For about ten years, we have been using the term maverick buying and thinking of ways a purchasing department can counteract it. In procurement management, maverick buying stands for uncontrolled and non-standardized procurement.

A total of 44.4 percent of the opinion poll participants indicated that their maverick buying percentage in the entire procurement process is "less than 5%". Actually, this is also an absolute top value because deviations from the specified process can always occur for reasons of time unless this is regulated by a special fast track. In reality, many companies still have all too many "holes" in the process chain. That's the case for 55.6 percent of the participants.

Maverick buying entails manifold consequences and especially risks for a company.

Essentially, maverick buying means procurement without involving a purchasing department. There are still a lot of people in companies who think that anybody could do the buying – after all, we are all buyers in private life. Yet, it's quite a different dimension or magnitude to make commercial decisions for a company – not only in terms of plain purchasing values but also in terms of warranties, guarantees or auditing security. A company may incur significant extra costs due to non-standardized procurement processes frequently bypassing the purchasing department.

Maverick buying especially increases the number of creditors/suppliers of a company. This results not only in extra administrative expenditures for the purchasing department in managing these suppliers – considering, for instance, the consequences of having to inform every supplier of a new account connection. Also, there will be no bundling effects and sales targets with suppliers will not be reached.

Many companies forego the use of IT systems for their procurement management. But without any IT system, processes remain non-transparent and prevent reporting and thus controlling of expenditures as well. Only major manual efforts will then be able to achieve that.

Maverick buying also has its effects in the accounts payable department. When receiving invoices for the company which cannot be matched with a concrete order, the department will set in motion an internal process to check and audit such invoices and assign them to a cost center or a budget. A liquidity audit or the use of payment terms such as cash discounts can only be applied subsequently – if at all. That means, process costs will increase considerably in this case as well.
 
The biggest risk of maverick buying is that compliance guidelines are not observed. On the one hand, bypassing the purchasing department results in significant non-transparence. Also, the risk of corruption will increase because, for instance, release processes and/or signature regulations are frequently suspended or overruled for a purchase order. Auditing will then be possible only after billing or after service has been rendered by a third party.

In our current survey, we had wanted you to tell us whether an oligopoly forming on the supplier's side would present a threat for your purchasing power.

Just under half of those interviewed (48%) identified this as a problem for their purchasing department. This awareness is also reflected in the results of a study provided on the challenges in purchasing in the food industry which Kerkhoff Consulting conducted with the Institut für Demoskopie Allensbach (Institute for Public Opinion Research) and the Kerkhoff Competence Center of Supply Chain Management at the University of St. Gallen. In this study, even 78% of those interviewed stated that they consider oligopolies forming among suppliers as a future challenge. All the more surprising that more than half currently do not consider these developments as a threat, and just under one third had never given it a thought.

Yet, the oligopoly problem requires rethinking processes in the purchasing departments. Mostly, it is primarily attempted to optimize costs through rigorous price negotiations. But developing oligopolies provide suppliers with increasingly more power in negotiations so that buyers will rarely be able to still realize cost reductions through lower purchase prices.

It's important to think in greater dimensions and find suitable candidates to enlarge the pool of suppliers. Contractual relations with several suppliers provide a prophylactic measure – not only against the consequences of oligopolies but also against the resulting dependencies. Negotiation positions will thus be improved. Also, in case of possible supplier failures, there will be fast substitutes. A mutual trust relationship can be established through long-term collaborations with suppliers.

The survey shows that purchasing departments are not yet well enough prepared for this future development. It also shows that it's important to take measures now to guard against price increases or supply bottlenecks resulting from oligopolies.

Their companies will have a competitive advantage if they obtain products and services by sustainable procurement – that's the assumption by 41% of those interviewed in a study by Kerkhoff Consulting, Allensbach and the University of St. Gallen in September 2009 on the subject of "Sustainability in Procurement". Of the participants in this study, 91 % of the companies are already dealing with this subject; more than 60% have already taken measures in this respect.

Although the group of participants had certainly been different in this interview on our home page (a total of 204 persons participated), it is nonetheless surprising that 43.5% of the participants indicated that less than 20% of their purchasing volume is obtained by sustainable procurement.

But 30.4% of those interviewed also indicated that already more than 40% of their purchasing volume is obtained by sustainable procurement.

When the term is made to include ecological and social standards, it is not surprising that – according to the study by Kerkhoff Consulting, Allensbach and the University of St. Gallen – 78% answered that especially the end customer is the driving force and companies are thus put under pressure to do some serious rethinking.
There are numerous measures to establish sustainable procurement. The supplier relationship management plays a central part. Suppliers with sustainable production must be found, supported and monitored. This applies particularly in case of the geographic distance to a supplier.

Within the scope of the study, additional measures aside from auditing direct suppliers and sub-suppliers were named as follows:
-    Raising awareness of one's own workforce for ecological and social standards
-    Introduction of guidelines for compliance with standards
-    Certification of own products
-    Adjustment of standards for compliance with sustainable procurement

Yet, because of the great number of certifications and quality seals, it is not easy for purchasing departments to select the correct suppliers. That was mentioned as one of the main problems.

Our online opinion poll shows that purchasing departments already deal with the issue of sustainable procurement; but especially in the future, they will have to deal yet much more with it.

This is a very surprising result for us, as a consultancy. Stress tests provide simple means to identify weak points in the supply chain and optimize "bottlenecks" for the future. "Bottlenecks" should especially be known in times when inventories have been extremely reduced and already minimal fluctuations on the sales side have effects on the production supply. Why don't you just simulate a very large, short-term order, a truck accident with important material, or the loss of a supplier due to a fire. Process triggers for "stress" within the supply chain can be manifold ― the effects as well. But like the simulation of extreme situations, such as e.g. driver safety training – a supply chain stress test may help to be prepared for an emergency and react properly in case of need. Or, at least just as important, already known "bottlenecks" can be defused.

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Terms such as "Green Procurement" may certainly be trend words – but not the basic idea behind it. Sustainability, eco-efficiency, social responsibility or carbon footprint are important framework conditions in procurement ― today already and increasingly with a view to the future. Trend analyses as well as the book "Einkaufsagenda 2020"  by the experts from Kerkhoff Consulting have shown how important – for consumers – these subjects are now and will be in the future, and how companies can differentiate themselves from their competitors via implementation of these subjects in purchasing. Additionally, there are changing statutory framework conditions which are forcing companies to act. But the supplier market for these products is growingly only slowly and, seen worldwide, it is unevenly distributed. Although there are enough offers for a product on the market, it may easily be that the product with precise specifications for production, manufacturer, and logistics is only available in small numbers. Early action by Purchasing will then be important and correct.

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