Pain Points in Procurement Series
The Consequences of Getting Procurement Involved Too Late
Avoid getting procurement involved too late in the purchasing process. Learn how to engage stakeholders early to amplify the value procurement brings to the table.
By Hugo Britt | April 27, 2023
Welcome to Una’s Pain Points in Procurement series. Each week, the Una team will explore one of ten common pain points impacting procurement today, and put forth actionable solutions to each of these challenges.
The phone rings at the local fire station. The chief answers, listens intently, then hits the alarm summoning all available firefighters to the trucks. Sirens wailing, they speed to the scene of the fire only to find that the conflagration has already reached the point where it will be impossible to bring the blaze under control.
“Why didn’t you call us earlier?” asks the chief.
The homeowner, wielding a clearly inadequate garden hose, shrugs. “I thought I could handle it myself. Can you save my house, please?”
The fire chief shakes his head. “No,” he snorts. “We can hose down the ruin, but that’s all.”
A poor purchasing decision is like a house on fire; expensive and destructive. Getting procurement involved earlier can minimize the damage and save the house. Asking procurement’s advice earlier still (at the decision stage) will mean there’s a very good chance the fire will never begin in the first place. Yet many stakeholders fail to alert procurement until it is too late.
Getting procurement involved too late means less gets achieved
First, a reminder: not every purchase requires procurement involvement!
Most organizations will establish spend thresholds and purchasing guidelines that enable stakeholders to manage tactical or everyday purchases without assistance. This is often referred to as tail spend.
But strategic purchases require procurement expertise to mitigate risk and control costs. Getting involved late in the purchasing process severely hampers the value that procurement can bring to the table, often leaving the function with little to do other than rubber stamp the transaction.
Delaying procurement involvement can be problematic because it increases the risk of selecting a supplier that is non-compliant, carries reputational risk, or is poor value for money. Without procurement, a stakeholder may fail to connect the dots between different business objectives, such as achieving sustainability and diversity goals along with value for money in their purchase.
Procurement often finds itself in the frustrating position of having to point out the cost savings and other missed opportunities that could have been achieved if they had been called in earlier. In some cases, the entire purchase may need to be re-evaluated or renegotiated, leading to wasted time and resources.
Then there’s the compliance angle. Without procurement expertise, a purchase may not be compliant with regulations or company policies, risking legal, ethical, or reputational issues.
Without procurement involvement, a stakeholder may fail to connect the dots between different business objectives, and the value for money in their purchase.
Why do stakeholders delay getting procurement involved?
The first step in encouraging stakeholders to call procurement earlier involves understanding why people delay calling procurement.
Some reasons may include:
Lack of awareness
Some people are simply unaware that they need to involve procurement in a purchasing decision or may not know how to contact them. Solve this by launching an awareness campaign – speaking at team meetings, creating posters, or email reminders – to ensure stakeholders know when, why, and how to involve procurement in a purchasing decision. Ensure this information is included in new hire onboarding processes.
Perception of bureaucracy
Procurement processes can sometimes be perceived as slow or bureaucratic, which may deter people from involving them. Solve this by cutting out inefficiencies to speed up the procurement process while educating stakeholders on the need for due diligence and compliance.
People may feel that involving procurement will take too much time and effort, especially if they are working on tight deadlines. Solve this by explaining to stakeholders that failing to involve procurement can actually slow the process down due to the need for re-evaluation or renegotiation.
Lack of trust
In some cases, people may not trust procurement to make the right decisions or may have had negative experiences in the past.
Always explain the reasons for saying “no” to a purchase request. Stakeholders may not be aware of the wider context behind a decision, such as an existing supplier contract or compliance issues.
Lack of visibility
Part of the problem is that procurement simply doesn’t have visibility of the money being spent until it is too late. Solve this by configuring your e-procurement system to raise a red flag (in real-time) when a stakeholder makes a high-cost, high-risk, or non-compliant purchase request.
Encourage stakeholders to involve procurement earlier
Launch a multi-pronged campaign to encourage stakeholders to involve procurement earlier in the purchasing process. Start by educating stakeholders on the benefits of earlier involvement such as reduced risk, cost savings, and improved supplier relationships. Set people up for success by providing clear guidelines on when and how to involve procurement – this could involve templates, checklists, and other resources.
Foster a culture of collaboration by encouraging stakeholders to see procurement as a partner rather than an obstacle, and build relationships with stakeholders to help establish trust. Provide training on procurement processes and procedures, and be sure to showcase success stories of how involving procurement early led to positive outcomes for the business.
Una can help your organization establish procurement procedures and frameworks to streamline the purchasing process and make it easier for stakeholders to involve procurement early on. Contact us to learn more.