5 Most Common Mistakes in Procurement and How to Solve Them
Common procurement mistakes can easily turn into procurement horrors. If you are working with an inefficient system, it will lead to a whole host of joint procurement and purchasing problems.
When a problem occurs, it can be an opportunity to learn how to improve and avoid the next time. You only need to glance through some of the best procurement success stories to realize that your company’s success stories depend largely on your procurement system’s effectiveness.
Thankfully, technology can solve most problems in the procurement department. Autonomous procurement is one of the easiest ways to transform the procurement department and fix common purchasing mistakes.
To prevent future mistakes in your organization proactively, we have listed down the 5 most common horrors and how to avoid them!
1. Accepting Prices without negotiation:
Many times, you accept supplier quoted prices as it is without negotiating further. Since the purpose is to build a long-lasting and strong supplier relationship, negotiating prices and setting the right standards is more important.
But what is critically important is to be fair and professional while negotiating and not use outright bargaining means to do so.
We asked a few procurement managers. Most of them mentioned additional hidden charges in the contract like shipping, parking, etc. They missed noticing these during their negotiation with the suppliers.
One can avoid such errors by using automation software like Contract Discovery BOT that will automatically read, extract, and interpret critical business information from large volumes of contracts.
It will increase the procurement and the legal team’s efficiency and accuracy. Therefore, it will save a lot of time for you to pursue strategic activities.
2. Ignoring Force Majeure policies:
It is true not just for new suppliers but also for existing suppliers, which is most relevant now than ever. In the face of a pandemic, most organizations experienced a consequential business impact.
Hence, one immediate strategy for mitigating contractual risk exposure should be to identify existing contractual terms with Force Majeure clauses. These clauses provide flexibility to defer, terminate, or renegotiate those commitments, to prevent downside risk.
It is possible to eliminate third-party contract clause risk through an A.I. Contract Risk Bot & Force Majeure Bot, which will take the mammoth task of risk mitigation, reviewing contracts to identify clauses that address extension, termination, exclusivity clauses, and whether or not Force Majeure applies.
3. Avoiding technological innovations:
Many professionals still do not use advanced procurement and automation techniques and rely on obsolete OCR or ERP led procurement.
According to Gartner, autonomous procurement can drive efficiency and savings to new heights when the right building blocks are in place.
Using the right autonomous procurement tools so that you can focus on strategic initiatives by putting routine tasks on auto-pilot mode is an advantage available with the proper use of AI in procurement.
4. Disregarding data risks:
Data security and privacy are critical for contracting parties involved in commercial transactions. It is extremely important to scan through your contracts to identify clauses and provisions that concern your data’s privacy.
Using Artificial Intelligence and machine learning engines, the BOT can verify if the contracts are as per the standard data protection norms, thereby ensuring all your agreements address the consequences of a data breach and comply with critical regulations such as the GDPR and Privacy Shield.
5. Exceeding budget:
Naturally, every organization must keep a tight rein on its spending, and procurement is an area where you need to be especially vigilant. Therefore, there can be many reasons for overshooting the budget, like reckless spending, lack of coordination, and communication.
These common procurement mistakes can be avoided by taking appropriate steps as mentioned earlier. Also, you can combat this common procurement problem with better controls to govern purchases.
Use AI-powered spend solutions to classify and analyze millions of transactions in a few minutes. AI algorithms can help users locate reckless spending and also get suggestive actions. It will avoid most cases of exceeding budgets.
If these procurement horrors are your recurring nightmares, Zycus Merlin A.I. StudioTM is here to address the challenges by providing a comprehensive bot platform where customers can create, train, and launch numerous bots across the source-to-pay suite.
The bot platform comes pre-configured with numerous intelligent functions (think of them as bot-lets). They can be used to configure any bot specific to customer’s needs resulting in a one-of-its-kind configurable AI platform.
To know about our Autonomous Procurement and Merlin AI Suite, contact us at email@example.com.