Costly Procurement Mistakes

Your company’s purchasing ability depends in large part on the effectiveness of your SRM system. When the system is working well, then purchasing goes pretty smoothly. But if you’re working with an inefficient system it’s going to lead to a whole host of common procurement and purchasing problems.

Whatever the root cause for purchasing mistakes, leaving them unchecked can end up being very costly for your company. Here are some of the most common – and costly – procurement mistakes you’re likely to encounter, along with steps you can take to avoid and correct them.

SRM can help your team to avoid the following mistakes:

Not Negotiating

Some suppliers might tell your team members that their prices are set in stone. But that often is not the case. By following SRM workflows, your team members could automatically get prices from a number of suppliers and compare them. It makes your team members more professional and less pestering your suppliers.

Ignoring Your Suppliers

Suppliers are often a good resource for learning more about available products and finding the best deals. SRM helps your team maintain a good relationship with your suppliers and keep track of their current communications so they don’t miss out on something that could benefit your company.

Another way that SRM can help with this is by giving your team the option to set up a supplier self-service portal. This enables your suppliers to log in to your system to update their information, supply missing documents, and find answers to customer service questions. These features help improve communication between your team and your suppliers.

Going Over Budget

Assuming your organization isn’t prone to reckless spending, going over budget is usually an issue with communication and control. No matter what the root cause is, this problem is something you can’t afford to ignore. SRM allows you to enforce regular budgetary updates and budget checks for all your procurement activities.

Making Snap Decisions

Rushing your buying can lead to poor decision-making. Though timeliness is important, your team members shouldn’t skip steps. SRM can help with this problem by (i) ensuring proper procurement steps are being followed based on the procurement category and (ii) keeping track of historical transactions and benchmark prices to ensure no major deviation.

Isolating Major Decisions

Some people might want to move things along smoothly. In pursuing that goal, it’s tempting to not bother with looping other departments in on purchasing decisions. But that can easily backfire and end up costing more time and money in the long run. SRM allows you to set up to ensure stakeholders from different departments are working together on interrelated procurement activities.

Being Too Slow

In a fast-paced business world, slow-moving can take a serious toll on your business. SRM can help with this problem by keeping track of old orders in an easy-to-search database. That makes it easy for your team members to know how much of each product you used in the past so they can plan, source and purchase rather quickly. The system can also chase after approvers to ensure that they will review and approve on time.

Failing to Establish Internal Policy

Your company needs clear policies to govern your procurement activities. Without them, your team members might not have sufficient and consistent guidelines for the best way to handle everyday procurement activities or relevant problems. SRM allows you to set policies and it will enforce them and report exceptions in a timely manner.

Not Enforcing Your Policies With Your Vendors

Some companies are enforcing their procurement policies internally but not enforcing them with their vendors and suppliers. This happens mainly because their SRM systems have a deficiency. SRM allows you to set up your supplier self-service portal and can enforce all the policies that you set up for your company internally and externally.