9 Procurement Mistakes You May Be Making
By: Brock Hirschman
Director, Large Customer eCommerce Solutions. W.W. Grainger, Inc.
As a procurement professional you deal with complexities and challenges day in and day out, usually with flying colors. Even the best procurement pros will make mistakes from time to time, however, and when that happens, it is a good idea to take a step back to see the bigger picture. Yes, you must fix the mistake at hand, but a mistake is also an opportunity to make long-term improvements. Looking at the reasons for your mistakes can help you to establish procurement processes and procedures to reduce the chances of those errors happening again.
There are nine mistakes that are common to the procurement process, from finance to technology. Remember that procurement is like a long distance race. To get across the finish line, there needs to be careful planning, a clear pace, and the best gear. See how your mistakes can benefit from these tips:
1. Exceeding Budget
Going beyond the set budget by department or work function can happen. It may be from spending too much at the start of the budget year or by not managing overall costs as the year progresses.
Remember to plan ahead to ensure there is ample budget, where possible, and pace yourself accordingly with how major decisions are made with purchases.
2. Making Snap Decisions
Sometimes professionals may buy without considering if there is any strategic alignment. These snap decisions may seem good at the time, but end up eating up the budget or affecting workflow. Mistakes may also involve focusing on one part of the decision without looking at other factors, such as valuing price over quality.
Consider the bigger picture. Don’t give in to rushed deadlines and impulse buys. Establishing procedures and processes can go a long way to ensure all of your procurement decisions align with the strategic plans.
3. Forgetting Technology
Some professionals may not use e-procurement technology to its fullest capacity or potential. They may use an online catalog to search for needed items and an online shopping cart to create their requisitions, but there is much more that can likely be done with your procurement system.
Make sure that everyone who must submit a requisition knows how to do it electronically. Then leverage your ability to route those requisitions electronically for review and approval. Have you set up your system to route orders electronically? Make time to utilize technology now and save time in the days to come. Learn how technology and automation can improve your productivity in the procure-to-pay process.
4. Not Building a Relationship with Suppliers
Another key mistake is not keeping up your relationships with your suppliers. Without regular communications, you may miss out on savings, new supplier programs, opportunities for innovation and more. Your suppliers can offer new ideas or can let you know of helpful products in development that could benefit your work.
How to build those relationships? Make sure you're getting--and reading--your suppliers' emails, or follow them on social media if that's easier. Schedule a call with key vendors regularly, particularly in the weeks leading up to your project- or budget-planning deadlines.
5. Not Seeking Out Innovation
There can be a lot of technological advances, but the daily demands of work can prevent even the most well-intentioned procurement pro from checking with suppliers on opportunities for product innovation.
It pays to talk about innovation and your supply needs. Call up your supplier, as part of your relationship building efforts, and let them know about any emerging needs. Think about how these types of discussions can pave the way for new products specifically to address your business' needs.
6. Not Having a Compliance Policy
Without a clear set of compliance rules, your operations are open to costly risks, potential litigation and more. Compliance is important for both the procurement team and its suppliers, as it means consistency, reliability and ethics.
Schedule time now with your team and other interested parties to develop a compliance checklist, complete with all "red flag" moments. Then train everyone who touches the procurement process in using the checklist, and its importance. If you have a compliance policy, review it at least once a year for needed updates.
7. Failing to Negotiate on Costs
Some procurement professionals may accept a price as-is and not discuss shipping or other up-charges. That is a mistake.
It is in your company’s best interest to negotiate prices, including additional costs such as shipping and other charges made in getting you the supplies. Having a good rapport with your suppliers can help when addressing the often difficult price discussions. Remember that it is okay to negotiate, especially with suppliers you regularly use and will continue to engage for business.
8. Not Correcting Mistakes
Yes, incorrect orders can be placed, such as the wrong amount ordered or wrong product needed. Not fixing them, however, is a lost opportunity, and lost spending, too.
Take a minute to refresh your understanding of your suppliers' policies on mistakes--yours and theirs. Remember to get reimbursed for product returns, as shipping costs can add up.
9. Not Factoring in Corporate Social responsibility
The procurement process can be an opportunity to be a good corporate citizen. It can be a chance to source "greener" products that have a better impact on the environment or improve the well-being of people and communities who interact with your company.
Consider how your company can get the most of your purchases by connecting it to socially responsible suppliers. By working with these types of suppliers, you open up opportunities to enhance your own processes too.
Mistakes can really add up over time, so remember that there are proactive ways to prepare for and even prevent them altogether.