What is Agile Procurement?
Agile Procurement is a mindset, not a process. It is a new way to maximise responsiveness to your organisation’s true needs, how they frequently change, and to react to those changes in real time with a customer centric approach.
Agile procurement is not so much about speed, as many people often think. Nor is it a shortcut, as many people assume - cutting red tape, compliance, process and due diligence to save time.
Simply, it fuses the principles of Agile with the procurement process. It brings the key players together. It defines needs much more closely through collaboration. It concentrates effort and then iterates solutions cross-functionally. It is genuinely customer focused. It tries-and-buys vendors. It works transparently. It decides openly and quickly. And, critically, it captures early business benefits for doing so.
Why is it needed?
The problems that procurement teams endure are long standing. Stakeholders often see long-winded processes, a myopic view of cost, endless tenders, supplier bashing and a growing focus on compliance and sustainability. There seems to be less focus, perhaps, on the business and its core needs.
Yet suddenly, during the early stages of the pandemic crisis, stakeholders saw real responsiveness from procurement teams: a sense of urgency, business problem solving and far less process demands. The risk for procurement now is that stakeholders will want this level of service all the time, not just during a crisis.
In short, businesses need procurement to be more responsive to changing business needs. Not just faster at what they do. Agile procurement can enable this.
Who needs Agile Procurement?
PASA AGILE was able to segment those clients interested in Agile Procurement quite early.
They fall into two distinct primary groups – Proactors and Reactors :
Proactors – These are the proactive procurement leaders, often CPOs, who recognise long-standing procurement problems and stakeholder issues and ongoing problems borne by professional procurement teams – often based around stakeholder complaints of long-winded processes, a myopic view of cost, endless tenders, supplier bashing and a growing focus on compliance and sustainability. There seems to be less focus, perhaps, on the business and its core needs.
Reactors – These are those procurement leaders who recognise the growth of ‘AGILE’ philosophy within their own organisations, sometimes just within I.T. perhaps, and want to align procurement with internal trends and new management thinking.
The curious – are those more broadly experienced procurement managers who are inquisitive on thought-leadership, students of the profession and keen to move forward best practices with or without clear and apparent needs.
When to use Agile procurement?
The best way to view Agile procurement is as one more tool in the procurement toolbox, to be utilised for the right projects at the right time. It is not a universal solution. There’s no need to buy stationery supplies in an Agile way or to purchase complicated services or solutions with clear outcomes using the Agile methodology.
In fact, it works best to unravel complexity, where uncertain outcomes are prevalent, but certain inputs are all too clear. Collaboration pre-contract, not just post-award, can resolve this complexity up front, and better solutions are co-designed at the outset, not mid-delivery and in semi-crisis mode.
Yet Agile procurement cannot over-reach. When both ultimate inputs and outputs are unclear and a chaotic project is possible, then gain/pain share deals, alliance contracting, risk-sharing and joint ventures might work better. Agile procurement works well for the right project, not every procurement task.
The benefits of an Agile procurement approach
The assumed benefit of an Agile approach is speed. And, yes, an Agile procurement approach can save vast swaths of time. It can run a live request for proposal (RFP) or tender in an Agile BIG ROOM WORKSOP in two days and cut a market sourcing exercise from months to weeks. Famously, the flowdays team bought a large IT system in just two days for their client CKW in Germany. The project won several procurement awards.
Yet, the benefits from the CKW project went far beyond just speed and cutting sourcing time from six months to six weeks. They also used less than half the internal resources they normally would in a sourcing exercise, sourcing four times faster than normal, and exceeded budgeted objectives by 20%. Importantly, the time saved brought real business benefit, plus the benefits normally lost to the business whilst decisions were made over months. They also got to try-and-buy the chosen vendor by working more collaboratively – and more transparently – in the sourcing process.
Why Agile Procurement? The Business Case
- Improved Time to Market (days/weeks- rather than months) through reducing elapsed time and self organising
- Agile allows us to better evaluate people and culture
- Agile enables us to drive innovation in developing solutions
- Traditional approaches cost us a lot of money in resourcing, writing, evaluating and admin - AGILE can use much less procurement resource
- They cost suppliers a lot of money which gets added to the cost of any solution/service in the tender process - AGILE costs suppliers less
- Agile provides an opportunity for collaboration to ensure all parties are clear on the opportunity and each solution is comparable
The radical mind shift for procurement is to accept UNCERTAINTY and work cross-functionally.