Businesses and organizations create procurement processes to prevent waste, fraud and abuse, and ensure they receive competitive pricing, source quality products and receive needed inventory on time.
Through sound procurement processes that boost efficiency, purchasing will know where to source certain types of products so they can be assured of quality and delivery.
In today's business environment, employees often buy on Amazon for convenience even if it's not the best value or from an approved supplier. This requires managers to spend valuable time tracking, emailing and calling employees to remind them about the importance of compliance - purchasing from approved or contracted suppliers. This is especially painful for managers who are responsible for multiple branch locations.
By standardizing a procurement process, management can monitor employee purchases and recognize any cases of noncompliance. Without the ability to monitor compliance, organizations are powerless to prevent waste and may fall victim to poor quality of sourced goods, late deliveries and overcharging.
Procurement compliance is the only way management can ensure its procurement process is working. For example, purchasing departments often put significant time and effort into negotiating discounts with strategic suppliers in order to create a list of approved sources. This enhances efficiency because it takes the burden off purchasing people to negotiate discounts and qualify suppliers every time the company needs to source materials.
Compliance is exceptionally important, as it is the only way the company can be assured it will receive the expected quality at competitive prices.
How procurement noncompliance hurts businesses
Purchasing departments can morph into financial sieves if they lack a strong procurement process or procedures are largely disregarded. Employees who are noncompliant tend to pay too much.
For example, a buyer may choose to source from a favorite supplier for convenience rather than a less expensive approved supplier. Secondly, because of noncompliance, salespeople can take advantage of a buyer's bias towards a certain supplier in order to overcharge.
In egregious cases, the buyer may receive some type of kickback or incentive from the supplier to continue sourcing from them at an inflated cost. Enforcing compliance with an established procurement process makes it possible to identify such cases and stop fraudulent activities.
Procurement noncompliance also puts the company at risk of failure to comply with contracts and, in some cases, governmental regulations. A procurement process ensures that purchasers remain in compliance with all contractual and regulatory obligations. When noncompliance becomes a problem, purchasers may unintentionally skirt the rules, leaving the company exposed to liability.
Noncompliance can also result in buyers not receiving adequate supplies or even the wrong materials. Assuming the procurement procedures have identified the best suppliers and the proper materials, following them is the best way for purchasers to ensure that their internal customers are happy and that the company's projects go smoothly.
Noncompliance can cause inefficiency, internal confusion and needless delays for important projects.
Raiven brings contractors and employees into full compliance
Maverick spending has plagued organizations for decades. The problem does not emanate from poorly designed purchasing processes. In fact, purchasing processes are often carefully created and ensure consistency in both pricing and quality.
However, maverick spending continues because the process of identifying, tracking and correcting it is simply too time consuming. This leaves many managers with little choice except to accept an unacceptably high maverick spend due to noncompliance.
Automated compliance software from Raiven provides the solution to improving procurement compliance. For example, by deploying automated software, procurement managers can determine the percentage and sources of maverick spend with the push of a button.
Raiven's technology acts as "digital guard rails" that recommend approved supplier products when buyers are searching on non-approved e-commerce websites. For example, if a buyer is looking for a toner cartridge on a non-approved supplier website, Raiven will alert the buyer in real-time of a lower price from their approved supplier. This automated approach to compliance puts the accountability with the buyer while providing the purchasing group with real-time data on who is following procurement policies and who is going rogue.
Raiven's resulting data analytics show how maverick spend affects the procurement department and entire company, providing data that helps managers improve processes and enhance compliance. Managers can quickly intervene when buyers get off track and require them to get back into compliance.
It's a challenge when purchasers go rogue. Often, management has invested substantial time and resources in qualifying suppliers, negotiating terms and providing internal customers with the materials that work best for them. You manage such issues with Raiven's program, which negotiates the supplier contracts for you.
Raiven created an exclusive partnership with Avendra®, a leader in purchasing programs and supply chain management, to deliver deep discounts on MRO parts and materials by aggregating spend from contractors and building engineers.
Avendra handles the contract negotiations and supplier management, while Raiven provides the MRO expertise and a digital purchasing platform that streamlines the searching and buying process.
When noncompliant purchases become a regular occurrence, it can seem as if this work had never been done. As a result, employees waste time reinventing the wheel, resulting in inefficiencies and increased costs.
Raiven provides the software solutions that help companies track purchasing activity and succeed in quickly improving purchasing compliance. This creates a system of accountability that managers can efficiently administer.
What once required hours of data collection can now be achieved in minutes. This decreases managers' response time to noncompliance, allowing them to prevent it from getting out of control. Procurement processes create efficiency, provide consistency and save you money.
If you want to improve compliance, contact Raiven for a seamless solution.
