A reliable procurement system is designed for speed, efficiency and accuracy. Yet despite all precautions, problems ranging from human error to organizational shortcomings can still have a negative effect on a company’s procurement and purchasing ability, no matter how hard you try to prevent them. Here’s are five of the most common issues you’ll encounter as well as simple ways to fix them.
1. Accidental Orders
Did you order the wrong item? Or the wrong quantity? If you have a good relationship with your supplier, immediately follow up to admit the mistake and rectify the order. This can save you from considerable hardship in the long run. Given the speed of transactions these days, these types of ordering errors are still common, but they do raise concerns about the checks and balances that exist in your supply chain. Adopting a protocol that allows for approval from more than one person is one safeguard against mistakes like this in the future.
2. Inflexible Suppliers
Many procurement decisions correlate to a company’s risk management strategy: the lower the costs, the better they’re reflected on the bottom line. Most suppliers who recognize that will accommodate a purchasing company’s needs to maximize their performance. Still, some suppliers may not offer discounts or insist that certain surcharges be included in the price. Before opting for rigid supplier, consider other negotiation options. Can the supplier pay for shipping? Are discounts available in larger bulk orders? A skilled procurement professional like yourself will often find some wiggle room for negotiation and you’ll look good doing it.
3. Exceeding Budget
Chances are, procurement transactions that exceed your budget aren’t due to reckless spending if you have your company’s well-being in mind. It’s more likely that a communication (or coordination gap) is present in your procurement protocol and should be addressed as soon as possible. Regular budgetary updates affecting the financial status of all links in your supply chain, including budgetary changes, will go a long way towards rectifying that problem.
4. Damaged Goods
Impulse buying, making emotional decisions based on preference of suppliers and literally phoning in an order are often the most common causes of procurement errors, especially if the company is a rapidly growing startup. When a company launches, decision-makers usually want to ensure everything is ordered and in place all at once. Hitting the ground running often means ignoring the cautionary steps in a procurement process and may result in cost overruns in inventory before revenue streams can compensate for these purchases. A good, comprehensive procurement system allows for both prompt orders and more thoughtful decision-making. Thought it takes time upfront (and okay, you caught us, implementing a procurement process isn’t an “easy fix”), it will save you a ton of work in the long run.
5. Rushed Purchases
If your delivered order is damaged in any way, you have the option to refuse the delivery or accept the items but clearly indicate the condition of the shipment, you are the customer after all. Depending on who paid for freight, you must notify the courier and supplier immediately and negotiate who is responsible for compensating your company. Bear in mind that if the items were damaged during transport and if your company paid for the freight, the responsibility no longer rests with your supplier, but with the courier. Consider having a variety of couriers on deck in case one doesn’t work out. Also, always be sure to report any discrepancies as soon as possible to expedite solutions with either your supplier or courier.
Since most procurement problems can be attributed to human error, these issues can usually be resolved fairly easily. Make sure that your procurement system takes these mistakes into account and ensure your partnership with a supplier is based on mutual understanding. The more safeguards that are in place, the less of an effect these type of errors will have on your company’s procurement ability.