The average company loses a mind-boggling $14 million each year because it has poor procurement oversight.
In addition to rogue spending, fraud, and overpaying for products, these companies are simply unable to move as quickly as their competitors—literally.
While best-in-class companies are able to complete the requisition process in five hours or less, it takes slow-moving organizations nearly two business days to do the same.
In today’s fast-paced business world, slower companies are simply unable to compete effectively over the long term. So if you find yourself scratching your head wondering why it takes your company so long to buy something, it’s probably time to make some changes.
For the most part, organizations move slowly because they rely on antiquated processes. It’s no different in the world of procurement.
With that in mind, let’s take a look at five typical procurement processes that are outdated. If any of these sound familiar, you need to overhaul your purchasing policies right away.
1. Using Paper-Based Systems
Paper-based procurement systems helped lots of companies manage purchasing well enough for many years.
While you may still be able to kind of get by with the legacy systems, you can be certain your competitors have upgraded away from them—putting you at a severe disadvantage.
For starters, paper-based systems open the door for human error; employees might end up filling out forms with the wrong information, for example. There’s also a pretty good chance that important documents get misplaced and workers have to spend a ton of time tracking them down.
If you’re using a paper-based procurement system, there is no chance that you’ll be able to get full visibility into your procurement department. As a result, you can be certain that there’s a lot of waste (e.g., rogue spending and fraud) that you won’t be able to see.
2. Using Spreadsheets to Manage Procurement—Not Modern Tools
Understanding that paper-based systems don’t provide much utility—if they provide any—many companies have since shifted to a spreadsheet-based procurement management system.
While this is certainly a move in the right direction, there are a number of critical procurement metrics you won’t be able to find in spreadsheets, including:
- Maverick spending
- Procedural inefficiencies
Again, you have to assume that your competitors have migrated to a modern procurement system—which means they have access to all of these metrics. To keep pace, you need to know them as well.
The easiest way to do that is to migrate to a modern e-procurement platform.
3. Requiring Multiple People to Sign Off on Every Expenditure—Even Routine Ones
It’s one thing to require several purchasing managers to sign off on big-ticket items or inaugural expenditures that are expected to become routine. It’s quite another to require several folks to sign off on every single purchase that’s made at your organization.
Study your procurement policies to see whether you’re requiring too many people to sign off on each purchase. If, for example, three people need to sign something before a purchase order is finalized, what happens when one of those people is on vacation?
4. Keeping Track of Inventory by Hand
In the old days, procurement managers would keep track of inventory using a tried-and-true method: counting product by hand.
Not only is this an extremely inefficient way to do things, it’s only a matter of time before human error creeps into the picture.
Simply put, you need to be using a modern procurement platform to keep track of your inventory. Any other way just isn’t good enough.
5. Relying on an Outdated Procurement Process That Hasn’t Been Updated in Years
As a general rule: If you haven’t updated your procurement processes in several years—or you’re not sure if they’ve ever been updated—it’s safe to say you’re long overdue.
Get in the habit of assessing your procurement process on a regular basis (e.g., once or twice a year) to determine whether any updates could be made to optimize it further. That way, you won’t have to worry about any old ideas and policies holding your company back.
To learn more about how your organization can benefit from a modern procurement process, check this out.