Where did all the money go? | QPR

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18 May 2018

Where did all the money go?

Every organization buys. Some buy raw materials for their production, others procure services, while some just need the occasional office supplies or milk for their coffees. What is common in all the processes, is that goods and services are typically bought from certain selected suppliers. Very often organizations even have contracts made so that you always get the milk delivered from your local Walmart. Companies that need raw materials in their production are highly professional in their purchasing and have clearly defined processes with thresholds in place. This way they unify the purchasing process to make it as efficient as possible. It also has a significant impact in terms of prices. Suppliers usually grant bigger price reductions when the ordered amounts are bigger. 
And then, the Maverick enters the stage… 
 

What is Maverick Buying? 

Typically, there are three ways to define a Maverick in purchasing process. 
 
1) They buy outside the process from contract suppliers. 
2) They buy through the process but use a supplier that does not have a contract with the company.
3) Both. They buy from uncontracted suppliers and circumvent the process. 
 
You can guess that none of these options are cheap to the organizations. However, they can be extremely difficult to catch and, unfortunately, this happens in almost all organizations. There are ways to tackle Maverick buying, but before you can take action, you need to know what you are countering. 
 

How to identify Maverick buying 

There are some sure give-aways, when Maverick buying is happening. To catch most of the cases, look for these two signs: 

- There’s first a good’s receipt or an invoice and only after that a purchase order was created. How is that even possible? My guess would be, your Maverick picked up the phone and ordered the goods without entering any info in the system. Only when the delivery is in your warehouse, or your finance gets the invoice, someone starts looking into it. 

- You find a purchase order without a contract. It is possible, that there’s just a missing link in your master data. However, I’d look deeper. There’s a very real chance that the contract doesn’t exist, and someone just typed in the order to a supplier that doesn’t have a contract. 

 

How to catch Maverick buying cases efficiently 

I am a firm believer in data. With data we can also catch the Maverick behavior in buying processes. Using process mining to map your buying or procurement process, you can easily see where the process deviations are. Maverick buying still leaves a trace in the system and can be tracked down, when processes are visualized based on data. To catch deviations, you can use rules in analyzing your data. Try for example these rules:
 
-no good’s receipt should happen before a purchase order is created
-no invoice should be created before a PO 
-PO without a contract should not exist (particularly when the procurement is large in quatity and happens regularly)
 
Start tracking down these rules and you will already have a pretty good idea, where did the money go.
 
To find out how to work with the Maverick Buying KPI in practice, check out our webinar below.
 
Want to know more about process mining in purchasing process? Send us a message or book a demo; will be happy to tell you more! 
Marja Rajamäki
Business Development Manager