Guide

What is Agile Procurement and Why You Need It?

    While traditional procurement processes have strong merits, agile procurement is increasingly becoming the most effective procurement method globally. This guide explains agile procurement in detail and how you can successfully implement it at your organization.
What is Agile Procurement and Why You Need It?

Companies have traditionally procured products and services via a time-consuming and document-heavy process requiring evaluation of proposals from suppliers followed by paper-based approvals. Increasingly, however, progressive businesses are moving to a faster and leaner approach based on the agile methodology. While traditional procurement processes have strong merits, agile procurement is dramatically more efficient. As a result, agile procurement and cloud procurement solutions are now conquering the market by offering leaner and faster approaches. 

Buyer and supplier shaking hands in an office setting

Agile procurement is the application of agile software development practices to the management of purchasing activities. It’s an emerging approach that requires companies to rethink their procurement processes to adapt to customer needs and ensure successful product launches. At its core, agile procurement is all about moving away from siloed, disconnected supply chains and building relationships between suppliers, customers, and internal teams, leading to better coordination along the entire value chain.

What Is Agile Procurement?

The concept of agile procurement is not new. The term ‘agile’ means the ability to respond faster to market changes. In the light of a changing market, the purpose of procurement is also evolving. Agile procurement has now become a revolutionary method that transforms traditional procurement frameworks and improves procurement efficiency

Agile procurement differs from traditional procurement on many levels. In the conventional approach, organizations and project managers are responsible for procurement activities. In contrast, the agile method comprises a product owner, a scrum master, and self-managing development teams. The team is tasked with identifying items requiring procurement. Once done, the scrum master facilitates the acquisition of these items. 

In agile procurement, the speed of the work processes takes on the utmost importance. Hence, some steps are combined to ensure that the work gets done quicker. For example, contract negotiations are undertaken during the sourcing process.

According to the CPO Rising Report by Ardent Partners, "Agility is going to be the next wave of success." For a business to witness success, it has to put into practice agile procurement.

People pointing to a laptop in an office setting.

Agile Principles

When taken as a whole, the agile procurement function encompasses all aspects of procurement and helps to ensure that there are fewer delays and more follow-through with existing projects. To determine what agility means in a specific context is not always a piece of cake. Regardless of the situation, these 12 principles of agility are always at the core. 

  • Prioritize customer satisfaction
  • Always welcome changing requirements because change is an opportunity
  • Find synergy between speed and value
  • Collaborate to overcome conflicts
  • Trust team members and give them power
  • Emphasize on face to face communication
  • Use measurable KPIs 
  • Promote sustainable development
  • Continue improvement to ensure agility
  • Understand that simplicity is the key
  • Build self-organizing and self-guiding teams
  • Always leave room for improvement; teams can self-reflect on their performance

Types of Agile Methodologies

There are many agile methods, but the top two popular ones are ‘Kanban’ and ‘Scrum.’ Let’s take a detailed look at both.

Kanban 

Kanban is a Japanese word that means ‘visual board.’ Toyota first developed it as a scheduling system for just-in-time manufacturing. It is a simple method that allows teams to visualize their progress. The process is incremental, where transparency in software development is the critical aspect. It helps the teams see what they have done so far and what is waiting for them. 

Kanban board manages projects by dividing them into three columns. The columns are "To Do," "Doing," and "Done." 

According to The State of Kanban Report 2021, firms of all sizes use Kanban; many survey respondents worked in organizations with 10,000+ employees. 41% of the organizations surveyed were applying Kanban across 10+ teams.  

For the successful implementation of Kanban, you need to introduce six practices. They are:

  1. Visualize the workflow
  2. Limit work-in-progress (WIP)
  3. Manage the workflow at a sustainable pace
  4. Make process policies more transparent
  5. Implement feedback loops
  6. Collaborate to implement changes based on scientifically proven methods

Scrum 

Scrum is a framework that helps teams collaborate effectively. It takes its name from the famous rugby formation in which players interlock their arms together and push forward. The methodology encourages groups to self-organize and learn through shared experiences.

Scrum breaks down tasks into ‘sprints.’ A sprint is a time-boxed period of one week to one month. During this period, teams aim to complete a pre-assigned set of tasks. As mentioned earlier, a scrum team has three primary roles: product owner, scrum master, and development team. 

The primary goal of this agile method is to meet customers' needs by effectively working as a unit. So, Scrum aids with the progress of projects through a series of sprints. 

The State of Scrum Report 2017-2018 explored the growth and success rate of Scrum. Some insightful statistics provided by this report are as follows:

  • 94% of respondents claim to use scrum in their agile practice
  • The average size of a Scrum team is 7 members
  • 85% of respondents received certification for ScrumMaster, 40% for Product Owner, and 24% got certified as Scrum Coaches
  • The average sprint length is 2.4 weeks, while an average scrum project takes 11.6 weeks to complete

These statistics point to the fact that Scrum is being implemented by many organizations worldwide at a fast pace.

Tech Solutions For Agile Procurement

Digitalization has been responsible for essential changes in supplier management. Following are the top three technology-based solutions for agile procurement:

Cloud-Based Platforms

Procurement is ultimately moving to the cloud. Due to this, cloud-based platforms like Proqura are increasingly being adopted not only by large enterprises, but also small and medium sized businesses. The low barriers to entry have made way for a competitive yet disruptive market. So, cloud solutions can provide organizations with many opportunities for procurement processes—for example, cost-effectiveness, time efficiency, and a more coherent global supply chain. 

A laptop with software code written

Analytics

In the technological environment, analytics have the most significant impact on the procurement process. Management uses analytics for reporting, cost optimization, and process improvement. This tech-based solution offers creative fixes to tackle continuing challenges. An example of such challenges is the inefficient use of resources. Thus, businesses are finding new ways to embed analytics into their decision-making process. This way, they can improve operations through actionable insights. 

Automation

Implementing automation is not even a question anymore. Organizations are shifting their focus on automating all aspects of their operations. An automated procurement process will end management inefficiencies, time wastage, and ineffectiveness. It will also provide a more efficient way of managing the information involved. Proqura is particularly useful in minimizing manual work and automatic nearly all the procurement process elements, including: 

  • Purchase requisition
  • Vendor management
  • Purchase order
  • Invoice management
  • Contract approval

Why Agile Implementation Now?

The agile implementation allows teams to work on projects in small steps. It minimizes overall risk and allows for better, more data-driven feedback. In today’s fast-moving environment, firms need to be able to anticipate change. Agile procurement helps them do this by providing meaningful insights through data analysis.

Successful implementation of agility yields various benefits. Some of these benefits are:

  • Superior quality products
  • Customer satisfaction
  • Faster process workflows
  • Enhanced project predictability
  • Continuous improvement

What happens when procurement isn’t agile enough? Let’s discuss it through a recent relevant example. In 2016, one of Volkswagen’s suppliers stopped delivery due to unforeseen circumstances. As a result, two factories with over 27,000 employees had to stop the assembly lines. Because Volkswagen had no plan B, it had to enter negotiations with other suppliers while having little bargaining power.

The Future of Agile Procurement

In the current climate, predicting the future of agile procurement is nearly impossible. As the after-effects of the Covid-19 pandemic linger on, most companies are still looking to bounce back to usual ways. But one thing is sure; adopting agile procurement and learning how to implement modern procurement solutions will allow firms to streamline their work processes.

Digitization is driving the shift in procurement. In the future, agile procurement could become more supplier-centric. Digital procurement platforms will enable modernization. Organizations will move forward via extreme automation, integration, and artificial intelligence (AI). 

Moreover, some new developments in autonomous procurement are on the verge of taking place. These will provide firms with specific recommendations to strengthen their supply chains. These developments will also help them respond to internal and external threats.

Conclusion

In recent years, agile procurement has become the most effective procurement method. Among other reasons, this is because it has a faster time-to-market speed than the traditional method. Implementation of agility in the team empowers them with unprecedented flexibility. The 12 core principles of the agile manifesto guide teams to achieve many objectives. They also provide them with increased autonomy and authority. 

Every organization knows that the future of agile procurement requires flexible operating models to help keep up with the ever-evolving landscape. The benefits of agility also outweigh the traditional approaches. Being agile increases the efficiency of the procurement processes by leaps and bounds. If implemented correctly, agile procurement is going to change the course of businesses forever. 





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