Success in procurement doesn’t just happen.
A good procurement function delivers cost savings, timely deliveries and maintains robust supplier relationships.
But the journey isn’t linear, and procurement leaders get the strategy wrong at their peril. A disjointed procurement strategy could be an expensive mistake and lead to unexpected costs, significant delays and quality issues.
With this in mind, CPOstrategy explores five of the top procurement mistakes to avoid.
Lack of procurement strategy
Operating without a clearly defined procurement strategy is a dangerous game. Without a strong framework in place, organisations run the risk of inconsistent decisions, missed cost-saving opportunities and poor supplier relationships. It is a key reason why developing a procurement strategy aligned with wider organisational objectives, with clear metrics and KPIs, is vital. There should also be a standardised policy and governance as well as ensuring procurement goals are linked with wider company goals. Procurement leaders should regularly meet with senior leadership in order to ensure long-term synergy is achieved.
Lack of automation
Leveraging technology isn’t something that is optional any longer. All organisations must be digitally fluent and seek to embrace the latest innovations in order to keep up with competitors. The likes of spreadsheets and emails are prone to human errors, while a lack of visibility, brought on by the absence of real-time tracking of spending, causes issues. This is where the use of e-procurement platforms and spend analytics tools is essential in order to identify cost savings in real-time and result in greater efficiency.
Lack of communication
Poor communication in procurement leads to misaligned expectations across the function and suppliers. This could mean confusion over requirements, timelines and responsibilities as well as a lack of buy-in from internal stakeholders who are not involved in the procurement process. Instead, procurement leaders should engage all stakeholders early and use clear communication channels to provide updates to keep all relevant people informed.
Poor supplier selection
Choosing the right suppliers is arguably one of the most critical aspects of the procurement process to get correct. It is a problem because a short-term cost focus leads to low-bid vendors who are unable to deliver, while a lack of due diligence exposes the risk of financial instability, legal risk and supply chain disruption. Instead, procurement leaders should define clear selection criteria, take part in a thorough due diligence process and use a structured sourcing strategy.
Lack of budget control
A lack of budget control in procurement can lead to cost overruns, strained stakeholder relationships and missed financial targets. Untracked or unauthorised spending bypasses approvals and preferred suppliers, while overspending against departmental budgets can cause frustration within the organisation and could result in cost-cutting. Instead, good budget control in procurement requires a pre-approval process to be implemented alongside real-time budget tracking tools and categorising spend effectively. It is also important to stay on top of spend and conduct regular budget reviews.