What is maverick buying and what impact does it have on purchasing?
Purchasing-Department defines the suppliers and ensures a uniform procurement process. Nevertheless, it happens time and again that the finance department receives invoices from unknown suppliers. This situation is known as maverick buying. Find out what the reasons are and how you can deal with them.
Explanation of Maverick Buying
Maverick buying can occur in different forms. These are shown in the following diagram.
- Bypassing purchasing (#1): The employee selects the supplier himself and negotiates conditions. Purchasing is completely bypassed and only becomes aware of the process when the finance department makes a query (we don’t have an order in the system).
- Bypassing the framework agreement (#2): Purchasing is included in the supplier selection process. However, the conditions of the contract are not used. For example, alternatives to the negotiated parts are purchased or the already negotiated prices are not used.
Uncontrolled purchasing by the employee that bypasses the specified procurement process. The term maverick is derived from the cattle breeder Samuel A. Maverick (1803 – 1870), who did not brand his cattle, unlike was customary at the time.
Reasons for Maverick Buying
Why is the purchasing or procurement process not being used? There can be various reasons for this:
- Ignorance: Employees do not know the procurement process and framework agreements with suppliers
- Total costs are not taken into account: The costs from the part and the procurement process are not taken into account. Therefore, a cheaper part or item is chosen and the high costs of the procurement process are disregarded.
- Subjective perception of the specialist department: The specialist department is of the opinion that the parts from another supplier are more suitable or that there is better personal contact there
- Employee experience: Due to a lack of trust and bad experiences with the focus supplier, the employee will opt for another supplier
- Availability: Lack of availability of a certain variant or, in the case of an assembly assignment, the defined procurement processes cannot be used due to time pressure.
- Cooperation: Purchasing does not see itself as a partner of the specialist departments and focuses on the key figure “savings”.
- Usability: The systems or processes used are difficult for employees to operate
What are the disadvantages of maverick buying?
The consequences of buying wildly at the point of purchase have a financial impact on the company. The following disadvantages can be cited:
- Increase in process costs, as goods receipt, finance department and purchasing have to carry out unnecessary activities
- Purchasing cannot take purchased parts into account in supplier discussions
- Due to the invisible demand, Purchasing cannot define the appropriate suppliers or framework agreements in supplier management
- Legal certainty for complaints
- Risk management by the purchasing department is not effective
- High number of suppliers
- Lack of cost transparency
How is the maverick buying rate calculated?
With the maverick buying rate, the question arises as to which key figure should be recorded? As described above, there are two types. The purchase bypassing the purchasing department or the purchase bypassing the framework agreement.
vThe following formula can be used to quickly calculate the purchase bypass. In my opinion, you need a clear internal definition and a suitable system that makes the definition evaluable for the rate for the “purchase bypassing the framework agreement”.
You can determine the purchasing volume via your procurement system. With a purchasing volume of 1.0 million euros and a financial volume of 1.4 million euros (settled invoices), you get a rate of 71%. According to the study by Mercateo and HTWK Leipzig, your company would therefore correspond to the maverick buying rate of companies with a non-standardized and manual purchasing process.
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How can maverick buying be prevented?
The approaches range from consistent monitoring and sanctions for violations (confrontational) to perceiving the employee as an internal customer (partnership-based). In this case, Purchasing sees itself as a service provider that wants to inspire the employee. Depending on the approach, the following approaches can be implemented:
- Introducing and expanding electronic procurement
- Operate C-parts management
- Reduce free text orders and map requirements via supplier catalogs
- Establish clear, simple, coordinated procurement processes with the specialist department
- Intelligent supplier management
Conclusion
Maverick buying owes its name to a cattle farmer who did not follow the rules of the time. Maverick buying can be caused by reasons such as the employee’s ignorance or the lack of usability of the purchasing system. This has a negative impact on the company’s success, as purchasing depends on the transparency of requirements. Only on this basis can purchasing be managed effectively.
Many approaches describe that the solution is to control the employee or department in order to get a grip on maverick buying. I am of the opinion that the maverick buying rate represents the ability of the purchasing department to manage the specialist departments. Because if employees and specialist departments are involved and their needs are met, then the rate will automatically fall. This is because the user or the specialist department is the real decision-maker. Why?
Peter Prütting is an expert in value-oriented and digital business development. With over 15 years of sales experience in wholesale, manufacturing and e-marketplaces, he takes a holistic view. His colleagues value him as a customer-centric and focused leader who guides teams through digital change. Away from his day-to-day work, he recharges his batteries by mountain biking.
Sources
- Mercateo, Purchasing study: https://www.mercateo.com/corporate/wp-content/uploads/2017/03/Mercateo-Studie_Indirekter-Einkauf-im-Fokus.pdf
- Wikipedia, Reasons for Maverick Buying: https://de.wikipedia.org/wiki/Maverick-Buying
