Beware of committing the 5 Deadly Sins of Procurement
Did you know that over 60% of enterprises rely on manual MRO procurement? But just because it’s prevalent, it doesn’t mean it’s the best strategy. If your organization is also yet to automate and upgrade its procurement process, here are two questions for you:
- Are you struggling to minimize expenses and keep track of costs?
- And are you piling inventory or facing material shortages?
It’s highly likely that you may have answered yes to either of these questions. Unfortunately, such gaps in the procurement process can cause consequential disruptions to your business operations.
Effective management of procurement, especially indirect procurement like MRO (Maintenance, Repair, and Operations), can considerably reduce unnecessary costs. However, curtailing costs alone is not enough. If the COVID-19 pandemic has taught us anything, it is that procurement dynamics are changing as rapidly as technology. Today, procurement spans across departments in companies — from finance to operations — advocating the need for a sound procurement strategy.
So, this Dussehra may be the perfect time for your organization to identify and steer clear of the fundamental errors in the procurement process. After all, the festival is all about the triumph of good over evil, and what better time than now to draw up a plan and fight the cardinal sins of MRO procurement?
5 Sins of Procurement
1. Getting your Sourcing wrong? Think Again
Indulging in any procurement activity without a robust sourcing strategy is calling trouble. From picking out the sellers, negotiating contracts, and buying the materials, vital sourcing channels and effective supply chain management are necessary. Many times there is a spike in demand for goods. You might need to procure from global networks to ensure timely delivery of the product. But, global markets are susceptible to volatility in the currency exchange market, time constraints, and import limitations.
You can mitigate supply risks by diversifying the sourcing channels and selecting the most suitable products and services you require to run the business.
2. Manual Processes are so last decade. What You can do instead?
Living in a digital world and relying on manual processes is outdated and inefficient. Doing things the old way can be comforting but waste time and money. One of the significant challenges in MRO procurement stems from investing time in manual tasks. They make procurement cycles lengthy and lead to increased operational costs.
By digitizing the procurement process, you can safeguard yourself from task burnout and working with poor-quality data. The advent of mobile apps and catalog-based buying ensures you undergo smooth procuring.
3. Streamlined Supplier Base
You might have a business where there is a need for specialized demands and unique materials. Often these necessities are met with a fragmented supplier pool and a decentralized procurement network. Such networks pose significant risks in carefully monitoring the procurement process and lead to massive costs, specifically in MRO categories. Additionally, a decentralized system leaves room for errors because individual departments/stakeholders purchase materials separately. It also results in poor management of data, thus suboptimal business analysis.
To reduce cost, waste, and risks associated with multiple supplier bases, you should opt for supplier consolidation and standardized pricing to beat the latent costs of the procurement: which will allow you with greater buying power and higher long-term returns.
4. Inadequate Analysis of Internal Needs
Faulty decisions always arise when you are uncertain about the company’s requirements and goals. Today, data is the world’s most critical resource, and its improper conduct will lead to inaccurate business forecasting. It paves the way for piling inventories because you cannot gauge the market demand and estimate necessary sales. It results in short budgeting and inferior overall outcomes.
Safeguard your business from the misery of inventory pile-up by strategic optimization. Avail of the benefits of vendor-managed inventory and enjoy the perks of an entirely data-driven process and demand-supply optimization. Also, with the help of an MRO aggregator, you can automate the procurement process and indulge in cost savings.
5. Shoddy Inspection in Contract Agreements
The biggest obstacle to the seamless procurement flow is the lags caused due to breaches in service and contract agreements. SLA breaches can result in delayed delivery of goods or subpar service performance. Moreover, seeking redressal from vendors becomes difficult if you do not follow proper contract management practices.
To avoid such violations, look at the finer points of the contract. Inspect the supplier proposal to keep away from making the wrong decisions.
Get Cracking with the proper steps
Managing MRO in procurement can get overwhelming if not tackled correctly. You can reimagine your procurement process with guided assistance from experts. Moglix, with its digital solution, can assess the pain points of your procurement process and elevate it to a new digital paradigm. Download this exclusive e-book, as it can be a helpful ally in your journey to ease the hassles of procurement.
Looking forward to transforming your procurement? Just send your business query to firstname.lastname@example.org.