The role of procurement common mistakes

Common mistakes

• Assuming JIT eliminates all stock risk

  Thinking that JIT means no risk of stockouts or supply delays.

  Fix itJIT reduces inventory but increases dependence on supplier reliability; businesses must manage lead times and have contingency plans.

• Assuming lower stock costs always increase profit

  Thinking that reducing stock costs automatically boosts profit without considering ordering costs and demand variability

  Fix itExplain that while holding costs fall, ordering costs may rise and demand uncertainty can lead to stockouts, which can hurt sales.

• Confusing spare stock with buffer stock

  Assuming spare stock is the same as buffer stock.

  Fix itSpare stock is extra inventory kept for unforeseen demand, while buffer stock is a planned safety stock to cover lead time variability.

• Assuming lower price equals better value

  Choosing a supplier solely because it offers the lowest price.

  Fix itValue must also consider quality, reliability and potential hidden costs such as delivery delays or poor after‑sales support.

• Confusing procurement cost with logistics cost

  Assuming that all costs incurred during procurement are the same as logistics costs.

  Fix itProcurement costs relate to the price paid for goods or services, while logistics costs cover storage, handling, and transport. Both are separate components of the total cost of a unit.

• Confusing supply chain with supply chain management

  Thinking they are the same thing.

  Fix itA supply chain is the network of entities; supply chain management is the process of coordinating that network to improve efficiency.