Gone are the days when procurement was just a division that dealt with ordering and procuring goods and services to satisfy internal business requirements. Organizations today are closely monitoring their procurement departments as they have realized their importance and the need for continuous improvement. As a result, procurement has gained greater significance as an important contributor to business goals and a support function to other departments.
However, no procurement management system is perfect. While evaluating the system, here are several problems one needs to keep an eye out for:
Over-spending/Under-spending: Often, organizations find that planned and actual budgets rarely match. There always seems to be a problem of over-spending (procuring too much, which might lead to waste) or under-spending (procuring too little which might lead to unfulfilled business goals).
Remedy: Set limits! You can set limits for both cases, and just in case there is uncertainty on the actual amounts, set a range that triggers a metaphorical alarm if they are broached.
Too many cooks: This is a problem generally faced by larger organizations. There are far too many people in-charge of procurement, which could result in chaotic decision-making and improper procurement. Employees do not have a clear understanding of their responsibilities and might tread on one another.
Remedy: Have a centralized system in place with a clear definition of roles and responsibilities. Document every aspect of the procurement process and ensure that there is no ambiguity.
Fraud: When the same person is in-charge of the whole procure-to-pay cycle, there is chance for fraud to creep in. Are the numbers being quoted right? Is the employee receiving any kickbacks? Is one supplier being favored too much? How would you know?
Remedy: Gain visibility into the whole process. Ensure that the whole process is transparent and in the best interests of the organization.
Alignment with company policies: Say your company advocates human rights and your procurer, without knowing, procures from a third-world sweatshop! Or, say your company lays out eco-friendly business policies and the procurer procures from the biggest polluter in the region! How can you avoid such incidents? What if the procurer is not completely aware of the company policies?
Remedy: Clearly lay out policies, procedure, and guidelines that the procurer has to follow. Gain greater visibility and closely monitor the process to ensure that none of the policies or procedures are being violated.
Now that we have seen several problems and their individual remedies, ask yourself, would it not be greatly useful if there is one BIG remedy for all these problems?
There is, we say! Automate the entire procurement process! Online procurement management solutions help you lay down spending limits, policies, and guidelines, centralize the process, give you complete visibility over the process, and more! Learn more to know how!