How biases in the procurement gave the largest passenger car manufacturer company of India less profits than expected?
Human beings are often seen as bad decision makers because of the tendency to fall for biases. Same is the case for Purchasing and Procurement managers. A research of the car manufacturer’s procurement practices shows that while ordering the optimal number of products, many a times managers tend to under-order. Further it was seen that only this sub-optimal ordering leads to 1 to 5% of the loss in the number of expected profits. The top level management when asked about this said, “We are in a dilemma. We can’t and don’t want to micro manage our employees. We need to know how much it will impact our business before we go and question anyone.”
Another problem in the procurement decisions is many managers tend to make their decisions on the basis of their intuition. This could be the result of lack of experience in devising a ordering policy. And the passenger car company wasn’t willing to rethink its method of procurement till it caused them their profit of more than 1%.
Challenges for the largest passenger car manufacturer of India
1. Challenge of having a robust decision making system
Having a robust decision making system will make more vendors to participate in the procurement process. This was a challenge for the car manufacturer because they weren’t able to avoid a bias which resulted in lesser options, no innovations and no competition.
2. Unconscious Bias
It is common when managers form an opinion and take a decision with a prior knowledge for a product and not by looking at the details. The impact of such decision makings is that the right vendor/seller is not selected by the managers and this could lead to huge losses.
3. Previous relationships with Vendors
This particular car manufacturer or any other organization can’t record of if any of their procurement team members have worked with any of the vendors, have a pre-existing preference of the vendor’s product etc.
How shift to Bonolo revolutionized procurement for the largest passenger car manufacturer of India?
With this car manufacturer coming up as one of the prominent leaders in the automobile sectors, the need of a efficient procurement system was the need of the hour. Initially while evaluating options for a procurement software, the few market leaders could definitely be a choice for them, but the no CAPEX and great efficiency of the Bonolo platform made them choose Bonolo for their procurement.
They now has an increased profit of 7-10% by adopting to Bonolo that makes their procurements simpler and efficient. Bonolo is a online platform that helps buyers to complete their procurement at the click of a button. They now finds ideal vendors from a pool of thousand vendors using the Bonolo’s Artificial intelligence tool. The challenges of bias in vendor selection is reduced due to this.
Other benefits of procurement with Bonolo
1. Bonolo has no CAPEX involved
While other procurement solutions had a CAPEX associated, Bonolo has no CAPEX involved for the shift to its platform.
2. Automated process and involves less of the workforce
Any orgnanisation could now use its workforce for other business tasks as the process of selection of best vendor and auctioning after the RFP is done by Bonolo itself.
3. Get best Vendors
With more than 5000+ vendors registered on Bonolo, our technology helps you get the best vendor and a transparent reverse auctioning method with no hidden charges involved.
4. Hassle free purchase
Bonolo offers a platform where the organizations don’t need to haggle over price quotes or evaluating the technical bids of the vendors.