When it comes to efficient procurement, the opportunities for your enterprise are endless. And while it’s important to highlight the benefits of what solid procurement strategies can do for your company, discussing the aspects of poor procurement is just as essential.
To prevent businesses like yours from learning the hard way, we’ll dig into the consequences of bad procurement below.
As you know, procurement impacts nearly every aspect of your business. However, risks associated with procurement typically fall into short-term or long-term issues.
Short term problems include but are not limited to the following:
- Stock-outs on key materials and parts
- Too much inventory
- Poor to no compliance with pricing deals and contracts
- Overpay for goods and services
When any of these short-term risks exist in your business, it results in poor use of key resources (cash and people) and often the ability to provide adequate services. The key is always getting the right item, at the right quality, with the right service, at the right price – when you need it. When poor procurement systems, processes, and policies are in place the risk of doing it “right” is high.
With inefficient procurement, you may settle for lower output, subpar components, higher costs, and poor use of human resources all due to a lack of modernizing your procurement and payables operations and toolsets.
Long term problems include but are not limited to the following:
- Persistent overpayment for goods and services
- Poor use of human capital and turnover
- Being in constant firefighting mode
As listed above, poor and/or old procurement practices and tools are a costly issue for companies that show up in purchase price, inventory, and time. This puts unnecessary strain on financials and your people.
Implementing modern procurement sourcing strategies and tools are the most effective ways to drive out inefficiencies and enhance the P & L. Not to mention, these same strategies and tools can have a significant impact on your people’s time and likely overall job satisfaction.
A good procurement solution ensures you have access to exactly what you need at a competitive price, and ordered and paid for in the most efficient means possible. Learn all the ways you can increase savings potential and accelerate continuous improvement within your procurement function with Supply Tigers.
Trial and error is an unfortunate reality of life, but it doesn’t have to impact your business. Listed below are three potential procurement challenges to consider.
Due to the large numbers of suppliers and items usually seen within indirect spend, it is difficult for any one company to gain the spend leverage it needs to access good pricing and services. This leads to the following challenges:
- Ongoing proliferation of suppliers and items
- Inefficient buying processes – the ole “Three bids and a Buy” solution
- Higher pricing as most activity centers on tactical actions like placing orders, obtaining pricing and availability, and order follow ups
- Either stock outs (thus expedited orders) or too much inventory (poor use of cash)
A properly curated and managed GPO offering, paired with the right onsite services can solve much of these issues.
Supplier and Item count and non-repeated spend
There are simply too many suppliers and items that must be purchased to run a manufacturing operation, for most purchasing or maintenance departments to effectively manage. This leads to the following challenges:
- Higher prices
- Manufacturing downtime
- Inefficient use of human capital – not to mention stress and frustration
A properly constructed procurement strategy, back by good contracts (aided by a GPO offering) can solve for these issues.
There are, especially in the middle market, very few modern procurement tools used to manage indirect procurement. This leads to the following challenges:
- Inefficient use of human capital in both purchasing and payables
- Lots of errors and rework in processing orders and invoices
- More mess as growth occurs
A properly selected and implemented private marketplace, along with a payments solutions plug-in, can solve these issues.
Ultimately, the above issues point out the lack of investment in procurement’s potential. Modern tools and data can make for a solid ROI case and one that can easily support modernizing and improving your indirect procurement and payables capability.
As soon as your business decides to address your procurement issues and opportunities, reach out to us and let us get started on an ROI review and plan. Supply Tigers can help to revamp your procurement operations so your enterprise can operate at peak efficiency. Address inefficient procurement practices with Marketplace as a Solution (MaaS™), a revolutionary concept designed to help businesses refine and simplify their procurement and payables processes.
Increase savings potential and drive procurement efficiency with automated and advanced purchasing, payments, vendor invoices, and spend management. Contact our business development team to get started today.
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