Michael Dant, the director of sales and marketing for YPurchasing, shares four predictable purchasing pitfalls and how to combat each.
YMCAs everywhere are quantity purchasers for products and services like fitness equipment, janitorial products, office supplies and childcare. However, to meet supply and demand needs quickly, Ys unknowingly fall prey to inefficiencies that ultimately cost time and money. Here are four predictable purchasing pitfalls and ways to combat each.
1. Rogue Spending
Rogue spending is defined as spending without formal oversight or approval. It’s unmanaged and uncontracted spend by employees, occurring outside of procurement mandates and contracts. Rogue spending happens when procurement policies aren’t in place and expectations aren’t communicated. On average, 30-80% of an organization’s spend is off contract.
Effective ways to mitigate rogue spending:
- Set clear and documented purchasing standards and expectations.
- Regularly review existing vendors.
- Take advantage of programs and pricing set up for the YMCA.
- Utilize existing technology that helps manage programs and vendors.
2. Difficulty in Analyzing Spend
Spend data can be difficult to retrieve and assess, especially if there are no benchmarks. Given that 40-80% of an association’s costs are attributed to external spend, spend analysis is a powerful tool to increase profitability and help the association meet its financial goals. Some barriers to good spend analysis are incomplete and have decentralized data, paper invoices and receipts.
Effective ways to analyze spend:
- Utilize an enterprise resource planning system to organize and automate the process.
- Determine permanent benchmarking data.
- Seek out an organization that specializes in spend analysis.
3. Purchasing Ambiguity
Purchasing ambiguity is a response to the absence of clearly defined purchasing policies and procedures. Employees “make it up as they go” to get their job done, which often ends up costing the association time and money. Like rogue spending, purchasing ambiguity also risks higher prices and violating existing contracts.
Effective ways to eliminate purchasing ambiguity:
- Create an official print and online catalog of approved vendors and pricing.
- Leverage an online marketplace of approved vendors.
4. Unverifiable Savings
Unverifiable savings is the result of a lack of vendor accountability and absence of purchasing process standards. There’s a common assumption if a product or service is advertised as having a savings then there is one. In reality, if you aren’t tracking and benchmarking prices, your savings can’t be quantified or verified.
Effective ways to verify savings:
- Implement an effective ERP system.
- Review vendors, products and pricing consistently.
- Partner with a company that specializes in assessments.
To shape your Y to be efficient and successful, make time to identify and examine these common challenges. The sooner you minimize added costs and employee overhead, the sooner you can maximize your budget and overall stability.
