Applying Agile Procurement Principles for Increased Efficiency

Successful procurement is about keeping pace with an ever-increasing cadence of purchases. Decisions must be made faster and with more confidence if companies expect to move with the market and respond to its shifting conditions. One practice that enables this speed is agile procurement. 

Agile procurement eliminates many documentation-heavy, slow selection processes that drag down project completion speeds. It helps your procurement team deliver more favorable results faster.

This article teaches readers about the basic concepts of agile procurement:

• What agile procurement is
• Which principles support agile procurement
• How agile procurement differs from traditional procurement
• The benefits of moving to agile procurement
• How technology enhances the agile procurement practice

What is agile procurement?

The agile procurement strategy uses agile methodology to run your procurement team and processes. An agile methodology is an iterative approach to business processes, focusing on continuous improvement and delivering fast results for stakeholders. Although originally developed for software engineering teams, agile has many cross-applicable features that improve procurement processes for organizations.

There are many ways to practice agile methodology and several agile frameworks for procurement professionals to choose from when building an agile program. Many teams take components from several frameworks to customize a program that works best for them.

What are the principles of agile methodology?

Agile adheres to a collection of principles that guide the work and establish a framework for completing it. The most important principles for lean-agile procurement deal with early and ongoing delivery, simplicity, and impact:

1. Deliver early value: Get the stakeholder involved early and keep them there throughout the procurement cycle. Many procurement teams practicing agile refer to their stakeholders as a customer, reinforcing the idea that procurement is responsible for delivering value to that individual. 

2. Expect (and welcome) change: Flexibility is all about adapting to change. In agile, it may look like building flexibility into contract language, regularly communicating with the internal customer to receive change direction, or building a modular procurement approach to enable adaptability.

3. Work on short cycles: Speed is of the essence in the agile approach. Building brevity into the process through short supplier trials and workshopping reduces some of the lengthier portions of the procurement timeline. In less complex procurement scenarios, access to preferred vendors reduces closing time. 

4. Focus on lean and sustainable sourcing: Resilience is a byproduct of adaptability in procurement. Maintain high-quality outcomes while solving for speed by establishing a consolidated list of preferred suppliers and ensuring sustainable procurement practices. 

5. Practice continuous improvement: The iterative approach prescribed in agile creates constant opportunities for improving processes, skills, and outcomes. Use sprints to execute current best practices and retrospectives to discuss and refine the process at the end of those sprints. 

Ebook

Choose the Right Procurement Technology With This Decision Matrix

There are A LOT of procurement softwares out there. Make sure you're choosing the right one for your business.

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The difference between traditional procurement vs. agile procurement

Although traditional and agile procurement both aim to solve the same basic challenges, traditional procurement focuses on process and documentation, while agile values flexibility (and, yes, speed). 

Traditional procurement

Traditional procurement is built for outcomes but not necessarily for speed. In a traditional procurement scenario, each stage of the process, from needs assessment to RFP evaluation and contract negotiation, is set in advance. There is exhaustive documentation of the process, and the procurement of each needed item is scheduled within a larger project deliverables plan. Procurement is conducted with the pre-prescribed vendors, and the work continues according to the established project plan until its conclusion.

Agile procurement

Agile procurement is an alternative approach that values speed and flexibility in the decision-making and execution process. It often depends on a cross-functional team of stakeholders collaborating to make the process quicker and easier. An agile buying team might feature stakeholders from the IT, legal, CSM, and finance departments. The team might also include external stakeholders such as a supplier partner. 

In agile procurement, assessments and changes to the procurement plan occur at the end of each sprint. Adjustments to the plan occur in shorter intervals, and vendors may change throughout the course of the project. Agile procurement's value is remaining nimble through project changes and shortening the time to delivery for goods and services. 

Benefits of implementing agile procurement

Taking an agile approach to procurement planning in your organization can save time, clarify workflows, and deliver faster and more valuable results. These are the top reasons companies choose to implement agile practices within their procuring:

• Faster time to market: Agile procurement focuses on responsiveness and quick decision-making, leading to faster outcomes. The combination of streamlined business processes and solving for speed in vendor selection means goods are delivered faster. 

• Better supplier relationships: Agile favors partnerships over transactional vendor relationships, leading to higher-quality vendor interactions and more long-term partnerships. 

• Stronger procurement workflows: Efficient process is one of the main drivers dictating time to close. Much of this efficiency comes from repeatable, simple processes that reduce lag time and blocking issues. 

• Better procurement outcomes: The focus on agility and a trial-based approach to contract management with supply partners mean agile procurement activities often produce better outcomes. This is also because the agile process requires customers to take time to outline business stories and priorities, resulting in better alignment between procurement and desired impacts. Teams use agile contracts to build flexibility into the process and ensure best outcomes and fast value creation. 

• Fewer friction points: The scrum master or project manager actively finds areas for improvement through sprints and iterations, meaning that the process of procuring becomes smoother over time. Continuous improvement ensures that practices undergo regular review and refinement.

Ebook

Choose the Right Procurement Technology With This Decision Matrix

There are A LOT of procurement softwares out there. Make sure you're choosing the right one for your business.

Download

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How can you organize an agile procurement department?

Reorganizing your procurement organization into an agile team or teams takes time and consideration, but the above benefits make it well worth the effort. The agile approach relies on a specific hierarchy of team members and careful consideration of each project to ensure speed and flexibility in its execution. 

Who makes up an agile team?

Team makeup depends on the type of agile framework you follow. An example of a common framework, Scrum Methodology, calls for four roles to carry out sprints and iterative work. 

The customer: These are the people requesting the procurement and may be the same people benefitting from the project outcome. In this sense, customers are often internal (different from stakeholders, who may be external partners such as suppliers). 

The product owner: These leaders act as the champion for customer needs. They build the bridge between customers and the project team. They are the communicators and decision-makers for the project, leading the iterative process and providing a roadmap for the delivery of outcomes.

Scrum masters: These members take on a project management and facilitation role within the project. They clear blocking issues and smooth the path to success for the rest of the team. Since agile methods center around self-defined work tasks, scrum master isn’t analogous to a site foreperson or a manager. They are a guide helping the project reach completion and meet its goals. 

Scrum teams: Scrum teams are the team members responsible for executing the plan and self-assigning work tasks. They are very much the moving parts of the procurement effort, charged with making progress and reporting on issues. They offer context and collaboration for clearing away logjams in the process.  

How agile procurement increases efficiency

The above players in an agile team conduct every procurement project using agile practices and tools. The efficiency of the agile procurement approach comes from a combination of exceptional planning and nimble reaction to issues. As an overview, the process works as follows: 

1. Customers define the project scope, outlining the impacts and priorities of the project and identifying the outcome they most desire. Customers do not control the method of accomplishing these priorities, only defining them for the scrum teams who execute the requests. 

2. The project manager establishes a timeline for project completion within the parameters set out by the customer. Within that timeline, a series of “sprints” or short working periods serve as mile markers in the completion of the project. Sprints typically last a week to a month, during which scrum teams identify and execute the tasks necessary to complete the project on time and within budget. 

3. The scrum team carries out the work for this established segment, conducting daily short meetings (called standups) to discuss the current progress, identify blocking issues, and seek advice and guidance on conducting the next sprint.

4. At the end of each sprint, teams conduct retrospectives to see what worked and could work better and plan the work for the next sprint. This is an in-person opportunity for each team member to get questions answered, surface issues, and prepare for future sprints. 

5. Teams track project completion to date to understand the remaining work. This is accomplished with a burndown chart that outlines the work yet to be completed compared to the overall timeline.

Increase agile procurement with Order.co

Order.co creates the ideal environment for implementing agile processes within the organization. It creates opportunities for teams to collaborate closely, understand the total value of the companies in their preferred vendor list, and more.

Here are some Order.co features that simplify agile procurement:

• Contract centralization and preferred vendor features that allow customers access to the best vendors with full visibility of contract information 
• Communication and data-driven insight to inform current and future procurement projects and decisions 
• Access to a collection of high-quality vendors that meet the logistical needs of buyers and create procurement opportunities focused on speed and quality 

Need a more nimble procurement process? Order.co provides a way to fully execute these projects without manual tracking, time-consuming traditional procurement practices, or the loss of agility in purchasing. To get started, schedule a demo of Order.co.