The Ultimate Guide to Agile Procurement
The Agile methodology has become increasingly popular in the world of software development, as more organizations implement this approach to optimize their project management.
Procurement professionals too are beginning to embrace agile to reduce risk, stay flexible, and continuously improve their sourcing strategy. Agile requires the right mindset and the right technology to bring more efficiency to procurement and help organizations accelerate their time-to-market with an iterative, collaborative mindset. Here’s how agile procurement could work for your organization.
What is agile procurement?
Agile procurement is a procurement methodology that borrows elements of the agile approach to software development. The core concepts of any agile methodology are to work in small, fast increments that build flexibility into the process. As such, agile procurement is an approach that is open, collaborative, and less strict than other procurement methodologies.
The Agile Manifesto is relatively straightforward. The four tenets of the agile prioritize:
- Individuals and interactions over processes and tools
- Working software over comprehensive documentation
- Customer collaboration over contract negotiation
- Responding to change over following a plan
Organizations that implement agile procurement are able to benefit from a quicker procurement process that prioritizes building relationships with key strategic partners. Here’s how agile procurement differs from traditional procurement approaches, and how to get started implementing an agile approach.
Agile procurement vs. traditional procurement methodologies
If agile procurement still sounds a little nebulous, it’s easier to understand the approach by comparing it to traditional procurement methodologies.
“Applying the principles outlined in the agile methodology to procurement processes is easy when one considers the ways in which these principles compliment digital transformation and the ongoing evolution away from traditional procurement models,” wrote Planergy. “Unlike those models, which emphasized fixed, cost-reduction solutions, agile procurement seeks to recontextualize the procurement function as a foundation of value generation supporting organizational goals and meeting business needs.”
What does this look like in practice? In traditional procurement, a project manager, for instance, is responsible for procurement activities. An agile approach sets up a procurement team led by a scrum master — facilitates the acquisition of goods or services by managing the approvals process and strategic sourcing.
In traditional procurement, a supplier agreement will often include fixed requirements, extensive documentation, a comprehensive project plan, and other traditional deliverables. In agile procurement, supplier agreements are based on an evaluation of the working relationship at the end of each sprint, or procurement cycle; the agreement does not use fixed deliverables that may or may not have any bearing on the shared success of the project.
In a traditional procurement methodology, supply chain management is difficult once a project has started. An organization may find it difficult, costly, and time-consuming to switch suppliers once a project is funded and underway. The agile approach is iterative and contextually responsive. This means that suppliers can be readily changed after a given sprint as needed.
The goal of agile procurement is to provide greater efficiency, faster time-to-market, and build better relationships with suppliers. As such, a key step to getting started with agile procurement is to have the right technology in place.
How to get started with agile procurement
What does agile procurement look like in practice? There are a couple of ways to increase speed and collaboration in your procurement process.
First, organize your procurement process in sprints, short periods in which a team accomplishes a set amount of work. In procurement, this would require breaking down the six steps of the procurement cycle into smaller steps. For instance, “Create a list of suppliers” could be broken down into identifying potential partners, evaluating their track record, pricing out their product offering, performing reputation analysis, and getting pricing quotes from each candidate. These smaller steps add transparency to the process and allow teams to build collaborative relationships with suppliers along the way.
In addition, technology is critical to improving the efficiency of your agile procurement process. Tools like Fairmarkit allow you to automate and gain visibility into your entire P2P process, thereby adding opportunities for continuous improvement. Procurement tools also allow you to collaborate internally more effectively, integrating with project management, ERP, and accounting software. These tools also facilitate supplier communication, contributing to the success of your long-term relationships.
Finally, agile procurement is all about iteration. Take the time throughout your procurement process to determine what’s working and what isn’t. Use analytics from your procurement software to identify and overcome roadblocks quickly. Continuous improvement is the ultimate goal of agile procurement; teams that commit to open communication will realize the most benefit from this approach.
For more insight into how your organization can improve the procurement process, check out Fairmarkit’s blog, The Source.