There is no doubt that we are living in unprecedented times that have disrupted local, regional, and global supply chains pushing many procurement organizations to find ways to evolve and meet their targets. To thrive, a new approach to managing and organizing work in an adaptable manner is a must. In this article, we look at the strategic benefits of agile procurement.
What is agile procurement?
Organizations now operate in an environment that requires them to be flexible to changes and make the best use of opportunities. Agile procurement is placed to be the driver of this change, comprising a team that is data-driven, collaborative, forward-thinking, and action-oriented.
Agile procurement is a method of purchasing outcome-based solutions from potential providers instead of considering a single solution, resulting in cost savings for the organizations. The approach offers specific solutions that are focused on solving intended issues and helps to maintain an amiable vendor-client relationships. It takes into consideration the opportunities and cost pressures of the supplier market before collaborating with the vendors.
The agile approach helps in aligning the organizational interests with those of the suppliers and values the significance of cost as well as speed.
The difference between traditional and agile procurement
- Agile procurement is based on an analysis of the working functionality at the end of each run instead of fixed deliverables. Whereas, traditional procurement involves fixed deliverables, a comprehensive project plan and extensive documentation.
- Time and speed are the essence of agile procurement, therefore, some steps are combined together-for instance, during the sourcing process contract negotiations can be entered. Traditional procurement, on the other hand, works on legacy frameworks and systems. A lot of time is taken with each stage of procurement- identifying the requirements, defining the procurement plan, selecting suppliers, tender evaluation, and so on.
- The agile procurement method lays importance on maintaining a cooperative and positive relationship between both parties right from the beginning of the procurement process. However, in the traditional approach negotiations can sometimes get stressful and challenging which can damage the relationship between buyers and sellers.
- Agile procurement projects are divided into parts that make it easier to cost-effectively change the vendor at the end of each part. Whereas it is difficult to switch vendors after the project has started in the traditional approach since the new vendor will have to first understand the work-in-progress of the earlier vendor before he begins his work.
- A select handful of people may be opted to form a cross-functional team under the agile approach. However, a large team of professionals is employed under the traditional method.
To sum up, the agile procurement method is more effective, offers greater efficiency, and has a faster time to market speed when compared to traditional procurement.
The Benefits of Agile Procurement
Organizations typically develop a level of comfort with their tried-and-tested vendor selection process, and that may work for projects with fairly stable deliverables and a long lead time. However, if the organization is looking to forge ahead, disrupt the norms and deliver something exciting and new, the traditional vendor selection process may not be good enough. Having an agile procurement process is a better way to adapt to the change.
The agile procurement process offers the following strategic advantages
- Specification-driven and time-consuming processes can be altered by discussing solutions instead of approaches. It enables businesses to make intelligent moves quickly
- The agile approach anticipates the change thus allowing both parties to be flexible and adapt to the change as the data becomes available. This ensures that the best solution is delivered
- When organizations’ invite vendors into a collaborative partnership, facilitate a better working relationship and tend to expand their pool of innovative options
- Much of the in-house inventory management load gets shifted to the vendor, where they know how to manage their material in the best possible way
- Lastly, agile procurement metrics are more meaningful to measure in real-time
In this rapidly changing world, procurement teams are always in the dismal need of procurement models that demand less effort and are efficient so that they can freely give complete attention to their primary work responsibilities. Agile procurement is a favored method because of its fast and trim approach. It shuns the traditional approach and instead embraces change and innovation.
The agile procurement process effectively collaborates between the business seeking the solution and the supplier of that solution. The approach is all about being flexible and adaptable to continual changes.