5 Common Purchase Order Mistakes to Avoid in Procurement
Thanks to the development of more sophisticated software, almost all common (and embarrassing!) mistakes in the procurement process can be eliminated. But even the best software in the world can’t rectify poor decisions made by procurement agents and management that could adversely affect company performance. Thankfully, many of the problems we outline below can be solved through better communication between staff, management, suppliers and other companies.
1. Ignoring Deals from Other Suppliers
Chances are you use some suppliers more frequently or order greater quantities from them than others. If you’re dedicating more time to these types of orders, other companies you deal with may get lost in the shuffle. That can be a costly decision if any of those other suppliers offer something critical to the operation of a small company, however small, cheap or infrequently the item offered is purchased. Benjamin Franklin once said that “a small leak will sink a great ship.” Giving all suppliers the due diligence they deserve is one sure way to keep those leaks plugged.
2. Disregarding Suppliers’ Advice
You’ve heard it before: the customer is always right. But what if being right comes at the risk of not taking advantage of advice or services that your supplier is willing to share? Suppliers are more likely to know about the products they sell than you, meaning that they have a wealth of knowledge at their disposal. This can include the best way to use their products or even ways to purchase them for cheaper. The market is more competitive than ever and procurement agents are wise to follow any tips from suppliers that might help them stay ahead of the game. Sometimes it pays to be wrong (or at least to listen).
3. Accepting Prices As Is
All too often, procurement agents assume that the price of an order is set in stone. That frame of mind not only robs the company of any cost-saving opportunities, but can also shave some profit from the bottom line. Buyers and sellers have one thing in common: they want each other’s business. If it’s likely that you’ll be using this supplier regularly down the road, try negotiating on deals to assure them that their services are valuable enough to warrant repeat orders. If a supplier benefits from tinkering with the price to gain a long-term customer, negotiating will be worth it—for both of you.
4. Resisting Change
Remember old sayings like “It’s always been done this way” and “If it ain’t broke, don’t fix it”? There’s a reason why they’re old. To remain competitive in this quickly changing market, take a look at what’s going on in the industry and look for options that can benefit your company. This may mean looking elsewhere for emerging suppliers offering innovative products far cheaper than the organization you may have been loyal to for decades. Examine customer trends and new products taking the industry by storm. If your procurement workflow is constantly losing the footrace to snails, consider upgrading your technology. By being open to new ideas and better practices, you can ensure your company is staying relevant and informed.
5. Working in Isolation
Procurement agents are given the task to order supplies and inventory for the company—a huge responsibility given the variety of needs every department within the organization has. Most orders are routine, but sometimes, items may require additional input from other departments before a requisition can be put through. Agents who don’t seek that kind of input run the risk of buying wares that may not be a fit for the company. The result? You’re left with merchandise gathering dust in warehouses or parts that may not work in the products your business creates. Ask for input from other managers or departments to determine whether these items will actually benefit the company. Be sure to keep the company’s business objectives in mind before you place any order.
While procurement automation may solve or prevent most procurement errors, the software isn’t able to make all company decisions for you. That’s why you need to think strategically every time you handle a procurement transaction. Remember that every right decision will help you save money for your company, as well as keep it competitive in today’s unpredictable economy.