Struggling to Spot Maverick Buying? Here’s What Procurement Should Do

Maverick spend in an organization takes place outside the approved buying channels and vendor contracts. It occurs when internal team members continue buying goods from a vendor who is not approved by the procurement team. Or they make a quick purchase to cash in on available discounts and neglect the established buying process.

Maverick spend can also occur due to incorrect pricing. This happens when different business units pay different prices for the same goods, resulting in purchase price variance. 
While maverick spend may seem trivial, it can do more harm than good. How do these unapproved purchases impact procurement and larger business goals? Let’s find out.

What Causes Maverick Buying  

Why do internal teams engage in maverick buying? They might feel there isn’t an easy way to getting what they need. They may find the procurement process too complicated and time-consuming for what could be a relatively straightforward purchase. Or they think that acting quickly is more important for making the purchase instead of going by established procedures.

Long, time-consuming approval processes can lead employees to skip out on formal procurement that may seem inconvenient.

Poor communication can also result in maverick buying. Internal teams often operate in functional silos. In the absence of cross-functional visibility, they tend to bypass established processes to make quick purchases. Teams may not be fully aware of the benefits of contracted purchasing, potential discounts and value-added services.

Additionally, procurement may not have direct control over certain spend categories, leading to off-contract purchases. 

How to Identify Maverick Buying

To deal effectively with maverick buying, procurement first needs to understand where and when it’s occurring. But identification isn’t easy, especially when multiple teams and business units in different locations keep making maverick purchases.

Here are some ways to identify this portion of spend:

• On-demand purchases

Do you have a high volume of on-demand purchases that bypass defined processes? Or is there a large number of ad-hoc purchases with minimal oversight? These are clear signs of teams indulging in maverick buying. 

• Low supplier engagement

Have you seen the number of supplier transactions go down? This suggests that teams often purchase from unapproved vendors. In doing so, they miss out on preferred supplier contracts and negotiated terms.

• Contract utilization rate

How many purchases are made via contracts? And how many are non-contract purchases? Comparing the two shows the contract utilization rate. A low utilization rate shows that teams are bypassing contracts and purchasing from unapproved vendors. The number of contracts up for renewal is another indicator. If this goes down over time, it shows that employees have found alternative suppliers and are circumventing established buying processes.

• Small value invoices

A high volume of low-value invoices is another indicator of maverick buying. This shows that teams are making several low-value purchases without choosing proper buying channels. 

How Maverick Buying Impacts Your Business

Maverick buying may seem like a quick fix for urgent needs. But it often leads to inflated costs, compliance risks, and missed savings.

• Increases risk:  

Different types of risks emerge as teams bypass buying rules and processes. For example, if the team purchases new software without consulting IT, there is a risk that the software does not meet the established data check guidelines.

• Leads to duplicate purchases

Teams may make duplicate purchases without even knowing. For example, your sales and customer service teams each buy a messaging tool for better communication with customers. This means your business has two licenses for similar products. Procurement has to manage two contracts and two vendor relationships.

• Impacts KPIs

Maverick buying makes it difficult for procurement to manage its KPIs. Key criteria such as purchase order coverage and price competitiveness take a backseat as internal teams make random purchases. 

• Increases overall cost

Procurement does not get a chance to negotiate better deals as maverick buys are made without their involvement. This means that businesses pay a higher price for buying goods. Costs associated with managing exceptions, setting up and paying one-time vendors, or post-purchase support add to the overall costs.

• Low-quality goods

As employees make these purchases without formal checks, quality control is lacking. If they receive inferior quality goods, they can’t blame procurement. 

How Procurement Can Prevent Maverick Buying 

Here are some ways procurement can discourage maverick buying.

• Create a clear purchasing policy

Establish clear purchasing policies and ensure that all users understand the policy. These policies should outline when buyers have decision-making authority and when they need to escalate a purchase request.

• Enforce compliance

Find ways to enforce compliance by making the process as easy as possible. Use a procurement software platform to automate approval workflows.

• Create an approved vendor list

Prepare a list of vendors you have already worked with as well as those you have vetted and assessed for risk. Such a list reduces the need for lengthy approvals and allows buyers to make quick decisions.

• Use technology

Leverage procurement software for better visibility of spend. Track spending by departments, categories, and teams to identify instances of maverick spend. Conduct regular audits to identify gaps in compliance and off-contract purchases.

• Streamline approvals

Make approvals more stringent by introducing checks and balances in the procurement process. Include additional layers of approval for any purchases made outside of pre-approved suppliers.

Communication is Key

Are your buyers aware there is a preferred list of vendors? Do they understand procurement policies? 

Better communication between internal teams can reduce maverick buying. 

Procurement must communicate and emphasize the importance of complying with established buying processes. If procurement recommends buying from a supplier, there is a reason for it. Teams are more likely to comply when they understand the reason. 

Also, if there is a change in policy, procurement must share this information with buyers. If, for example, there is a change in the approval process, procurement must inform all buyers. It should also explain the reason for such a change. 

By keeping all stakeholders in loop, procurement can ensure that buyers understand purchase policies and comply with them.