Standardize your Internal Procurement Process
The best way to ensure accuracy of the information passed along your supply chain is to ensure that a standard process is followed within your internal procurement function. Often small and medium-sized businesses – especially those that have grown over time – tend to stick with their own preferred method of ordering. This may work when it is a mom or pop shop with just a couple of employees, but not when a company has a larger team of employees. While ad hoc systems will work, implementing a streamlined internal procurement process will make an organization much more efficient.
Without a standard process people will order how they feel most comfortable. For the buyer, this will result in a very time consuming routine to track and process orders. In an internal procurement process where there are no regulatory controls to spending, it is very difficult to take advantage of preferred vendors. Often, this leads to miscommunication. Companies often realize that items ordered don’t always match what the requester originally wanted. Miscommunication not only causes delays but also results in a lot of stress for the buyer.
Implement an Approval Threshold and Run Audits
Companies wanting to cut internal costs may try to control and tighten up their internal procurement processes by making their department managers approve everything bought – even a paperclip. Though there are benefits to managing your internal procurement process in this way, the cons will eventually outweigh the benefits and create a lot of unnecessary work.
Having a manager approve every item your company purchases is not only a heavy burden on the manager, but can also create major bottlenecks. Instead, an alternative internal procurement process could be to allow employees to purchase under a certain threshold, so only items over a certain dollar value will need approval. For example, a threshold could be all items that cost more than $100 will need approval. This will allow employees to procure items as needed and free up managers from having to oversee all purchases. Larger purchases would still go through the necessary checks and balances but the build up of bureaucratic red tape that often comes with a inefficient internal procurement process will be erased.
Of course, to mitigate the risk of mismanaged spending, managers can still choose a small sample to audit to ensure employees are buying properly on a monthly basis.
Reduce Approval Chains
Having many levels approval can increase both your request and approval time significantly because the item will wait on more managers to approve an order request. Alternatively, having extra approval levels only for really expensive items can be just as effective.
Adopt a cloud based system that is nimble. Companies are much more likely to gain widespread adoption of a system if it simple and easy to use. Finding a solution that takes months to learn will not only be expensive, but difficult to maintain. Having a system that can be easily used by everyone – as well as offering mobile options – can increase your approval time. Cloud-based software, for instance, can be accessed wherever there is an Internet connection. Further actions are no longer dependant on a key person being in the office to make approvals.
And, buying locally will not only promote the local economy, but speed up logistics. Often people fail to realize that the cost of delays can sometimes outweigh the benefits of a lower cost.
How Can Procurement Add Value to Organizations