Agile Procurement

Traditional procurement processes are grueling, and honestly, they just take far too much time and effort. If there’s one thing that 2020 has shown us it’s that we can adapt quickly to change business models and systems when we need to.

Switching to an agile procurement approach is just another way that businesses that change things up to make systems work better for them. But before we get into all the benefits of agile procurement, let’s define what it actually means.

What is Agile Procurement?

An agile procurement process is one that is truly collaborative between the business seeking a solution and the supplier of that solution. The business defines the desired outcome of the project and works with the supplier to determine the appropriate result. Agile approaches are all about being flexible, which is a huge advantage when working on innovative products or technology. 

In a traditional procurement process the business would have spent tons of time defining the exact deliverables required of the supplier. But when your project is at the cutting-edge of your field, it can be difficult to know exactly what you need on a granular level. 

Agile Procurement

Agile procurement allows for change to happen during a project. Both parties understand and are open to changes in approach, technology and deliverable, so long as the agreed-upon result is reached. This is key, because in high-tech businesses, data and learning come in quickly, and project managers and teams need to be able to react and continuously improve based on the information that they have.

Traditional Vendor Selection vs. Agile Procurement

Let’s take a look at a simple example that can compare the two approaches to procurement to better illustrate the potential advantages of embracing an agile methodology. 

Automotive Supplier Case Study

Imagine that an automotive manufacturer is looking for a supplier of suspension components. The new car they’ve designed is a stunner, and they really want the handling to be revolutionary. They can approach the procurement process in one of two ways: 

Traditional Vendor Selection Process

The large company puts out a request for quotes and specifies very precisely what the suspension components should look like and how well they should perform, including:

  • Material specification
  • Minimum lifetime
  • Load cycles to be applied
  • Minimum strength requirements
  • Specified stiffness

Based on their initial calculations, all of the above criteria should be satisfied by the chosen vendor. But getting all this information in the first place took a tremendous amount of effort on the internal engineering team, and it set in stone the exact performance envelope for the car. 

Agile Procurement Process

The large company contacts a few chosen vendors and describes the end result they are looking for from the designed suspension components: second-to-none handling, given the constraints of the current design envelope and a desire to improve on strength and stiffness targets from previous models. 

Instead of boxing in suppliers with rigorous specifications and requirements, the company works with the vendors to allow them to come up with the best solution. So long as the suspension surpasses the previous targets, the vendors are now free to come up with a novel design.

The automotive company now has a few innovative approaches to choose from during the procurement process, and has likely been delivered options that it never would have dreamed of if it was still sticking to a traditional vendor selection process. 

Benefits that Result from an Agile Procurement Process

Now, there is clearly a level of comfort that many large corporations will have with their tried-and-tested vendor selection processes. And that may work for projects with long lead times and fairly stable deliverables (like those of the next pick-up truck manufactured in North America). 

Agile Procurement

However, if your company is looking to push the envelope, disrupt the norms and deliver something new and exciting, the slow-and-steady vendor selection process just isn’t going to cut it. An agile procurement process is going to much better accommodate change (which, as the saying goes, is really the only constant). 

Agile procurement delivers the following benefits:

  • Time-consuming specification-driven processes are virtually eliminated by discussing solutions rather than approaches
  • By inviting the vendor into a collaborative partnership, you expand your pool of innovative options and facilitate a better working relationship
  • It anticipates change, allowing both parties to adapt and be flexible as data becomes available, which also helps to ensure the best solution is delivered
  • Much of the in-house project management burden gets off-loaded onto the vendor, where they know how to best manage their teams
  • Minimize risk by taking the project in small steps and allowing for data-driven feedback to drive project direction and course correct as required

Agile Methodologies Apply throughout Your Business

Agile approaches to many business functions are quickly being adopted across industries, because the above benefits can translate. Software development teams were first to embrace these principles in order to work smarter, but business leaders can get creative and start applying them to all aspects of their companies for maximum effect. 

Looking for another example of how an agile approach can be applied to procurement and project management? Check out our process page to see how we applied agile methodologies to chatbot development projects. 

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