Common procurement mistakes cost businesses millions annually. Are you making these costly purchasing errors?
It is shown that unregulated purchasing activities can cost businesses up to 30% of their targeted savings. Sadly, it doesn’t only hold companies back in procurement, it can hinder their entire progress. So, when thinking about how to improve procurement efficiency, removing common procurement mistakes is a key step to success.
5 Common Procurement Mistakes You Must Avoid
Lack of Automation
Automation is an increasingly important feature across all business verticals. As far as procurement is concerned, relying on manual processes increases the risk of errors and inefficiencies. It hinders employees and can potentially cost the company thousands.
Thankfully, procurement automation is more affordable and accessible than ever. Once you understand how automation saves time and money, impacting everything from order creation to requisition processes, persisting with manual approaches is no longer a viable option.
Automation streamlines processes, increasing speed while removing human error from the equation. In turn, procurement teams gain a far stronger foundation to build upon.
Poor Supplier Management
When you experience suboptimal partnerships with your suppliers, it’s your company that suffers. Financially and logistically. Therefore, failing to leverage data and assess supplier performance levels could be one of the most costly purchasing errors you encounter.
Over 75% of procurement leaders now focus on closer supplier relationships. When searching for effective procurement cost reduction strategies, implementing data-driven supplier relationship management tools is highly advised.
Suppliers should do their part too. If they fail to meet your demands, though, improved management from your end should highlight this. The next step is to find another option.
Inadequate Spend Visibility
It is difficult to improve any business metric without first gaining a clear image of the current situation. So, without clear insights into spending, opportunities for cost savings are missed. Conversely, once purchasing errors have been highlighted, they can be addressed.
The procurement software market is growing with a CAGR of over 11%. Real-time data tracking of all spending, along with visual representations, makes it easier to see where money is wasted in procurement. Advanced tools can also send alerts or trigger automated responses.
Reduced financial waste is truly one of the most effective ways to improve your procurement processes. Not least because it encourages you to approach other areas with equal care.
Decentralized Procurement Processes
For procurement to work in an optimized fashion, consistency must be established across all departments. Without it, the company may experience compliance issues while also encountering increased costs as buyers ignore procurement policies and procedures.
As well as opening the door to inefficient spending, decentralized approaches leave companies vulnerable to issues like procurement fraud. It is a widespread issue but only a small percentage of firms address it. Even without the fraud aspects, it could cost the company thousands.
Allowing users to purchase goods without respecting the established protocols can lead to overspending, duplicate purchases, and other troubles.
Neglecting Employee Training
While automation and advanced tech should be integrated into your procurement processes, ignoring the role of employees is another surefire way to lose a lot of money without realizing it.
It’s because untrained staff may not follow best practices, leading to procurement inefficiencies.
Research shows that 96% of companies use AI in procurement while most plan to increase their usage over the next year or two. Training employees to use the chosen software, utilize data, and collaborate with other teams is no longer an option. It’s a necessity.
Using AI to automate processes like matching order requests to receipts should be further supported by insights into the latest threats. Prevention is the best form of protection.
How To Improve Procurement Efficiency
Identifying common procurement mistakes and costly purchasing errors is the first step to overcoming them. However, it counts for very little if it is not followed up with proactive steps.
Procurement automation can address the inefficiencies currently seen in this arena. Automating procurement processes can lead to significant cost savings due to streamlined processes, data-driven decisions, and reduced human workloads. Moreover, delays and time wasted on incident responses are eradicated.
While there are many solutions on the market, eParts is the only procurement automation service you need. The tools will allow you to automate workflows, enhance supplier management, and offer real-time spend analytics. This helps your business avoid common pitfalls caused by outdated manual procurement processes while you can also be sure that each document and process meets compliance needs.