Agile Procurement – Need of the Hour

With intensifying competitive dynamics, businesses need to be able to adapt quickly and efficiently to changing customer demands, technological advancements, and environmental and geopolitical factors. Traditional procurement methods, which are often rigid, bureaucratic, and slow, may hinder the ability of organizations to ensure a smooth flow of supply chain operations. Agile practices can help companies achieve better procurement outcomes.

Agile procurement is an approach to purchasing goods and services that aligns with the principles of agile methodology. The approach helps transform traditional procurement practices into a process that 1) encourages flexibility to changing requirements; 2) fosters collaboration among stakeholders; and 3) enhances responsiveness to geopolitical or macroeconomic risks. Thus, agile procurement aims to deliver value faster, reduce risks, improve quality, and foster innovation.

Agile Over Traditional

Traditional procurement methods involve lengthy processes of planning, budgeting, tendering, contracting, and monitoring. These also tend to focus on minimizing costs and risks rather than maximizing value and innovation. This approach may work well for stable and predictable projects, but complex projects with dynamic requirements need to be handled differently. This is where agile procurement outshines through the following aspects:

Iterative and Incremental Approach: This entails the systematic breakdown of a procurement process into smaller, manageable phases. The approach helps foster an environment for ongoing feedback, refinement, and adjustments as needed.

Cross-functional Collaboration: Collaborative partnerships among diverse stakeholders are key for driving efficient procurement strategies. The agile approach involves active discussions and engagements among procurement teams, end-users, and suppliers. These collaborative teams maintain close connections throughout the procurement journey, ensuring a comprehensive understanding of requisites and swift resolution of challenges.

Prioritization and Adaptability: Business demands change frequently for most organizations. The agile methodology focuses on achieving high-value outcomes by meticulously prioritizing requirements depending on stakeholder interactions and adapting to evolving needs and circumstances. This approach allows for strategic modifications based on responsive feedback.

Transparency and Communication: The agile methodology essentially involves collaboration with multiple stakeholders. Hence, it is important for procurement professionals to ensure transparency and effective communication. Routine gatherings, updates on progress, and feedback sessions play a pivotal role in maintaining alignment and promoting well-informed decision-making.

Leveraging Data and Analytics: Procurement professionals have access to abundant data, available from within their organizations or from external sources. Big data analytics tools help procurement professionals rigorously analyze data to make informed decisions amid changing requirements.

Agile for All?

The agile procurement methodology offers numerous benefits. However, it is not a one-size-fits-all solution and needs to be adopted on a case-by-case basis.

Here are some best practices and tips on how to implement agile procurement successfully:

• Define the problem and desired outcome clearly, and align these with procurement goals.
• Establish a cross-functional team of representatives across departments, functions, and levels. Empower them to make decisions and solve problems autonomously.
• Use agile tools and methods such as user stories, backlog management, sprint planning, and daily stand-ups to plan, execute, monitor, and improve the procurement process.
• Embrace change and uncertainty as opportunities rather than threats. Establish protocols to be flexible and responsive to changing procurement requirements and feedback.

Success Stories – Agile Implementation

Agile procurement practices have already been embraced by many companies across the globe.

Cisco: The global leader in digital communications adopted the Scaled Agile Framework (SAFe) and implemented three agile release trains within the Subscription Billing Platform (SBP) – one each for enhancing capabilities, addressing defects and fixes, and managing projects. The primary goal was to foster collaboration in the development and testing of compact features within a single Software-as-a-Service (SaaS) component and subsequently deliver these to the system integration and testing teams.

Cisco successfully launched the latest SBP release without the need for any overtime. 

Key Results 

• Improved time to market by 20%
• Reduced critical and major defects by 40%
• Dropped Defect Rejected Ratio (DRR) by 16% 

Procter & Gamble: The consumer giant partnered with Trimble to revolutionize transportation procurement through agile practices. Trimble will develop an agile transportation procurement collaboration platform to help enhance Procter & Gamble’s existing supply chain solutions. 

Key Objectives

• The platform will foster closer shipper-carrier relationships, expedite contracting, and increase the pace of business transactions while promoting cost-effective freight movement.
• This collaboration capitalizes on P&G's industry expertise and Trimble's transportation technology experience, aiming to reshape and connect the North American transportation industry through efficient, smart solutions.

Philips: The global health-tech company’s agile procurement strategies help it innovate and transform its products and solutions to address various health challenges and improve people's lives. Philips has a culture of co-creation and experimentation, where it involves its customers, suppliers, and partners in the design and development of its offerings. Philips also uses agile methods and tools to cut procurement cycle time, reduce supply risks and costs, and enhance customer satisfaction.

Agile Recommendations

Several other multinational corporations, such as Toyota, Ford, Unilever, IBM, Ericsson, Mitsubishi, and Siemens, have successfully adopted and experienced positive outcomes from the agile methodology. Hence, it is recommended to initiate the shift from a conventional setup to an agile one by engaging a technology provider that best suits your needs, and to accompany this with a dedicated implementation support team for overseeing and managing the entire process along the value chain. 

The key areas to focus on are: 

• Business process outsourcing
• Shared service centers
• Leveraging existing and disruptive technologies
• Acquiring requisite procurement suites
• Speed-to-market and margin improvement through supplier collaboration
• Supplier lifecycle management and innovation
• Mapping procurement capabilities against evolving business and market requirements
• Reducing third-party spend across indirect and direct materials categories through strategic sourcing, contract rationalization, and working capital optimization
• Measuring and improving total landed cost and social/environmental impact across geographies and product/supplier life cycle

Agile procurement is a transformative approach to vendor management and acquisition. By prioritizing collaboration and iterative progress, agile procurement fosters dynamic partnerships between buyers and suppliers. As organizations continue to seek ways to navigate increasingly complex and dynamic marketplaces, agile procurement will facilitate flexibility and adaptability to enhance value creation. However, challenges may arise in implementing agile practices, particularly in legacy set-ups that are accustomed to rigid processes. Effective change management and a commitment to cultural shifts will be key in maximizing the benefits of agile procurement.