5 Limitations of Traditional Procurement Process

Organizations normally purchase items from numerous vendors. Procurement experts handle the details of getting these materials purchases at ideal costs. Setting up reliable procurement strategies and techniques empowers a private company to adjust its purchasing system to its long term objectives and goals. 

Procurement managers/ supervisors identify the requirement of what to buy, total buy orders, negotiate delivery times, get items and administrations from providers, survey and acknowledge things and endorse supplier payments.

Managing procurement as an integrated function can draw a positive as well as a negative effect on a business. Procurement can yield different advantages whenever utilized successfully with a decent procedure. But poor procurement processes can lead to cost organizations a billion dollars.

Some limitations of traditional procurement are:

High Costs: There's no competitive offering, which involves sellers contending to offer the products at the most minimal cost to benefit the purchaser. The firm additionally may acquire high search costs when looking for data about the most solid and least expensive suppliers.

Quality Standards: Sourcing from a single most vendor can compromise on the quality standards of the product that is procured. This may increase wastage and in general operational activity costs, leading to a decrease in the organization’s profitability, competitive advantage, and customer loyalty.

Increased Complexity: Generally, the procurement process becomes more complex due to shortage, delays, and supply chain disruption.

Limited Stock Supply: Expecting products from only a single seller can is a risk for an operating business. The supplier organization may neglect to convey the correct amount at the stipulated time, prompting to stock-outs. These stock-outs may prompt loss of sales, lower benefits, and loss of customer goodwill as well as loyalty.

Time Consuming: The most concerning problem faced in the traditional procurement process is that it consumes a lot of time for both the vendors and the buyers. This ultimately affects the productivity of the organization.