Confusion Reigns In Procurement

Procurement remains one of the most basic building blocks of corporate activity and one that can dramatically impact day-to-day operations and, ultimately, margins.

After all, the continuous act of sourcing, buying and maintaining an eye on costs tied to goods and services is one that directly ties into expenses, which can, of course, add up if inefficiencies creep into the process.

To that end, AmeriQuest, which provides procurement and asset management solutions, has some sobering findings tied to a survey just conducted, focused on procurement. The upshot? Confusion reigns among employees surrounding procurement, at levels as basic as how, who and when.

It’s not too farfetched to say that, where confusion is rampant, inefficiencies follow.

In an interview with PYMNTS, Reggie Peterson, director of AmeriQuest’s indirect supply programs division, noted that the confusion over procurement is “general, and it is confusion over who does what.”

Indeed, the survey itself, which sampled 2,000 screened respondents directly involved in the procurement process, showed that transparency is lacking within organizations. Key issues, noted the executive, stem from the fact that key people involved in the procurement process “sometimes do not have a seat at the table” when it comes to discussing strategy or process with the uppermost echelons of management, such as CEOs or CFOs. Without direct discussion with these key decision-makers, tracking expenses — and an ongoing dialogue on how to manage those expenses — can be a conversation of key importance that falls by the wayside.

Lack of clear direction and firm-wide strategy on procurement means that what Peterson termed “dark purchasing” becomes a side effect and one that leads to lost margins as employees make suboptimal purchasing decisions.

A few alarming facts emerged from the survey: Roughly one-third of respondents said that they remained unsure as to who exactly within their organizations had the final sign-off responsibility for procurement. And, said Peterson, 20 percent of those surveyed said that procurement in general, as a practice, had “no visibility within their own firms.” Additionally, roughly a quarter of respondents said that they order supplies on their own and then file expense reports. Peterson said that this also leads to inefficiencies, as much of the reporting and then expense report submissions rely on paper processes across expense reports, invoices and checks for reimbursement. Given the fact that fully 20 percent of those surveyed said their firms have no procurement processes in place at all, clearly, there is room for improvement.

Among the industries that are dominated by such archaic processes, with room for improvement: manufacturing, with far-flung operations and long supply chains, including cross-border, with issues tied to currencies.

Technology can help streamline processes internally and also standardize procurement, said Peterson. Key measures that could find succor in technology and firm-wide standardized policies: rebates and discounts, which, of course, can help cash flow. But, according to the survey, nearly 27 percent said they were aware of rebates but had to seek them out on their own. Another roughly 20 percent stated they were not aware of either opportunity.