comes from and what helps.

MRMohamed RezaNov 24, 2024 · 4 min read

Procurement leaders are balancing cost, compliance and risk while being asked to adopt new technology and meet sustainability goals. Each of those demands is reasonable. Together they stretch teams that are often lean and still working in spreadsheets and email.

This guide was first written for 2025 and has been refreshed for 2026. The core challenges have not gone away: supply disruption, cost pressure, regulatory complexity, talent gaps and cyber risk still top most lists. What has changed is the tooling, especially AI that can read contracts and sourcing responses. Below are the main challenges, the pressures specific to direct procurement and key industries, and the responses that work.

Five challenges every procurement team faces

1. Supply chain disruption

Natural disasters, geopolitical tension, trade restrictions and pandemics can all cut supply without warning. The organizations that recover fastest have usually prepared in advance.

  • Diversify suppliers and regions for critical items, and consider dual sourcing
  • Identify critical suppliers and build contingency plans, including safety stock where it makes sense
  • Use analytics to spot early warning signs, such as supplier financial stress or regional risk
  • Write continuity, notice and force majeure terms into contracts and track them

2. Inflation and cost pressure

Cost management remains a top priority for most chief procurement officers. Useful responses include contracts with clear price adjustment mechanisms tied to a published index, forecasting based on market data, and continuous sourcing work such as consolidating suppliers and renegotiating. Equally important is checking that suppliers actually charge what the contract allows. A supplier price increase review catches increases that exceed agreed caps.

3. Compliance and regulatory complexity

Rules on sanctions, data protection, sustainability reporting, supply chain due diligence and operational resilience keep expanding. Dedicated compliance ownership, regular training and software that tracks requirements against suppliers and contracts all help. ComplianceNext screens contracts and supplier documents against policy checklists and flags gaps for a person to resolve.

4. Talent shortages and skills gaps

Procurement now needs people who combine commercial, analytical, legal and technology skills. Competitive pay and flexible working help with hiring, but training and career paths matter as much for retention. Automation also helps by removing the repetitive work that makes procurement roles less attractive.

5. Cybersecurity threats

Suppliers with access to systems or data widen the attack surface. Assess suppliers by risk before onboarding, write security and breach notice terms into contracts and reassess regularly. Our guide to supply chain cyber risk covers this in more depth.

Challenges specific to direct procurement

Direct procurement buys the materials and components that go into products, so problems hit production and revenue directly.

Challenge What it looks like What helps
Supplier management Quality issues, late deliveries, limited alternatives Scorecards, performance reviews and qualified backup suppliers
Cost control Volatile commodity prices and freight costs Index based pricing terms and should cost analysis
Inventory control Too much stock ties up cash, too little stops lines Demand forecasting, supplier managed inventory and clear lead time terms

Industry specific pressures

Manufacturing

Manufacturers face long, multi tier supply chains, volatile input costs and quality requirements that must flow down to suppliers. Visibility beyond the first tier and strong quality agreements are key. See manufacturing.

Healthcare

Healthcare buyers must protect patient safety, manage provider and supplier contracts under strict regulation and control costs under constant budget pressure. Contract compliance and fraud prevention carry extra weight. See healthcare.

Higher education

Universities often have decentralized buying across departments, public procurement rules and limited procurement staff. Central contract visibility and simple intake processes make the biggest difference.

Banking, financial services and insurance

Financial institutions face detailed rules on outsourcing and third party risk, including the EU Digital Operational Resilience Act. Contracts with technology providers must contain specific terms, and firms must be able to prove it. See financial services.

Responses that work across the board

Connected data for real time decisions

Most procurement challenges are harder because data is scattered. When sourcing events, contracts, supplier records and invoices live in separate places, nobody can see the whole picture. Connecting them, ideally on one platform, means a buyer can see a supplier's performance, contract terms, risk assessments and spend together.

Stronger strategic sourcing and supplier relationships

Structured sourcing events with clear criteria make supplier selection fairer and faster, and the data feeds the next decision. AI now reads proposals and drafts scores for evaluators to check. Regular performance reviews and honest communication turn key suppliers into partners who will prioritize you when supply is tight.

Sustainable procurement

Customers, investors and regulators increasingly expect evidence of responsible sourcing. That means supplier assessments on environmental and social criteria, sustainability terms in contracts and tracking whether suppliers meet them. Read more about sustainable procurement.

Where to begin

Facing all of these at once is overwhelming, so most successful teams pick one or two and build from there. A short self assessment helps decide where to start.

  • Which categories would stop the business if a supplier failed tomorrow, and do they have alternatives?
  • How many supplier contracts can you find, search and report on today?
  • Do you know which suppliers raised prices last year, and whether the contract allowed it?
  • Which regulations affecting your suppliers changed in the last two years, and have contracts caught up?
  • How much of the team's week goes on chasing approvals, documents and responses?

The answers usually point to a data problem first. Getting contracts and supplier records into one searchable place makes almost every other response easier, from dual sourcing decisions to compliance reporting.

How Aavenir helps

Aavenir connects the work from sourcing to payment. RFPflow runs sourcing events and uses Aavenir AI to draft scores. Contractflow manages the resulting agreements, Onboardingflow brings suppliers on with the right checks, Obligationflow tracks commitments after signature and Invoiceflow checks invoices against contract terms. Everything runs natively on ServiceNow or standalone, and a person approves every AI action.

The bottom line

The pressures on procurement are not going away, but they are more manageable with connected data, clear contract terms and tools that take routine reading and chasing off people's desks. Start with the challenge that costs you most today, fix the data behind it and build from there.

Frequently asked questions (FAQ)

Frequently asked questions

What are the biggest challenges in procurement today?

The most common are supply chain disruption, inflation and cost pressure, regulatory complexity, talent shortages and cyber risk from suppliers. Many teams also struggle with scattered data that makes each of these harder to manage. Learn about procurement optimization.

What are the challenges in direct procurement?

Direct procurement buys materials for production, so the main challenges are supplier quality and reliability, volatile input costs and inventory control. Problems hit production and revenue directly, which makes backup suppliers, clear pricing terms and good forecasting essential. Read about direct procurement.

How does technology help procurement teams?

Technology connects sourcing, contracts, supplier records and invoices so teams can see the full picture, automates routine steps and uses AI to read proposals and contracts. People still make the decisions, but with better information and less manual work. See the Aavenir intelligence platform.

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