Procurement Problems, And How To Handle Them

In business, good procurement is all about speed, efficiency, and accuracy. However, despite all the common knowledge and precautions business owners keep in mind, issues ranging from organizational shortcomings to simple human error can cripple a business’s purchasing and procurement, no matter how hard the CEO tries to iron these issues out. Here, we’ll look out some of the most common procurement issues business owners will face, and the best ways of dealing with them.

Accidents with Ordering

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If you or your procurement team makes a mistake and orders the wrong item, or the wrong quantity of the right item, you need to follow up on it immediately, contacting the supplier and having the mistake rectified. Doing this can save your business from some considerable hardship in the long term. Although modern transaction systems are very fast and reliable, running into ordering issues like this should prompt a close look at the kinds of checks and balances that you use in your managing your business’s supply chain. Adopting an ordering system that requires approvals from more than one person is one simple change that can reduce the room for human error.

 

Cost Overruns

Emotional decisions based on intangible factors and impulse buying are often the root causes for some seriously damaging procurement issues, particularly when it comes to rapidly expanding start-ups. As soon as your company launches, you and your higher-ups may (understandably) want to make sure that all the essentials are ordered and in the right place all at once. However, rushing through this while you’re trying to manage every other aspect of the company can easily lead to cost overruns before your revenue streams can accommodate for those big purchases. Sure, you may have that bulk order of linear bearings out of the way, but if you can’t afford all the other components required to build your product, you’re pretty screwed! Implementing a comprehensive and reliable procurement system will give you the flexibility for prompt, accurate orders, as well as more effective decision making. This is going to mean a big investment of time and money, to begin with, but once the system is in place, you’ll see that this strain has been worth it.

 

Inflexible Suppliers

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A lot of procurement decisions have to coincide with the business’s risk management strategy. After all, the lower you keep your costs, the better your bottom line will ultimately look. Good suppliers who are aware of this will accommodate a buyer’s needs to maximize their performance. Having said that, there are still suppliers who may not offer discounts or insist that various extra charges are included in their invoices. Before you enter any long-term contract with a supplier, try to assess how much flexibility you have for negotiations. Will they pay for shipping? Will they offer discounts on bulk orders? Asking these questions can feel daunting when you’re just getting your business off the ground, but B2B suppliers are used to it. Push for flexibility in your negotiations, and you’ll have a much better long-term relationship.

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