Do You Make These Purchasing Mistakes?
PurchTips - Edition # 206 June 15, 2010
By Charles Dominick, SPSM
How Many Of These Six Mistakes Have You Made?
- Assuming that a small order doesn't warrant much time. A purchase doesn't have to involve a large monetary expenditure to represent a big risk to the organization if it isn't fulfilled at the right time with the right quality item or service. So, evaluate the criticality of each order and invest an appropriate amount of time based on the degree of criticality.
- Assuming that supplier offerings are equal except for price. Most suppliers strive to differentiate their products or services. You should seek to understand those differences, what value those differences have to your organization, and which offering is the best overall fit for your organization, price and other factors considered.
- Failing to allow suppliers to suggest alternatives. Suppliers may know a better or cheaper way to accomplish your goals. Restricting them to your requirements without giving them the chance to suggest other options may result in forgoing profit improvement opportunities.
- Failing to build stakeholder consensus in purchasing decisions. A big determinant in things like whether supplier onboarding is smooth, estimated cost savings are achieved, or volume guarantees are met is the compliance of stakeholders in your organization. If you give them a voice in the purchasing decision, the likelihood of compliance - and purchasing department success - is much higher.
- Failing to qualify a new supplier. You should select a supplier because that supplier is the best fit for your organization, not because the supplier was the best proposal writer. Always qualify new suppliers in a way that is appropriate for the value and criticality of the purchase. This may even mean "dating the supplier before marrying the supplier."
- Agreeing to things that the organization can't support. When purchasing agents focus solely on price, there may be temptation to do anything to achieve savings. But being able to trade concessions for lower prices means knowing your organization's limits. For example, don't agree to pay a supplier in 10 days or via EFT if you haven't confirmed that your organization can actually do those things.
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