Avoid These Common Procurement Service Mistakes
5 MIN. READ
The competition is brutal out there for HVAC contractors. Every opportunity for greater efficiency makes a difference, especially as prices for equipment continue to rise. A well-managed procurement service process is one highly impactful way contractors can reign in unnecessary costs, maximize profits, and leverage pricing and relationships in their supply chain. Through an efficient, technology-driven procurement system, HVAC contractors can get better cost forecasts and control.
The best way to optimize your own process is to understand what does not work and steer away from it. Here are the top six HVAC procurement mistakes your process needs to avoid at all costs.
1. Neglecting supplier relationships
This one is simple, but too many companies get bad deals because they lack robust relationships. A long-term positive supplier relationship benefits both an HVAC contractor and its suppliers. Predictable purchasing as well as volume-based pricing are the obvious benefits. Leeway in exact deliverables and priority on lead times are harder to quantify but make a massive difference.
Working with preferred suppliers also provides a heightened level of support to help deal with procurement service issues that otherwise could impact your customers. Maintaining a strong supplier relationship helps keeps your procurement management aligned with your overall organizational goals. In short, by being a valuable customer, you generate reputational capital that you can leverage.
2. Exceeding the budget
Here is another one that sounds obvious - exceeding budgets leads to procurement nightmares. But why do so many HVAC contractors fail to reign in procurement service budgets?
It is mostly about metrics. Businesses always track costs and revenue but fail to account for things like DIFOT (delivery in full, on time) as well as indirect costs (trucking, employee or labeling errors, rogue spending, etc.).
There is always going to be an unexpected item or two on your budget sheet. Whether it is a sudden price change, supply chain hiccups or inflexible contracts that are more trouble than they are worth, the key is to track all of it and know which items you can take off the list without hurting your bottom line. Pick your battles when it comes to budgeting, and use technology to count every penny.
3. Leaving other departments out of the loop on your purchasing decisions
Making major purchasing decisions without the input of all stakeholders puts you at risk for multiple problems. Not only might it create conflicts within the organization, but you can also miss out on the key expertise that other teams have.
In addition, buy-in from other departments helps you notice potential inefficiencies in any given purchase. This is especially relevant for subcontractor management and any department that works directly with customers or logistics. Not to mention, input can help increase adoption rates for new technologies across the board, which helps with analytics and drives efficiencies even more.
4. Failing to adopt and enforce purchasing compliance policies
Once you have set budgets and procurement policies, it is crucial to ensure compliance. Rogue spending is not just an issue for building managers - it very much exists in HVAC organizations.
For example, you might have an employee who believes they are finding a better deal or a faster supplier. Or maybe they feel that it is a better product. So, they make decisions with the best of intentions but end up hurting your bottom line nonetheless.
However, the scope of efficient procurement service goes beyond single transactions. The lower-priced product may be of inferior quality or may be for a limited supply.
The best pricing structure comes from enforced policies with preferred suppliers as part of an ongoing relationship. Defined purchasing compliance policies allow you to take advantage of preferred pricing arrangements and help you build the relationship capital mentioned earlier.
5. Not having a force majeure policy
This one has two sides. Firstly, common force majeure contract clauses can be overused by suppliers to excuse nonperformance. In the wake of the pandemic, many suppliers invoked force majeure to excuse product delays. If you have long-standing outlined contracts, it is entirely appropriate to challenge delays or non-deliveries under an asserted force majeure. This one is all about picking your battles carefully and knowing what does and does not fall under the "acts of God."
Secondly and most importantly, you must have a force majeure policy for every high-volume contract. What happens if they fail to deliver? Establish backup options and keep up arrangements so you know exactly how to avoid scrambling for solutions if a supplier fails to deliver. Otherwise, you might be in for huge urgency premiums for last-minute replacements.
6. Failing to use the right procurement service technology
Optimal procurement practices are all about digital tools and analytics. You do not have to keep a paper trail of every single purchase when you have digital records and automated price alerts. Procurement management technologies use data to help your team find the best pricing for supplies.
The Raiven browser extension is a cloud-based platform that allows your users to find the exact product needed at the best price while staying in full compliance with your procurement policies. It enables fast searching and purchasing, so your employees spend less time sourcing products. Instead, they can focus on delivering results, services and better customer support.
How Raiven can help
Raiven stops rogue spending by enhancing the eProcurement experience. With the Raiven browser extension, an employee can search for a product on any site, and Raiven will analyze it.
It will then identify and find similar products with better value/quality offers. In addition, the browser extension provides these alternative products from your preferred suppliers, making it easier to track and create long-term relationships as well as stay in compliance.
This technology also helps you control purchasing outcomes. You get access to Raiven Marketplace, with a robust list of pre-vetted suppliers, allowing you to take advantage of specials that you may have missed out on otherwise.
Raiven has an exclusive partnership with Avendra, a leader in purchasing programs and supply chain management. This allows you to take advantage of pre-negotiated pricing incentives and discounts based on larger aggregates than your business would typically spend.
HVAC contracting is an increasingly competitive business that relies on well-managed supply chain logistics and procurement service. Contractors can increase profit margins by avoiding common procurement mistakes and investing in technology that helps streamline and automate the process. Learn more about how your HVAC business can experience the power of cloud-based procurement management and optimization by contacting Raiven today.