Navigating the Top Five Procurement Pitfalls: an Industry Expert’s Inside Guide
Every organisation makes mistakes, but when mistakes happen in procurement they tend to snowball.
Due to the involved nature of the procurement function, any mistake along the timeline can lead to myriad others down the line, negatively impacting company performance.
The good news is, better communication solves issues between staff, management, suppliers, and partner companies.
By understanding the most common mistakes procurement professionals make, you can learn to prevent them.
ProcureAbility – who has partnered alongside some of the most innovative procurement teams for more than 25 years to design bespoke, scalable, and outcomes-based procurement solutions – has the strategies you need to ensure your teams stay on track.
Here are five areas where things can go wrong, along with tips for how to avoid these common challenges.
1. Accepting prices without negotiation
A common procurement mistake is assuming that the catalogue price is set in stone.
Depending on the scale of your organisation and your relationship with suppliers, prices, lead times, freight charges and, in some cases, consignment arrangements are often open for negotiation.
To help pave the way for such opportunities, keep the lines of communication open with your suppliers and look for solutions that create a win-win for both parties.
Early renewals are a great place to start. By sharing your future forecasts with your suppliers, they will feel more secure about the steadiness of your business. It might be enough for them to bend on price or agree to other concessions.
2. Choosing lower quality for lower costs
One of the biggest challenges in procurement is making sure you choose dependable suppliers who match your standards for quality, ethics, and values.
All too often, procurement teams compromise on these principals for a “good deal,” only to receive sub-par products that don’t match the original agreement, arrive late, aren’t produced ethically, or fall short for some other reason.
To avoid such lapses, work to improve your supplier selection process.
Learn more about your suppliers and their processes. Conduct regular visits and audits to ensure they are capable enough to meet your quality standards and deliver products and services on time. Formulate better-worded questionnaires during the supplier selection process to help ensure a good fit.
A rigorous focus on quality will ensure that procurement remains a valued partner to your internal business partners.
3. Losing spending control and visibility
Organisations go beyond their budgets for a wide variety of reasons, including poor management and unexpected inflation.
Once the budget is created, it should be reviewed in as much detail as possible.
Track your spending in real time and right the ship quickly in cases where you overspend.
This heightened level of transparency will facilitate data-driven discussions with the finance department when creating budgets or requesting additional funds due to unexpected costs.
4. Making snap decisions
At times, purchasing professionals may procure goods or services without considering the strategic alignment to business requirements.
This often means ignoring the normal procurement process, which is a common issue among organisations experiencing rapid growth.
Consider deploying purchase order software such as Coupa or Ariba/SAP to keep track of old orders and to formalise procurement steps – such as creating purchase orders, reviewing, and approving (or rejecting) them, releasing funds, making purchases, submitting invoices, verifying invoices, and recording purchases.
5. Not trusting technology
Organisations can be suspicious of using innovative technology to improve business processes over concerns regarding additional cost or security.
They may use an online catalogue to search for needed items and an online shopping cart to create requisitions, but much more can be done by using specialised procurement technology.
For example, by using procurement software, teams can reduce their requisition order cycles, requisition-to-order costs, and cut back on maverick spending.
If you already have procurement technology deployed, contact your provider, and make sure that you are using the system to its full potential. Also, be open to opportunities to improving your processes by doing things such as switching to a third-party provider for managing your information technology systems.
The road not taken may be well and good for poets, but procurement teams are wise to stick to the well-worn path.
Processes are there for a reason – to keep your teams on task and keep any surprises to a minimum. Stick to these tips for avoiding some of the most common and costly procurement mistakes, and you’ll be glad you didn’t cut any corners.
About ProcureAbility
ProcureAbility is the leading provider of procurement services, offering advisory, managed services, digital, staffing, and recruiting solutions. For more than 25 years, they have focused exclusively on helping clients elevate their procurement function.
They combine leading-edge methodologies, analytics, market intelligence, and industry benchmarks with a uniquely flexible and customizable service delivery model. The Fortune 1000 trusts ProcureAbility to transform their procurement operations, drive growth, and reimagine what’s possible. For more information visit: www.ProcureAbility.com
