The most common mistakes in procurement planning

Procurement planning is one of the most important activities for any company. As it accounts for 60% of an organization’s expenses, the sector deserves a strategic look from its managers and businesses that wish to stay relevant.

But without good planning, it’s nearly impossible to achieve efficiency, minimize errors, reduce costs and have expressive results. That’s where corporate procurement management comes in: a tool that helps organizing the procurement process and optimizing results.

However, for a successful management, professionals must be aware of errors that can impair the operation. If you are thinking about corporate procurement planning, find out the key lapses that can happen and run away from them!

1. Lack of efficiency in the approval of corporate purchases

While some companies have unstructured approval processes, with teams that use their budgets without any criteria, others are more bureaucratic and follow strict procedures, which delay decision-making processes.

Finding a good balance, in order to invest in an easy and strategic process, should be part of any company’s goals. Therefore, it’s advisable to hear experts about the best practices in procurement management.

The automation of this process, with the use of digital platforms, is a desired resource – as it contributes to bring more convenience and innovation to the sector, by aligning internal operations with modern practices.

With the help of technology, procurement professionals can focus on more strategic tasks, and dedicate themselves to improvements that will contribute to company growth as a whole.

2. Buying products in improper quantities

Excess inventory accumulated in the company is synonymous with loss. Inactive products will impair working capital, and run also the risk of expiring or becoming obsolete.

Buying less than necessary poses risks too, and can impair production. Without the required inputs, the sector in charge won’t be able to manufacture the items – which, consequently, won’t be delivered to customers. As a result, you will have customers dissatisfied with your company.

At this point, monitoring the turnover of purchased inputs, as well as identifying the correct buyback point and minimum order quantities, are key factors that must be analyzed to ensure the efficiency of future purchases.

3. Lack of a strict inventory control

We have already seen how tracking stock levels makes all the difference when planning future purchases. Therefore, you must also make an inventory of all items – that is, a balance of all goods that are kept in stock.

For such purpose, it’s vital to align the stock’s electronic accounting system with the real world. Periodic checks can avoid possible faults. Updated data ensure that other sectors involved in the process are informed – thus avoiding risks such as negotiating a batch of goods that doesn’t exist or that had been negotiated with another buyer.

This kind of practice should be part of the industry’s routine. Only in this way you can avoid inconsistencies, which will impair the company’s image with your consumers.

4. No KPIs in procurement planning

KPIs (Key Performance Indicators) are crucial to monitor the performance of procurement processes. Without a careful evaluation, you can’t identify the strengths of the sector, as well as improvement possibilities.

That’s why adopting performance indicators for result monitoring raises productivity levels, promotes more integration between the different areas of the company, and helps to discover the key demands and priorities for your business.

Many KPIs can be used to manage procurement processes – including supplier performance, volume of returned goods, cost per order, buyer productivity, savings (how much the area saved on every order), purchase lead time, etc.

It’s up to the managers to define which indicators will be used, according to the company’s strategic goals, and how this evaluation will occur.

5. No technology for supplier appraisal

Businesses now have a health of technological resources that assure convenience and efficiency for all their areas.

Failing to use these tools and insisting on strict and manual processes is the same as “to harping on same string” and expecting a different result.

In addition to the problems caused by human error and information mismatch, the team will lose time, not being able then to have quick answers and perform strategic tasks.

e-Procurement makes any process easier and turns procurement into a strategic area

With technology in the procurement sector, e-Procurement tools will facilitate the process of supplier validation, selection and evaluation.

E-Procurement uses an on-line environment to quickly assess the most suitable suppliers for your business. Such system allows also contact registration, which will simplify communication and negotiation with business partners. And everything on the same platform!

In addition, an e-Procurement solution allows procurement managers to track supplier performance. Therefore, finding a substitute can be done in just a few clicks, without having to restart the selection and research process. And the production chain can go on without any interruption.

Such mistakes are the key culprits of your company’s procurement planning. Pay attention to internal processes and invest in technology, to avoid failures and bring more efficiency to your procurement area.

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