Do you have risks in your asset procurement and purchasing processes?
Asset procurement and purchasing risks are the potentials for failures of a procurement process. In many cases, procurement risks are also compliance risks and the potential for failures in a procurement process results in business losses and disruption.
Conservative estimates that procurement errors (purchasing the wrong product and/or purchasing the product for a higher price) and a lack of controlled procurement can easily add up to an average 10% ‘error’ cost across all purchase transactions.
Procurement refers to all activities involved in acquiring goods or services, either outright or by lease. This includes acquiring consumables, capital equipment, real property, infrastructure, and services under consultancies, professional services, facilities management and construction, as well as the outsourcing of functions and subsequent contracting.
Asset procurement and purchasing risks and likely consequences
RISK: understatement of the need
- Purchase of unsuitable product and/or service
- Money wasted
- Need not satisfied
RISK: overstatement of the need and/or misinterpretation
- Greater expense
- Poor competition
- Totally unacceptable purchase
- Time lost
- Increased costs
- Possible downtime
RISK: insufficient funding and impractical time-frames
- Delay in making the purchase
- Additional costs for re-tender
- Inadequate responses from tenderers
- Reduced competition
- Delivery schedule not met
RISK: probity issues
- Increased procurement costs
- Misuse of resources
- Most suitable product not obtained
Asset procurement risks are real and can cost your organisation! Conservative estimates that procurement errors (purchasing the wrong product, purchasing the product for a higher price) and a lack of controlled procurement can easily add up to an average 10% “error” cost across all purchase transactions.
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Integrating procurement and budgeting with asset management
Complete control of your procurement process starts at the purchase order and goods delivery, through to deployment, re-deployment and final disposal.
It is essential to have an end to end solution that delivers enhanced intelligence of past, present and pending asset acquisitions and procurements such as:
- Accurately analyse need
- Verify purchase requests from around the company
- Contract negotiations; improve consultation with users and suppliers
- Obtain appropriate approvals before undertaking the process
- Administer contracts that have a longer duration
- Improve forecasting and planning
- Improve communication with potential tenderers
- Implement best practice policies, guidelines and practices
- Maintain an ethical environment
- Disposal of waste products like the packaging
By entering purchase order information directly into your asset register, system users can see at a glance what assets are on order, their cost, what has been received and those overdue. Every step, from budgeting, requisition request, requisition approval, purchase order, goods delivery, to invoicing and conversion of PO items into assets, stock/inventory or services.
Improved budget control and productivity
Match your available expenditure to your procurement schedules and trigger alerts as thresholds are met, so you never overorder or go over budget again. With the automation of administrative tasks across the entire procurement solution, as well as pre-defined processes, permissions and simplified re-ordering, you can significantly improve your operational efficiency and budget control.
- Inventory control
- Asset management and financial planning
- Audit procedures & accurate audit trail
- Purchasing information
- Create linkages between items and vendors
- Equipment planning and replacement management
- Maintenance & warranty information
- Labour and administration costs
- Insurance and disaster recovery costs
- Optimum asset utilisation
Hardcat software solutions take control of your assets, expensive equipment and stock (inventory).
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Thanks for the post about asset procurement and purchasing riѕks, this really helps!