Common Problems in Procurement Management
There is always the possibility that things will not go the way you planned. It's the case in nearly everything in life and there is only so much that you can prepare for at any given moment. However, that doesn't mean that all hope is lost and you have to just accept problems when they happen. You can take action and attempt to remedy the situation, but that only works if you know what problems can arise and what options are available.
This article will look at some of the common problems that happen in procurement management. These are things that can happen in regards to any element of procurement, although there are some areas that are more prone than others. The topics listed here will include what the problem is, the signs that suggest it has occurred, how to handle it, and if it's possible to prevent it from happening. Keep in mind that this is only a sample of what is possible and should not be treated as a complete list.
Errors with orders are fairly common, and not just in the procurement industry. The majority of returns made in retail purchases are often due to a mistake with the order and responders agreed that the way in which the retailer handles the situation impacts their intentions to purchase from them again. This can also apply to procurement, as there is the expectation that orders will be done correctly and to the satisfaction of the person(s) making the purchase. If a supplier makes an error in an order, the procurement team will include that information in their decision making regarding the continued usage of that supplier's services. How the error was handled, the severity of the error, and the delay it caused will also be taken into account.
So why do order errors happen in the first place? Often, it's due to people's misinterpretations and it can happen on either side of the ordering process. At the purchasing end, someone can fill out an order from incorrectly, select the wrong product, or put down the wrong specifications. At the seller's end, they can grab the wrong thing, misread the order request, or attach the wrong shipping information. Depending on the cause, you might not be able to prevent it from happen beyond double-checking your orders and exerting caution. As for fixing it, that usually means contacting the order source (e.g. supplier), notifying them, and attempting to get the correct product.
Sometimes it's not so much the order that's the problem, but the supplier who you made it with. There's quite a bit that can go wrong with a supplier; anything that can happen, might happen. The warning signs that were discussed in relation to those problems--changes in behavior, questionable business practices, frequent errors, etc.--are often your primary means of prevention. Other options include being vigilant in your selection process and thoroughly researching supplier candidates.
When things are a mess organization-wise, it makes it harder for things to get done. You don't have a clear means of accessing valuable information because you can't clearly pinpoint where it is. No information means you can't use it to make decisions and do your job. It also makes it harder for others to work with you, as disorganization can impact your interactions with them.
As with order mistakes, damaged goods are something that you can always control. Goods can be damaged at any point of the ordering and shipping processes and it can be very difficult to pinpoint when the damage occurred. Did it start out this way? Was it when it was being prepared to ship? Did I do it on accident? Was it the shipping crew? The supplier? In most cases, you may never really know. There are only so many precautionary steps that can be taken, especially when you're in a rush or when things are out of your hands.
When you do get an order and there are damaged goods, your best bet is to contact your supplier and talk with them on it. If they can replace it without issue, then go for it. If it's something that has been happening frequently with no explanation, then you probably want to start thinking about getting someone new with better quality.
Sometimes that great strategy you started using isn't getting the job done. It's not working right, you're not getting the results you want, and it's quite likely that it's harmful. With ineffective strategies, you can't always know that they're not going to be a good choice. Different circumstances yield different results, so it's possible that it's not working because of something in the situation that was already there. There are a lot of options to choose from so it's possible that you convinced yourself that this would work--possibly after debating your choices for a long time--only to learn that it was (for you) a dud. More isn't always a good thing, after all.
If you want to avoid getting stuck with a surprise ineffective strategy, you could try running a trial period where you test the strategy out. You apply the basic components of the strategy and use it for a set amount of time; at the end you evaluate it and determine if you want to continue using it. It may take a certain amount of time for some strategies to have any effect, so it's best to be patient. If a strategy really is a dud and you've clearly determined that, then stop using it and move on to something else. You may need to repair any damage it did first, so be cautious about what actions you take.
High Risk Situations
Circumstances on occasion may determine that a situation is high risk and poses a threat of additional problems. These do happen in procurement and teams do not always have an option to opt out of these situations. However, there is no guarantee that members of a procurement team will encounter a high risk situation at any time in their career. Most of what makes a high risk procurement a high risk is what is being procured more so than how it is being procured.6 Things that there isn't a high demand for and that there is a very small market for are often considered high risks because the potential for the purchase to backfire is likely. Some of the inventory management strategies involve taking these high risks based on what is predicted through data--which can be wrong.
High risk situations in procurement are entered willingly, so if you don't want to have to deal with what is involved then you should probably avoid them. If you do go into a high risk procurement, then you may want to take actions to reduce your risk. Have some kind of fallback if things backfire and plan things out extensively in advance. Double and triple check the data that made you want to do it in the first place.
The extensive inclusion of technology in the business world means that it is just as problematic as it is beneficial. The usage of technology in procurement is only growing and more applications are entering the market with the promise of simplifying and making things better for those who use these products. However, when there is something at fault with a piece of technology--whether it's equipment, software, or a system--it's causing a lot of damage to procurement teams and businesses. Because they've integrated their usage so deeply into their operations, they're stuck when it breaks down or crashes.
To prevent issues with faulty technology, it's best to educate yourself on the tech you're using. Learn about how to use it, how it works, what happens when it breaks, and what your options are when it goes haywire. Research your choices thoroughly before implementing it. What's the fail rate? Who do you have to contact for maintenance and repairs? How often does it need to be upgraded? Look at user reviews, industry reports, and the reputation of the product. Try to get the choice that is going to work for you and your needs. If there's a problem with it, do whatever is needed to repair it.
Inappropriate Resource Usage
Resources can be abused and that often makes it harder for them to be used for legitimate means. In procurement, misuse of resources often is a violation of ethical codes and company policies. It's wasteful and largely frowned upon, especially if it's for personal reasons instead of professional ones. This issue may arise with administrative staff who are abusing the power their job gives them for personal gain. Those lower down in the hierarchy may also abuse resources for the same reasons, but in a much more subtle way to avoid getting caught.
Putting limits in place to prevent resource abuse can be one solution. For example, a purchase cannot be made without approval from certain people (administration) or from a minimum of two or three procurement officers. Requiring automatic documentation of resource usage, like recording the identification or login information of an agent when making a purchase, could help catch abuses more so than prevent them. It can also help determine what resources are being abused and allow for specific solutions to be developed.
Not all limitations are good, although their intentions may have been. Procurement teams work all the time with limitations in place and are able to still be successful because of their ability to optimize what they do have. Unfortunately, there may be some limitations that are too strict and cannot be worked with. Their placement cannot always be controlled either, as they may be a result of third parties (e.g. accounting and the budget) or from outside forces acting in extraordinary circumstances. Trying to bypass limitations depends on their severity and what resources you have at your disposal. If you're able to, optimize and strategize as much as you possibly can to achieve your goal under those conditions. If there's so much as a hairs-breathe of wiggle room, then use it. Take and use what you can get in order to deal with the situation.
- A Discussion of Inventory in Procurement Management
- The Importance of Financial Management in Procurement
- The Process Involved in Procurement Management
- The Involvement of Measurement And Analysis of Performance in Procurement Management
- Understanding Procurement Management?
- Credit Checks for Businesses
- Emotional Intelligence and Interpersonal Conflict
- Improve Your Communication Skills by Using Storytelling and Humor
- Using Scrum to Manage Product Backlog
- Identifying and Prioritizing Needs and Risks in Strategic Planning
- How to Improve Your Communication Skills by Understanding the Flow in Conversations
- The Basics of the Decision-Making Process
- The Balance Sheet, Debits and Credits, and Double-Entry Accounting: Practice Problems
- Strategic Planning: Designing and Validating Tactics
- The Structure and Anatomy of a Decision