Procurement: Avoid Being Everyone Else

Introduction

Procurement is a critical activity that helps firms achieve efficiency, cost savings, and strategic success. It is an area that affects almost every part of a company, from day-to-day operations to long-term expansion. A well-executed procurement process may give businesses a competitive advantage, so it is critical to grasp its importance and best practices.

Whether aware or not, many people globally fall victim to the herd mentality. One of the largest examples of this is with new Apple products, specifically the iPhone. Each time Apple releases a new iPhone thousands of people camp outside of stores to be the first to buy the phone before they sell out. Despite being aware of whether or not an Apple iPhone is the best available phone on the market, millions of people buy the product due to its popularity. Another example of people following the herd mentality is with social media. Participating in viral trends, dances, or filters, sharing and spreading information without fact-checking, and following influencers and adopting their recommendations are all examples of people on social media following the herd mentality. Content creators greatly influence their viewers and can cause them to purchase subscriptions or products that they have been paid to advertise. Finally, people follow the herd mentality when it comes to shopping. Days such as Black Friday cause people to buy things they don’t necessarily need, but people are more likely to make impulsive purchases and buy trendy products and popular items they couldn’t afford before. Also, during perceived shortages, people are more likely to make bulk purchases in fear of popular demand causing shortages. This was prevalent with the COVID-19 epidemic and the toilet paper shortages.

What Is The Herd Mentality?

The herd mentality is when someone follows the actions of a group or the general public due to being unsure about their own decisions, and usually is done without much critical thinking.

What Is Procurement?

Procurement refers to obtaining or buying goods and services for business purposes, including sourcing suppliers, negotiating contracts, and purchasing raw materials.

Case Study: Herd Mentality When Purchasing Goods And Services

The herd mentality can also have effects on procurement on a global scale. One such example is when businesses refer to known suppliers for their resources. Whether or not the supplier has the best prices or is the most reliable, due to their demand it attracts businesses. This could affect businesses with less personalization or lower-quality supplies, but it could also affect suppliers. With overreliance on such few suppliers, the pressure could lead them to self-destruct. Businesses need to find a supplier that best fits their needs, not just who is most popular. Another example of herd mentality affecting procurement is with locations. Many companies believe that stores generate profits depending on their location. Stores in more popular areas can gain more revenue, but if the product isn’t on par with the competitors, the location can cause a company’s demise. A priority should be creating the highest quality product, better than all competitors. In that case, locating a store in a popular location can be beneficial. Finally, herd mentality can affect procurement with talent acquisition. Many large companies only hire their workers from big-name universities, or those with resumes that seem perfect. However, this eliminates a large population capable of doing the job that doesn’t have the resources to compete. Searching for capable workers shouldn’t start with eliminating those with the resources to attend great colleges or stack up their resumes. Although they are often great matches with what a company looks for, they shouldn’t be solely looked at when hiring workers. A successful business needs to look past the norms and search for the people who can complete the job at a high level, not just those who look like they can.

With herd mentality affecting procurement globally, it is no surprise that it also affects procurement within New York. One such way is sustainable practices within companies. With New York ranked third among Fox Weather’s most eco-friendly states, there is a high expectation for companies in New York to follow sustainable practices. Although, in theory, it is great for a company to perform sustainable practices, economically, it is unfavorable. Using environmentally friendly resources can be costly, and small companies may find incorporating sustainably friendly aspects in the office space incredibly difficult. Although being sustainable is never a bad idea, being eco-friendly for smaller companies isn’t as possible for smaller companies as bigger companies, so they shouldn’t feel pressured to match norms. Another example of herd mentality affecting procurement in New York is with real estate. New York is home to some of the most expensive real estate in the world. In addition, it is home to some of the highest prices per square foot. Companies may feel pressured to place offices or facilities in more urban areas, although the high costs and competitiveness could cost the company more than it benefits them. It could attract employees as more people would walk by the office. It could also be more convenient for workers to commute to and from work. Simultaneously, it could lead to underpaying the workers as rent for the office will be high. It could also lead to less flexibility and room for error as missed payments on rent could lead to eviction. Finally, herd mentality can affect procurement in New York with technology adoption. New York is home to some of the most advanced technology in the world, and staying on top of the latest technological advancements is crucial for any company to be successful. Although that may be true, there are positives and downsides to having the newest technology. A positive would be the attraction it brings to new workers. Many people are familiar with the latest technology, so it provides familiarity and allows workers to utilize technology to the best of their ability. Another positive would be having the latest features that the newest computers have that can lead to more productive work time. A negative of having the latest technology would be the costs. Not only is buying the technology expensive but replacing damaged or stolen equipment could cause costly trouble too. Another negative would be constantly replacing them with the newest equipment. Companies like Apple or Samsung regularly release new, better products that progressively become more expensive. Always keeping on top of the most recent equipment can be a hassle and very expensive.

Stratagies To Overcome The Herd Mentality

How To Avoid The Herding Mentality In Everyday Life:

Don’t always follow what everyone else does
Take your time to form your own opinions
Recognize that popularity doesn’t mean better

How To Avoid The Herding Mentality When Deciding Which Goods And Services To Buy:

Don’t rely on popular suppliers, but instead diversify
Use key performance indicators to evaluate suppliers
Don’t assume the most common practices are the best ones

What Do You Think?

Have you thought about starting a business? Have you ever found yourself buying something you don’t like due to its popularity? Do you realize how heavily some of your favorite companies rely on certain suppliers?