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December 11, 2018

Achieving agile procurement success: Part 1

Achieving agile procurement success: Part 1

Making the move from concept to reality.

In this two-part blog series, Determine Chief Product Officer Julien Nadaud explores what it takes to strengthen your procurement strategies and make them easier with just one word: agile. Part One looks at the groundwork required to rebuild your present agile procurement strategies, and in Part Two he’ll summarize two case studies surrounding specific examples of agility in action. [inlinetweet prefix=”” tweeter=”” suffix=”#AgileProcurement”]The idea of “agility” is getting a lot of play in the procurement world these days, but it is real, achievable and what success will increasingly look like[/inlinetweet].

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 they want to win anyway.

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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? 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 ideals. They also reflected a shared sense that procurement is capable of being more multi-faceted, cross-functional, responsive and proactive. Although a few commented about not being traditional or falling back on old ways and technologies, most shared the idea that procurement can align with the bigger picture and strategically manage new spend and suppliers without getting hung up on the details or the “different” nature of the work.

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?”

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Lest we fall into the same trap, here are some examples of agile procurement approaches:

  • Agile procurement addresses big picture business 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 differently than 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 awareness, because it never falls back on ‘the way we do things here’ when making decisions or recommendations.

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 additional technology.

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For many companies, “agility” often falls into one of two categories: buzzword, or daunting. Neither of these is accurate. Though there is a lot of buzz out there, it’s because agile procurement is a real thing that leading organizations are using to accelerate their processes and success.

In Part Two, Julien looks at some specifics around customers who embody agile concepts and are using them successfully.

If you’d like to experience what agile procurement can be like for you, schedule a no-obligation personalized demonstration of our modular Procurement Solution on the Determine Cloud Platform.

*This blog originally appeared in IACCM Contracting Excellence Journal.

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