Risks Of Not Using Software For Direct Material Sourcing
DIRECT MATERIAL SOURCING
The procurement of materials for goods and services is critical part of strategic sourcing activities, not least from cost-saving perspective. However, processing direct material sourcing manually can entail significant risks for any organization, not least for the C-Suite. Understanding the risks of not using software for direct material sourcing and the implementation of source-to-pay software is essential for finance executives in order to ensure the best solutions for their companies.
The most pertinent risk of manual direct material sourcing processes is the risk of fraud. Without the necessary transparency of source-to-pay software, the risk of bribes and kickbacks is substantially higher, which could lead to severe financial penalties and reputational damage. This lack of transparency also makes it difficult to know who is accountable for the transactions, leading to decreased understanding of whether the purchases are made in cost-effective way. Complex compliance regulations, such as anti-corruption laws, could easily be broken due to procedural inefficiencies or breaches of policy if direct material sourcing is not digitized.
Another risk of manual direct material sourcing processes is the potential for errors in the information that is inputted since these processes rely on collation from disparate systems. This can lead to inefficiencies and costly delays, not least when multiple orders for similar items need to be consolidated. Additionally, when individual or manual processes are indepe
