In this article, author Julien Nadaud tells how to strengthen your procurement strategies and make them easier with just one word: agile. He lays the basic groundwork to rebuild your present agile procurement strategies. And he concludes by summarizing two case studies surrounding specific examples of agility in action. For both these companies, procurement agility made all the difference…
It is easy to get behind the idea that investing in agile procurement is a good idea. It sounds cool for one thing. But not supporting agility also implies a preference for the alternative, calling to mind words such as inactive, rote, lethargic, and rigid. No one is going to campaign on that platform – not if
And yet reaching consensus about the desirability of agile procurement is only the beginning. Moving from concept to practice requires far more clarity around what agile is, exactly, and what it looks like in action. We recently reached into our network of practitioners and thought leaders and asked: “What is ‘agile’ procurement?1 What benefits does it offer and what do procurement professionals need to think about before they can adopt agility as their standard mode of operation?”
As you might expect, their responses covered many perspectives and
Although this informal survey had an element of “ask many people, get many answers” to it, each definition was, in its own way, correct. Despite the visionary nature of the ideas we received, few were clear on what procurement must do to become agile. This (common) lack of a connection between ideas and actions makes it nearly impossible for procurement teams to successfully execute the transformation required to systematize agility. And so, we continue to ask, “Can you walk the talk?”
Lest we fall into the same trap, here are some examples of agile procurement approaches:
- Agile procurement addresses
big picturebusiness needs rather than automatically finding solutions comparable to what is in place and re-bidding the demand. This might result in the selection and implementation of a solution that looks completely differentlythan what has been done in the past but satisfies the same objective.
- Agile procurement understands the cost pressures and opportunities of the supplier markets and can collaborate with stakeholders to ensure their requirements ‘learn’ from supplier feedback - taking advantage of all cost efficiencies on a detailed (i.e. specification) level.
- Agile procurement restructures contract terms to incent the ‘right’ behaviors from suppliers, bringing their interests and the business’ interests into alignment.
- Agile procurement recognizes the value of speed as well as
savings,and knows when to apply traditional strategic sourcing, when to simply extend or renew an existing contract, and when the demand itself should be questioned.
The difference between traditional and agile procurement is deep. It requires more proactive thoughts and constant
Is “no” the only answer?
If we go back to the idea of defining agile by identifying what it is not, we can start by looking at the most common scenarios in which we say “no” or “can’t” in response to a request or opportunity. Examples of responses might be:
- No, you can’t just sign a contract with that supplier! We need to run a full sourcing process and vendor qualification first.
- No, we can’t help you with this negotiation; you went too far down the road without getting us involved.
- No, procurement has never done that before. We don’t have an established framework for trying that approach. You’re on your own.
Be kind to yourself -- making this shift is significant at many levels and cannot be done all at once. If your objective in becoming “agile” is to enable the business to make smart moves faster, you can adopt some practices without discarding established ones or implementing
Streamline to get leaner and faster
Negotiate the contract during the sourcing process, not after. When procurement manages supplier selection as though each step is a prerequisite to the next, it elongates the process and sometimes requires the team to double back. Why select a supplier through sourcing and then start hashing out the contract?
Keep suppliers involved as long as possible. There is no law that says procurement can only discuss terms and conditions with suppliers they will definitely contract. That’s just a legacy practice that emphasizes caution over speed. Keep as many suppliers on the table as long as possible, and prevent surprises and delays by getting right down to business from the outset. You can even send your master contract templates as part of the RFP documents.
Eliminate anything that will not affect the outcome. Doing things “because” is the antithesis of agile. Look at RFx2 questions and supplier screening forms. Chances are, the team only reviews the responses to a few of them, because they are the only ones of interest. Get rid of the others or use questions from a library with auto-scoring.
Agility requires a high level of context sensitivity. The big picture is important, but if it is allowed to sit at the center of procurement’s efforts, our work becomes too unwieldy to maneuver. Less is more as the saying goes, meaning that lean and fast are more aligned with agility than comprehensive and standardized.
Two organizations put agility to the test
Two companies wanted to improve their procurement agility. One used
Resolving processes without practice: By simplifying procurement processes and focusing on real-time data availability, the company with
Because their operations now follow the revamped processes, their financial controllers improved their budget adherence and their accounting personnel optimized the closing process and reduced processing time. Rather than doing administrative or overhead tasks, procurement became the lifeblood of data, decisions, and demonstrable results.
Establishing structures without slowdowns: Lack of purchasing processes and spend visibility was stifling the second company’s ability to make decisions and secure approvals at a reasonable rate. This led to costly delays, internal confusion, and an inability to seize innovative opportunities as they arose.
So, they integrated technology to fully modernize their procurement organization. The technology enabled them to increase access to information while centralizing approvals. As a result, suppliers were more than willing to increase investment in collaboration thanks to the acceleration and simplification of the payment process. Procurement structured and sped up
In both cases, procurement had to make fundamental changes to process and technology. More importantly, perhaps, is that they measured their success by how well procurement’s increased agility improved access and usability for their key stakeholder groups: buyers, suppliers, finance and accounting. The agility enabled by procurement was measurable through real enterprise results.
Agility defines your next wave of success.
As Ardent Partners wrote in their CPO Rising 2015 report3: “The procurement teams that adeptly connect their tools, resources, and expertise to support the evolving needs of the business will succeed above all others. Agility will define the next wave of procurement success.”
Procurement’s efforts and approaches must be flexible. We don’t need to replace our current methodologies and frameworks with “agile” methodologies and frameworks. Instead, we need to know when to apply a framework and when to roll with a dynamic push into uncharted waters. As the conditions around companies and their supply chains change, procurement must be ready and willing to respond and move in kind – at least if they are interested in “winning.”
2. RFx is a term that captures all references to Requests for Information (RFI), Requests for Proposal (RFP), Requests for Quote (RFQ), and Requests for Bid (RFB).
3. CPO Rising 2015: The Agility Agenda (Report) is Now Available, Andrew Bartolini, April 17, 2015
A global specialist in eProcurement and spend management, Julien was the founder, chairman
Determine, Inc. (NASDAQ: DTRM) is a leading global provider of SaaS Source-to-Pay and Enterprise Contract Lifecycle Management (ECLM) solutions. The Determine Cloud Platform provides procurement, legal and finance professionals analytics of their supplier, contract and financial performance, as well as technologies that empower customers to drive new revenue, identify savings, improve compliance and mitigate risk.