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December 13, 2018

Achieving agile procurement success: Part 2

Achieving agile procurement success: Part 2

Two organizations leveraging technology in pursuit of agility.

In Part One of this two-part blog series, Determine Chief Product Officer Julien Nadaud laid out the fundamental thinking and strategy behind what it takes to move toward a more agile procurement framework and operations. Part Two below delves into some of the specifics that two Determine customers used to streamline, modernize and “agilify” their organizations. As Ardent Partners points out, agile is the future of procurement success — here are some examples of how that looks.

Determine Procurement ROI Infographic

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 well documented processes that no one adhered to, and the other had no established procurement frameworks or controls at all. But, both faced the same challenge: ensure that spend, suppliers, and contracts can move as fast as the rest of the business.

Resolving processes without practice: By simplifying procurement processes and focusing on real-time data availability, the company with well documented processes was finally able to put their data to work. Operational teams were happy because the new, more ergonomic procurement frameworks required less effort and allowed them to focus on their primary roles.

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.

The State of Procurement in Retail

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 decision making process. This improvement repositioned them as a strategic internal enabler.

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 report: “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.”

Procurement Leaders Webinar: Easy changes you can make to your S2P process for instant impact

“Agility” has some mystique (and/or hype) around it, but it’s really a matter of deciding what you need to do so that you can do things better. Map what success looks like, then chart a course to get there. The two customer stories above aren’t groundbreaking, but their strategies to be agile work brilliantly.

In case you haven’t read it, in Part One Julien lays the groundwork on how to think about approaching or enhancing the concept of agility in your organization.

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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