When business owners use a procurement system, it’s generally intended to increase efficiency, accuracy and speed. However, despite the amount it’s been developed over recent years, there are still many businesses that let their procurement fall victim to organizational shortcomings and human error. You might think that you’re above making these errors, but don’t be so sure! Here are just a few of the most common procurement issues businesses face today.
First of all, sticking with inflexible or otherwise sub-standard suppliers. A lot of the time, procurement decisions correlate with a business’s risk management strategy. Essentially, the lower the costs, the healthier the business’s bottom line is going to be. When a supplier appreciates this, they will accommodate to your needs by maximizing their performance. However, some suppliers can be a little difficult. They might insist that you pay for various surcharges, or be stubborn on their prices when you’re trying to negotiate discounts. Before you jump the gun and enter a deal with a rigid supplier, make sure you’re thinking about other options when it comes to negotiation. Can the supplier cover shipping? Will you get a discount out of bulk orders? A flexible supplier will be happy to negotiate, and by pursuing lower prices you’ll help your professional reputation.
Going over your available resources is another big issue you need to avoid. If your business is currently a small operation, then sticking to your budget probably seems like child’s play. However, if you go through a period of rapid growth, things can become much harder to organize. If you’re not careful, you may end up biting off more than you can chew through a simple communication error. That new shrink wrap machine could be just what your operation needs. However, if you go over budget to procure it, the utility isn’t going to help the significant financial deficit you’ll have on your hands! Take a good, long look at your procurement protocol, and make sure you’re eliminating any kind of communication gaps that are coming up. Regular budget updates for anything tied into your supply chain can also be a big help in avoiding this kind of crisis.
Finally, making rushed purchases. When the people in charge of procurement make decisions based on emotional factors, impulse buy, or phone in an order, it can make for all kinds of costly procurement errors. This is especially true if the company is in its early stages, and rapidly developing. This is a fast-paced time, and you and your higher-ups may want to make sure that everything is in place in one big flurry. It’s one thing to hit the ground running, but another thing to overlook all the necessary precautions which you need for good procurement. If you make this blunder, you may drive your business headlong into inventory cost overruns long before your cash flow has stabilized enough to accommodate for them. An ideal procurement system will allow for both prompt orders and sound decisions. Investing time now will save you a massive amount later on!
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