Procurement and Purchasing
6 min read
At the early stages of a company, procurement is typically managed by a finance manager or controller. However, as a company grows, the advantages of establishing a dedicated procurement function become increasingly evident. A dedicated procurement team can ensure that business purchases are efficiently sourced, negotiated, approved, and managed at scale.
Nevertheless, change management in growing companies can be challenging, and forming a procurement function can bring about various complications if not handled carefully.
In this article, we’ll explore five common pitfalls when starting a procurement function and offer strategies for how to avoid them.
In early-stage companies, procurement is often handled by the finance or IT department. When an employee or team needs a product or service, they request assistance from finance, which then manually approves the purchase.
However, as companies grow, the need for more robust spend management becomes more necessary, with more complex technical, legal, cross-functional compliance, and financial considerations.
Bringing on a dedicated procurement professional can help manage spend more effectively, ensure costs are controlled, and minimize risks.
Traditionally, starting a procurement function will require a company to:
For a free step-by-step guide on how to create an effective procurement function at your organization, check out Zip’s ‘Procurement Zero-to-One Checklist: Essential Steps for Financial Leaders’.
Ad-hoc and unstructured procurement practices can lead to inefficiencies, lack of visibility, and control issues. This often results in duplicate purchases, uncontrolled spending, and difficulties in tracking procurement activities.
Solution: Implement a formalized procurement process with clearly defined procedures and approval workflows. Zip’s intelligent spend insights can provide transparency into procurement processes, helping to identify inefficiencies and optimize strategies.
Not involving key departments such as finance, legal, and IT can result in compliance issues and overlooked risks. Effective procurement requires input and coordination across various functions.
Solution: Foster cross-functional collaboration by involving all relevant departments in the procurement process. Zip’s collaborative workflow engine facilitates communication and ensures alignment across the procurement function.
Relying on outdated or insufficient tools hampers procurement efficiency and transparency. Manual processes are prone to errors and do not provide real-time visibility into procurement activities.
Solution: Invest in advanced procurement technology that supports automation and real-time insights. Zip’s procurement capabilities, including automated compliance monitoring and real-time alerts, enhance efficiency and transparency.
Employees may resist new processes due to cultural conflicts or lack of understanding. This resistance can hinder the successful implementation of a formal procurement function.
Solution: Engage employees early in the procurement transformation process, providing training and highlighting the benefits of the new system. Zip’s user-friendly interface and intuitive processes can help ease the transition and encourage adoption.
Without defined procurement KPIs, it’s challenging to measure success and drive continuous improvement. Lack of clear metrics can lead to misaligned objectives and underperformance.
Solution: Establish clear procurement KPIs to track progress and measure success. Regularly review these metrics to identify areas for improvement and ensure alignment with organizational goals. Zip’s powerful dashboards for spend insights can help monitor performance and optimize procurement activities.
Establishing a robust procurement function is an important step for driving value and achieving long-term success at scale. By addressing common pitfalls and leveraging advanced procurement solutions like Zip, organizations can enhance efficiency, reduce risks, and optimize spend.
By implementing these strategies and utilizing Zip’s advanced spend orchestration capabilities, finance and procurement leaders can build a resilient procurement function that drives cost savings, fosters positive supplier relationships, and adds significant value to their organization.
Request a demo to see how Zip can transform your procurement function and help you avoid common pitfalls.
A step-by-step plan to streamline procurement, save money, and drive growth.
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