Procurement is the art of purchasing good and services. It includes sourcing, contracting, negotiating, monitoring, compliance and technology. Without an efficient procurement process it would be impossible for your facility to function.
We have collated 7 ways to avoid costly procurement mistakes.
1) Inaccurate Material Information
Consistency and accuracy are required especially when ordering materials, as the same item could be catalogued or described differently by all parties. Mistakes must be avoided between your suppliers, contractor, facilities manager, when orders are made using your software.
Unit of Measure Issues
A unit of measure for every item must be identified and used consistently to prevent issues. If your supplier identifies a unit as 10 items and your software identify’s it as 2, this will cause problems with ordering.
Price Discrepancy
Prices are usually documented as the last used price or the moving average price. Issues can occur when suppliers are different, or materials have not been used for a while. The price on your system may be different from your suppliers.
Phaseout or Obsolete
Problems can occur if items are no longer available, fit differently or have a different appearance. Your facility manager will have to conduct research to find suitable items.
Solution
Ensure your data is accurate, updated, includes part records, multiple units of measure, this will decrease issues and allow mobility in your orders. Your bill of materials must also be precise to avoid errors, promote assurance in your system and allow the success of your project.
2) Lacking Negotiation With Suppliers
Some prices are fixed and cannot be altered, whilst some allow a degree of flexibility and negotiation with your suppliers.
Solution
Negotiate prices with your suppliers, practice open communication and determine win-win situations.
3) Failure to See the Bigger Picture
The relationship with your suppliers could last for years and not just for a one-off order. Ordering one item could prove very costly in maintenance terms, whereas if you order in bulk or superior items the long-term advantages may be more favorable.
Solution
Negotiations must benefit both partners, build lasting relationships, agree your favourable terms and conditions, invest in quality items and ensure open communication.
4) Not Making the Best Use of Technology
Facility management software systems are being used increasingly to monitor procurement development. Two reasons for not making the best use of technology are an inability to utilize the equipment or rejecting technology.
Not Using Available Equipment
Purchasing the latest software for your facility may not resolve all your issues, as it may not be compatible with your facility strategy. It will take time to install, staff may be used to old ways of working and reject the new software.
Solution
Discuss your requirements with your service provider to ascertain the best software for your facility. Training is essential and ensure accurate information is inputted. Your original records will need to be processed, outdated information removed and universal formatting implemented.
Rejecting Technology
Implementing new changes will always cause uncertainty to staff, including new software systems. Staff are used to old ways of working, may be reluctant to accept changes, or even reject them, especially if they are required to undertake training.
Solution
If you already use a procurement software system, review what is working well and identify issues. Assess if you are utilizing all its functions and your service provider should be able to assist you to improve your procedures.
Introducing a new procurement software system will need you to communicate this with you staff. Your role is to highlight benefits of the new system, promoting how it will reduce their workload in the future and cost-savings to the facility. You need a win-win situation.
If your are unsure about purchasing new software, you need to assess your alternatives, research what is available, calculate the benefits to your facility and balance the pros and cons.
5) Choosing Low Quality for Lower Costs
Choosing the lowest alternative will always compromise quality.
Solution
Understand your suppliers/manufacturers methods. Lowest priced items may need replacement earlier, which will cost more in the long run. Higher priced items may last longer, reduce risks and improve the value of your facility.
6) Downgrading Specifications Without Proper Review and Approval
Essential specifications may be omitted due to inaccuracies, extra expenses or supplying replacements.
Solution
Understand the above issues can occur and establish regular reviews.
7) Poor Documentation
Accurate documentation is essential in your software system to monitor your inventory. Without it you have no idea of what is in stock.
Solution
Documentation must be accurate, updated and operational.
Conclusion
All the above are essential components in procurement practice to ensure your facility is efficient and problem free.
