Apr
30
Procurements 7 deadly sins
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As procurement professionals, we generally try our best to be effective. Our particular profession is one that tends to be systematic and regulated with a heavy focus on process and strategy. While that’s all well and good it’s common for things to go awry and for problems to occur. In all the years I’ve been in and around supply chain either in career roles it’s evident to me that some issues are more common than others. So below I’ve listed my 7 deadly sins for procurement. See how many you’re familiar with and as ever feel free to let us know your thoughts in the comments section below.
1 Assuming that savings are a given
For many business leaders, procurement’s main function is to make savings. Perhaps THE most common trap to fall into is to embed over zealous savings targets into business plans and profit targets before procurement has had a chance to either make them or too often develop a strategy for them. Supply chain then makes risky decisions in order to realize the numbers with predictable chaos ensuing.
2 Not managing risk
Bad things happen in business. It’s a fact of life. Failing to recognize potential risks and then drawing up mitigation plans can not only result in challenges that are best avoided but in extreme cases can end the business. Managing risk should be at the heart of your supply chain strategy.
3 Ignoring true supplier lead time in planning process
Lead time sucks, we all want things quicker but it’s a fact of life that things take time to manufacture and assemble. Part of procurements function should be to hand off this data to the planning function to ensure that MRP systems are representative of reality and planning is accurate. A failure to do this effectively results in your best-laid production plans being wide of the mark and your business missing agreed customer delivery dates.
4 Not appraising suppliers before use
All suppliers look rosy on the outside but a failure to effectively appraise critical suppliers can lead to disaster. Supplier appraisals should draw out the pros and cons of using a supplier. A failure to identify potential problems before use could result in catastrophic supply chain issues.
5 Not building effective supplier relationships
Procurement is not transactional it’s all about relationships. THE key role of procurement is to build the right relationships. There are various elements in defining an excellent supplier, of course, the price is important but it is just one aspect, customer service, capability, strategy, behaviors also are important. An effective partner is far more useful to your business than merely being the supplier that delivers the cheapest product.
6 Bloated and ineffective KPIs
Data is crucial to supply chain effectively. I see time and time again companies that while recognizing the need to measure unfortunately measure the wrong thing or even worse spend days each month producing stacks of KPIS and data that serve little purpose and go largely unused. KPI’s and strategy should fit hand in glove and your monthly KPI review should generate actionable tasks that bring about quantifiable improvements.
7 Poor compliance to standards and processes
In the context of the supply chain, there are usually a variety of compliance requirements that the business should follow, specific rules or steps, export controls are a good example. Compliance might be driven by external rules or internal systems (that often support the external rules). Supply chains that fail to follow these processes can often put themselves in deep trouble.
So do you agree with our list? let us know in the comments section below.