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Procurement red flags: How CPOs can identify and address critical issues
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Not every risk Procurement faces is immediately evident. Some of the most damaging issues – like inefficiencies, poor controls, and dishonest behaviours – can infiltrate business processes gradually, remaining unnoticed until they turn into tangible problems: uncontrolled costs, operational inefficiencies, and compliance failures. We have seen how these can undermine Procurement’s credibility and ability to create value.
The good news? There are usually warning signs – so-called red flags – which CPOs can identify and, with a structured approach, act on early to prevent critical problems. Below, we share the five most common red flags we’ve encountered in procurement teams. For each, we examine the implications and outline best practices to make your procurement organisation more transparent, strategic, and efficient.
Static team structure
Challenges and implications
Stability is valuable – but stagnation isn’t. A common issue we observe is a low internal mobility within procurement departments. In some cases, we’ve seen individuals remain in the same role for nearly ten years, without any new additions to the team. This static structure can lead to operational rigidity, an unsubstantiated preference for familiar suppliers, and resistance to change. It also reduces opportunities for skills development within the team. Combined, these factors hinder the introduction of new strategies and ways of working, limiting process innovation.
Best practice
To mitigate these risks, CPOs can implement a structured personnel rotation plan. This plan should include both internal and external rotations and the regular introduction of new talent into the team. Another effective practice is appointing a dedicated manager to oversee rotation, monitor its effectiveness, and ensure it is applied at an appropriate frequency. This approach balances operational continuity with innovation. It enhances team capabilities, encourages fresh thinking, and drives greater diversity and agility in sourcing strategies.
Lack of transparency in spend data
Challenges and implications
Organisations vary widely in their approach to spend data management. Some have implemented advanced systems that enable real-time spend data extraction and offer in-depth insights, now increasingly powered by artificial intelligence. Others with less developed infrastructures may still rely on manual, ad-hoc processes for data collection and analysis.
Regardless of their technological maturity, we often encounter reluctance from procurement teams to share spend data in a timely and structured manner. This lack of transparency limits visibility into actual costs and the supply base, often hindering informed decision-making. The impact is two-fold: sourcing strategies are potentially compromised, and stakeholders can perceive Procurement as opaque and ineffective in generating business value.
Best practice
To address this issue, Procurement must foster a culture of transparency and data sharing, with standardised processes for spend data collection and analysis. Additionally, ongoing training and the active involvement of the procurement team in decision-making can encourage more strategic use of information, enhancing cost visibility and the quality of business decisions.
Lack of challenge to incumbent suppliers
Challenges and implications
Organisations commonly retain long-standing, non-strategic suppliers without periodic competitive bidding or market benchmarking. This often stems from long-established relationships, perceived operational risks associated with supplier changes, or a reluctance to challenge past decisions.
However, failing to update the supplier base can reduce business competitiveness, increase dependency on a few players, and limit the organisation’s ability to adapt to shifting market conditions. For instance, in one manufacturing company, contracts were renewed with the same suppliers for years without alternatives being evaluated – leading to missed opportunities for cost savings, innovation, and supply chain optimisation.
Best practice
To avoid stagnation, procurement leaders should implement a structured process to periodically review the supplier base. Introducing clear criteria for evaluating supplier performance, competitiveness, and capacity for innovation allows teams to balance the pursuit of new partners with enhancing existing collaborations. A continuous supplier evaluation framework encourages innovation, collaboration, and increased efficiency in process and cost management. In doing so, Procurement moves from being an administrative function to a genuine strategic driver of growth and business resilience.
Insufficient audits on procurement activities
Challenges and implications
Many companies conduct procurement audits sporadically and superficially, without a consistent framework for monitoring. This can result in operational inefficiencies and increase the risk of waste, fraud, and poor contract management.
In one recent transformation project, Efficio supported a multinational manufacturing company in overhauling its procurement function. The company had not conducted a thorough review of its procurement department for several years, citing geopolitical turmoil and COVID-19 as reasons. However, it is precisely during times of global supply chain instability that stronger oversight becomes essential to preserve performance and reduce risks. Without robust controls, procurement policies risk being poorly implemented, leading to unjustified cost increases, mismanaged contracts, and exposure to unethical or inefficient practices.
Best practice
To ensure robust and stable procurement, CPOs should implement regular internal and external audits, supported by a continuous monitoring system based on clear and transparent KPIs. We recommend reviewing and strengthening governance systems and tying stakeholder accountability to the frequency and transparency of audits to ensure better alignment with strategic business goals.
Compliance issues in the Source-to-Pay (S2P) process
Challenges and implications
When procurement processes lack proper controls and approval mechanisms, the risk of non-compliant spending and unethical practices increases significantly, compromising the integrity and effectiveness of operations. The Source-to-Pay (S2P) process, covering all stages from sourcing to invoice payment, is often marked by low standardisation and insufficient oversight. Manual, fragmented, or unchecked procedures remain all too common, but they lead to payment errors, duplicate invoicing, and unauthorised expenses. In one notable case, a pharmaceutical company lacking a centralised tracking system uncovered several thousand euros in duplicate supplier payments – highlighting the urgent need for stronger governance over spend processes.
Best practice
To mitigate these risks, it is essential to implement rigorous approval decision trees, supported by digital tools for stronger transaction control and monitoring. E-Procurement and S2P platforms allow for greater transparency and traceability by automating checks and approvals. These systems not only reduce errors but also ensure that Procurement can operate as a trusted, audit-ready function aligned with financial governance.
Building a best-in-class procurement function
Proactively monitoring these red flags is critical for Procurement to operate as a strategic, high-performing function that aligns fully with business objectives. Procurement leaders that invest in strong governance, digitisation, and cross-functional collaboration not only mitigate risks but also position their team as a driver of tangible competitive advantage.
Equally critical is how these red flags are addressed. Prompt escalation through the organisation’s official channels – typically involving senior stakeholders like the CFO or executive leadership – ensures issues are managed with the appropriate level of authority and alignment. Additionally, the effectiveness and durability of the solution are closely linked to the speed and appropriateness of the response; early, well-coordinated intervention is invariably more impactful than delayed remediation.