Mistakes in the supplier management process put your company in a poor position with vendors and customers. By understanding the common mistakes of the past, procurement personnel can keep an eye out for them and take measures to prevent them from happening again in the future. Let’s learn from the mistakes of others and take a look at the worst procurement errors of 2018.
E-Procurement to Protect Your Brand
National Public Radio (NPR) News published an article in February of 2018 about a database that names and shames global fishing suppliers engaged in questionable employment practices. The 134-page report from Human Rights Watch reveals poor conditions, forced labor, and human rights abuses in Thailand’s fishing industry. With Thailand as a major seafood exporter, U.S. importers are faced with the problem of shutting abuse out of the supply chain in order to appease customers and maintain a good reputation for their brand. In the modern globalized world where supply chain fragmentation is the norm, production often occurs out of sight. Supplier management software offers solutions for heightened levels of oversight and ethics. Tools like direct document requests and e-notifications of contract lapse dates help retailers source from suppliers meeting certified regulatory standards.
When questions arise, it’s nearly impossible to pick up the phone and reach a dedicated account manager at the supplier. Differences in time zones and language barriers present obstacles to clear communication. Supplier messaging and online chat features offer channels to connect directly with suppliers. Using translation tools, buyers are empowered to ask for further information. Supplier management tools aimed at communication not only help you to meet your business goals, but they ensure that purchases align with your company mission and protect the brand.
Poor Timing in Supplier Management
Another procurement error that made headlines last year had the potential to do a lot of harm. Despite an increase in flu-related deaths, half a million of vulnerable 65-to-75-year-olds in Scotland did not receive this year’s updated flu vaccine. While the Scottish Minister for Public Health blames suppliers for low volumes, records show the National Health Services (NHS) in Scotland began seeking the vaccine too late in the season. This led to a low production volume and it makes our list for worst procurement blunders of 2018. This is a classic case of poor timing and information asymmetry in supplier management. If the Scottish NHS had supplier management software with calendar reminders and automatic detection of warning signs for supplier problems, perhaps it could have been avoided.
Narrow Supply and Production Errors
Our final procurement error from March 2018 details how a Nando’s fast-food chicken restaurant made national headlines in England after running out of chicken. A Nando’s spokeswoman blamed the delivery company but the result was bad press and an embarrassing Tweet-storm for suppliers and the fast-food chain alike. It never looks good when customers rush to social media and complain about your brand by name. The Nando’s case points out the dangers of over-reliance on a single supplier for a major product. Supply chain optimization exists to overcome risks such as:
- Insufficient delivery volume or supply shortages
- Last-minute changes in demand
- Product quality failure
E-procurement software could have helped Nando’s mitigate these risks by encouraging supply chain diversity. By connecting with multiple suppliers, your options open up. Smaller companies who are competitive as they establish themselves in the market can offer solutions to mutual pain points and widen your real selection. Supplier management software is vigilant and can be configured to prompt your procurement team when narrow supply streams occur and it can issue RFPs to find new suppliers under pressure. Thanks to blunder prevention measures, e-procurement can find you new or temporary options at a good value when your main supplier can’t deliver.
Every major procurement error that made the news in 2018 has something in common: the blame game. When a commercial provider makes a mistake, the reaction is to publicly blame suppliers. This last-ditch recovery behavior to save face always comes with negative consequences, especially when they ruin business relationships with major suppliers as a result. Whether your brand is selling fish at the grocery store, providing flu vaccines for the elderly, or feeding fried chicken to the masses, your suppliers don’t want to be thrown under the bus either.
The good news is that e-procurement software prevents bad outcomes by offering tools that enforce contractual regulatory compliance, widen the supply chain, standardize procedures, and improve communication.