So far in lots of Eezee blog posts, we’ve been teaching you, as a procurement professional, what you should do in your line of work (for reference, things like this and this). That’s right, lots of talk about grabbing new opportunities that come by! However, we’ve realised that there are many procurement pitfalls that we haven’t addressed yet. Trust me, there will be many things that you’re currently doing that could do with a serious upgrade – there’s always something more to learn! Here’s the top 3 pitfalls that we find most procurement professionals fall in:
Pitfall 1: Bad Management of Supplier Relationships
There are a few errors that can happen here. One of the most common is applying too much financial pressure by drying out the supplier in search for bare minimum prices. While they may be a way to increase profit on your side, if allowed, this can set up an expectation that can’t always be met. Suppliers are businesses as well and must be able to maintain the supply and demand of all the businesses they work with. Procurement involves finding the best prices, but a pitfall can lie in burning supplier relationships in pursuit of them.
With that said, it’s important to stay competitive. To avoid this pitfall, aim to build a long-lasting business partnership for maximum benefits. This will aid in ensuring on time delivery, great deals, and thus optimal value for your money. But do not be afraid to negotiate for the best prices. Just make that you know when to draw the line out of the respect for the relationship and your business. If it’s in your business best interest to modify existing contracts or change suppliers, do so. But know that it can affect company performance.
Pitfall 2: Avoiding or Failing to Negotiate
While pressuring suppliers is an issue, failing to negotiate is just as much of a pitfall in procurement. Suppliers are businesses and may not always notify a client of the best deal available. Your procurement officers should aim to be proactive in finding deals and not be afraid to expect discounts from partnerships often worked with. Maximizing value is vital to the business and it never hurts to ask. It’s just pressuring that can damage supplier relationships.
To avoid this pitfall, procurement officers should aim to review deals and negotiate better ones if possible. By not doing so, extra revenue can be spent on goods and services that could be saved or used in another area. To maintain the long-term relationship with the supplier, ensure that the result end with both the supplier and buyer are pleased.
Pitfall 3: Not Taking Advantage of Technology
We’ve said this before and we’ll say this again!
In the age of technology, it’s vital to incorporate it into your business. Involving it into procurement allows for increased efficiency and savings in expenses. For example, digital invoices can save money on printing and delivery as well as expediting payment. What business doesn’t want to get paid faster? It’s no wonder that more businesses are turning to technology for these benefits and smoother operations. With competitors doing it, staying up to date is vital and thus necessary for procurement. Not doing so can cost time, money, and customers.
This common procurement pitfall can be avoided by reviewing and identifying where in your business technology could further growth. Look for areas that may involve a lot of paperwork and aid in digital organization. For optimal success, it’ll be best to streamline as many processes as possible. There are a variety of technologic tools available to increase performance. Procurement officers should investigate the best tools for their management system and utilize what will provide optimum success for their necessities. This includes from processing to measuring supplier performance and risk management.
Procurement is vital to the core functions of a business and should be treated as such. Identifying common pitfalls and strategies to avoid them is important for long-term success. All officers should keep in mind to negotiate for the best deals while aiming to maintain the supplier relationship. Mastering negotiation will maximize value for every business dollar spent in procurement. While this is important, a common pitfall also lies in the fear or lack of usage in technology. Many organizations are taking advantage of technology to streamline operations and maximize efficiency. Thus, there should be no second thought in involving it in procurement. These three pitfalls are seen very commonly, but with knowledge of them and how to avoid them, your officers can stay on the path to success.