Applying Agile Methodologies to Procurement

Successful procurement largely depends on the company’s ability to keep up with the fast pace and changing business environment. In today’s world, decisions must be made with confidence and faster than ever. 

Thus, in these shifting conditions, there is a need for more effective procurement management strategies to stay relevant. That is when agile procurement comes in handy. Agile procurement helps to eliminate manual procurement processes and improve project completion speed. It allows procurement departments to deliver faster and better than ever.  

In this guide, we will cover everything regarding agile procurement, from the principles of agile methodologies to the benefits of implementing agile procurement. So, if you are ready, let’s dive into it. 

What is Agile Procurement? 

Before unveiling what agile procurement is, let’s briefly discuss what agile methodology is. Agile methodology is an interactive approach to business and procurement processes. It values speed and flexibility in decision-making and execution processes. 

Originally, this methodology was developed for software teams to ensure timely deliveries and effective processes. However, it was found to be useful in different aspects of business, including procurement. 

Agile procurement is about using agile methodology in order to run procurement processes. It is centered around a collaborative and fast-paced environment where open communication is also encouraged. 

What is Agile Sourcing? 

Unlike traditional sourcing, agile sourcing is a collaborative process. It provides better opportunities for procurement teams to source higher-quality suppliers and materials. 

Collaboration, innovation, and forward-thinking approaches in agile sourcing help to enhance engagement. Moreover, agile sourcing highly relies on advanced data analytics to improve and speed up decision-making. It allows you to create accurate demand forecasts and manage inventory levels better by not purchasing too much or too little. 

Principles of Agile Methodology 

The principles of Agile Methodology in procurement are simple. All the principles are centered around the concept and importance of timely deliveries, impact, and efficiency. 

• Delivery early value. One of the key principles is to satisfy the customers (stakeholders) by delivering early and continuous value. 
• Anticipate and welcome change. Another principle of agile methodology in procurement is to harness change. Thus, you should find ways to remain flexible at every stage of the sourcing cycle. 
• Work on short cycles. One of the main principles and benefits of agile is speed. So, focus on establishing shorter timescales and faster deliveries. 
• Focus on lean and sustainable sourcing. Agile principles promote sustainability and aim to identify and minimize waste at every stage of the process. One of the ways to incorporate sustainable procurement practices is to choose the right suppliers. Build a list of quality suppliers to ensure sustainable and ethical procurement practices for long-term good.  
• Practice continuous improvement. Another important principle of agile methodologies in procurement is continuous improvement. Agile presents constant opportunities for process, skill, and result improvements.

Traditional Procurement vs. Agile Procurement

Traditional and agile procurement aim to solve similar challenges regarding procurement. However, while traditional procurement focuses on the process and documentation of the process, agile procurement focuses on speed and flexibility. 

Traditional Procurement 

To break down the differences, it is important to note that traditional procurement is built for outcomes. The speed in traditional procurement is not the main focus. 

Traditional procurement also involves lots of planning and manual processes to eliminate errors and ensure efficient decision-making. The main steps of traditional procurement include: 

• Identification of a specific business need
• Planning stage 
• Supplier sourcing and selection 
• Requests 
• Bud evaluation stage 
• Contract terms and conditions negotiations. 

One of the main limitations of traditional procurement is the fact that each stage must be completed before the team can move on to the next one. 

Agile Procurement 

For the most part, agile procurement follows the same steps and stages as traditional procurement. However, there is one key difference. It is an alternative approach that prioritizes speed and flexibility. Agile procurement oftentimes depends on a cross-functional team of stakeholders who are collaborating on the project for better speed optimization. 

Unlike traditional procurement, agile procurement allows teams to work on phases simultaneously. This helps to identify and address challenges faster. 

Benefits of Incorporating Agile Procurement 

The Agile procurement approach and agile methodologies, in general, will allow your organization to save time and resources and optimize processes more efficiently than ever before. Even though these are the main benefits of agile procurement, there are many others. Thus, let’s briefly overview each one of them. 

Faster Delivery 

Agile procurement’s main focus is speed and responsiveness. These drive efficient and quick decision-making that naturally leads to faster outcomes. 

Shorter Lead Time 

A shorter lead time allows the company to benefit from cost-effective solutions and new contracts sooner. This happens because agile procurement reduces the time needed to identify the need and implement the right solution by allowing for a streamlined sourcing process. 

Better Procurement Outcomes 

Agility and trial-based approaches toward contract management allow for the production of better outcomes. Agile contracts are used to add more flexibility to the process and increase the chances of reaching the best outcomes. This happens because the focus is on collaboration and long-run benefits that the partners can offer. 

Stronger Supplier Collaboration 

In traditional procurement, the main focus is cost reduction. Thus, many decisions are made considering the potential costs. However, when it comes to agile procurement, the focus switches to partnerships. 

By focusing on partnerships, organizations can build better vendor relationships. It allows you to get higher-quality interactions, leading to maximum efficiency in the long run. 

Embracing Innovation 

The agile procurement approach supports continuous improvements and collaboration. These lead to more new and fresh ideas, fostering innovation. 

Cost Effectiveness 

Agile procurement provides cost-effectiveness to the organizations implementing it. It allows for process optimization and automation. Thus, agile procurement reduces manual effort and supports simultaneous collaboration in different phases. Altogether, they lead to time savings that, in the long run, result in cost savings. 

For instance, if your employees stop focusing on manual data management, they can focus on more strategic business activities. By efficiently managing employee time, you are able to achieve higher operational efficiency.

How to Implement Agile Procurement 

To embrace agile methodologies, let’s take a look at the steps you need to incorporate. 

Analyze Your Current Procurement Process 

Before incorporating new tools and practices, you should first analyze your current procurement process. By carefully evaluating the current processes, you will be able to identify what areas of the process need improvement. 

Common challenges that can be found for further improvement include: 

• Manual processes such as supplier research 
• Rigid contracts and lack of collaboration with the suppliers 
• Limited visibility regarding supplier performance 
• Lack of data insights. 

Create Agile Process 

In order to incorporate agile procurement, you need to create a new agile process. This process should address all the challenges and problems identified during the first stage. 

For instance, let’s say the main challenge is a lack of communication with suppliers and poor supplier performance tracking. The goal here is to enhance supplier engagement and collaboration. A solution can be using a software tool that provides collaboration tools and supplier performance tracking tools to gain valuable data insights. E.g., Tradogram’s Supplier Management System. 

Build an Agile Procurement Team 

For the agile framework to work effectively, the team members must have shared goals and values regarding the procurement process. Thus, you should focus on building an agile and cross-functional team. 

It means that you should ensure that teams from different departments can effectively work together to transform the procurement process (e.g., the legal department, procurement department, suppliers, and end-users). 

Having a cross-functional team guarantees a wide range of skills and expertise that will contribute to a more efficient process. The teams can work independently to facilitate faster procurement processes, from market research and supplier management to risk assessment. 

Incorporate New Technologies 

To incorporate agile procurement practices and achieve speed efficiently, it’s vital to implement the right technologies. The right technologies are procurement automation tools. 

You can incorporate a solution that allows enhanced supplier collaboration and collaboration between the team. The software solution of your choice should also offer greater visibility into the process, automation opportunities, and robust data analytics. 

All of the features mentioned above will allow for the centralization of the procurement process, management and evaluation of suppliers, and the contribution of informed decision-making. 

Incorporating Agile Procurement to Scale Your Business 

If you are looking for a software solution to start agile procurement practices, then you are in the right place. Tradogram provides perfect solutions to implement agile processes within your organization’s procurement department. 

Our platform allows teams to collaborate and deliver results more efficiently by offering tools for supplier sourcing and management, inventory management, PO, invoice and contract management, documentation, and automation. 

All of the tools offered by Tradogram are designed to simplify agile procurement, allowing efficient centralization and management of all the processes. Get started by scheduling a free demo of Tradogram.