Purchasing planning is one of the most important activities for any company. Responsible for 60% of all expenses of a business, the procurement sector deserves a strategic look from managers and companies that wish to stay relevant.
But without a good planning in this sector, it will be virtually infeasible to achieve efficiency, minimize errors, reduce costs and have significant results. This is where corporate procurement management comes in: a tool that helps to organize the procurement process and optimize results.
For a successful procurement management, however, industry professionals must be aware of mistakes that can put the whole operation at risk. If you are thinking how to plan your company’s corporate procurement, see below the main lapses that can happen at that time, and get away from them!
1 – Lack of efficiency in approvals of corporate purchases
While some companies have unstructured approval processes, with teams that use budget without much discretion – which can do great harm to the business –, others are more bureaucratic and follow rigid approval procedures, which may delay the decision-making process.
To find a proper balance, by investing in an easy and strategic process, should be part of the goals of any company. Therefore, it’s recommended to hear experts on the best procurement management practices.
The automation of this process, with the adoption of digital platforms, is an invaluable resource – as it contributes to bring more practicality and innovation to the sector, by aligning internal operations to modern practices.
With the help of technology, the procurement team can focus on more strategic tasks. And even dedicate themselves to improvements, which will contribute to the growth of the company as a whole.
2 – Buying products in improper quantities
Inventory excess accrued in the company is synonymous with loss. Unused products jeopardize the working capital, and the company still runs the risk of spoiled items (if they are of the perishable type), or out-of-date ones.
Buying less than needed involves risks too, and can jeopardize the production process. Without the necessary inputs, the sector in charge won’t be able to manufacture the required items and, consequently, they won’t be delivered to the end customers. As a result, the company will have dissatisfied customers.
At this point, tracking the turnover of purchased inputs, as well as identifying the correct reorder point and minimum order quantities, are vital data that must be studied to ensure the efficiency of future purchases.
3 – Lack of strict stock control
We have already seen how tracking inventory levels makes all the difference when comes to planning future purchases. Thus, it’s also necessary make an inventory of all items – that is, a balance of all materials kept in stock.
For such purpose, the electronic inventory control system must be obligatorily in line with the real world. Regular checks, for instance, can avoid possible faults. Updated data ensure that other sectors involved in the process will be properly informed, avoiding certain risks – such as negotiating a batch of goods that doesn’t exist or had been negotiated with another buyer.
This type of practice should be part of the department’s routine. This is the only way to avoid inconsistencies that will impair the company’s image as seen by consumers.
4 – Not using KPIs in procurement planning
KPIs (Key Performance Indicators) are crucial to monitor purchase process performance. Without a careful evaluation, it isn’t possible to identify strengths of the sector and improvement possibilities.
That’s why adopting performance indicators to track results can increase productivity rates, promote more integration across the different sectors of the company, and help to discover the key demands and priorities for the business.
There are many KPIs that can be used to manage procurement. Some of them are: supplier performance, volume of goods returned, cost per order, buyer productivity, savings (how much the sector saved on orders), and purchase lead time, among others.
It’s up to the managers determining what indicators will be used, in accordance with the company’s strategic goals, and in what way such evaluation will happen.
5 – Not using technology to evaluate suppliers
Companies now have several technological resources to ensure practicality and efficiency for all their sectors. Failing to use these tools and insisting on strict and manual processes is the same as ‘to harping on the same subject’, and then expecting a different result.
In addition to the issues caused by human faults and information mismatch, the team will waste time, not being able to reach quick answers and to perform strategic tasks.
With technology in the procurement sector, e-procurement tools will facilitate the purchase validation process, as well as the selection and evaluation of suppliers.
E-procurement uses the Internet to quickly assess the most appropriate suppliers for your business. Such system allows also contact registration, to render communication and negotiation with business partners uncomplicated – and everything on the same platform.
In addition, e-procurement systems allow procurement managers to track supplier performance. Consequently, finding a substitute without having to restart the selection and search process can be done in just a few clicks. And the production chain can go on without any interruption.
Such mistakes are the key culprits of your company’s procurement planning. So stay tuned to internal processes and invest in technology, to avoid failures and bring more efficiency to your procurement area.