Agile Procurement Explained: Principles and Practices

Procurement is a complex thing. 

Finding the right balance between cost and quality isn't always easy. 

As our world gets more advanced and new challenges arise, it's normal to seek for approaches that allow you to be more prepared for unexpected market chances.

Speed and flexibility are, for example, key values that can transform your procurement processes for the better 

That's where agile procurement comes in.

Never heard about that one?

Let's fix it right away

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Defining Agile Procurement 

Agile procurement is nothing more than a dynamic and flexible approach to sourcing and purchasing that prioritizes responsiveness, collaboration, and continuous improvement.

Think of it as a philosophy that guides your operations to be less rigid and more open to be ready for unplanned changes.

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Key Characteristics of Agile Procurement

To fully understand the agile approach, let's see their components in more detail.

• Flexibility: The ability to pivot and adjust based on new requirements or market changes. For example, let's say that you had planned to work with a supplier in a specific location, and a natural disaster strikes. Being flexible in your approach can help you to find a suitable solution faster.
• Collaboration: Active engagement between stakeholders, suppliers, and teams to co-create solutions. Maybe you want to change your procurement processes to make sustainability a priority but don't know where to start. Working with a supplier that has similar intentions could provide you with some support. 
• Iterative process: Things aren't always static, especially in businesses, so if you work with a focus on continuous feedback and refinement rather than long, fixed planning cycles, you won't stay behind in case something happens.
• Customer-centric approach:  Your business works to make your customers happy, right? Hence, it really makes sense to be sure that your procurement decisions prioritize customer needs and overall value.

• Technology integration: Leveraging digital tools like procurement software to streamline and enhance procurement processes, agile is all about speed.
• Decentralized:  Another key aspect of agile procurement, is that it empowers cross-functional teams to make informed decisions quickly.

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Agile vs Traditional Procurement

You probably have heard everything about how procurement is a tedious and lengthy process. 

And yes, that's partly true at least for traditional strategies.

Traditional procurement follows a linear, very focused on processes approach, where decisions are made upfront and changes are difficult to implement. 

Agile procurement, as we've seen so far, works with an adaptable mindset so procurement decisions remain relevant across the entire lifecycle.

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Planning approach 

Traditional procurement relies on extensive planning. While there's nothing wrong with developing a plan, agile procurement adopts an iterative, adaptable strategy, so in case things follow an unexpected turn like a sudden change in the market you can switch directions swiftly. 

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Decision making 

Just like we mentioned above, traditional methods follow a strict hierarchy when it comes to making a decision, whereas agile procurement encourages decentralized decision and collaborative decision-making.

Supplier engagement 

Do you ever wonder why your supplier's relationships aren't fully productive? 

Traditional procurement often treats suppliers as external vendors while agile procurement integrates them as strategic partners of your operations.

Risk Management

Another crucial point that makes agile procurement different from conventional procurement processes is that an agile approach lets you reduce risks through continuous monitoring and adjustment.

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Benefits of Agile Procurement.

Faster times 

Deliver solutions more quickly. 

How?

By reducing lengthy approval workflows and negotiation cycles. 

Remember that agile values flexibility so you won't find a strict hierarchy of people to get things done. 

Improved supplier relationships

Once you adopt an agile mindset, you'll see how important and productive it is to collaborate with other people outside of your company, like your suppliers.

The stronger and more positive your relationship is, the easier it is to reap the benefits. 

Increased innovation 

Encourage creativity and problem solving by allowing iterative improvements as you welcome new ideas and constant feedback.

Cost efficiency 

Yes, you read that right. Agile procurement enables cost optimization by allowing you to reassess and reallocate budgets dynamically.

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Core Principles of Agile Procurement

Value delivery and customer satisfaction

Do you want to know what drives agile procurement?

You can look at your company's clients. 

The primary goal of agile procurement is to deliver value efficiently. Instead of focusing solely on cost savings, you prioritize procurement solutions that boost customer satisfaction and long-term benefits.

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Flexibility and change

We've been saying this from the very beginning of this article.

Markets and requirements are constantly evolving, and procurement strategies should evolve with them. Agile procurement allows you to make adjustments quickly, so sourcing decisions stay aligned with the shifting priorities around your company.

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Collaboration across teams

Agile procurement thrives on teamwork and transparency. When you bring together procurement, finance, legal, and operational teams, you create an environment where everyone works toward common goals. Frequent communication and shared decision-making lead to more effective and streamlined procurement processes.

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Continuous improvement

A critical component of agile procurement is ongoing refinement. Instead of viewing procurement as something that you do only when it's needed, agile methodologies encourage continuous assessment and improvement. 

By regularly analyzing performance data and gathering stakeholder feedback, you can identify areas for enhancement and implement incremental changes that drive better outcomes.

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Implementing Agile Procurement Strategies

At this point,you are quite familiar with the values and inner workings of agile procurement.

But how can you actually implement it in your operations?

Let's get a bit technical here 

Agile Procurement Framework

To implement agile procurement successfully, start by developing a framework that encourages flexibility and iterative processes.

Define clear goals, establish feedback loops, and create mechanisms for continuous improvement.

Cross-functional agile teams

Cross-functional teams are how you promote agility as you integrate diverse expertise and perspectives. If you involve key stakeholders from the beginning, you ensure that procurement decisions are aligned with overall business needs and priorities.

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Steps to Optimize Agile Procurement Processes

• Assess current procurement processes:  Begin by identifying  inefficiencies and areas for improvement in your processes. What painpoints could be solved with an agile mindset? Be completely honest here, as it’ll guide the final outcome. 
• Adopt an iterative approach: Agile works around consecutive steps so take a look at your operations and break down procurement activities into smaller, manageable points. 
• Supplier collaboration: Engage suppliers early to find solutions and build a sense of alignment.
• Work with data and feedback: Use real-time data and continuous feedback to drive decision-making.
• Embrace improvement: Regularly review and refine procurement processes to adapt to new challenges in the market.

Technology and Agile Procurement

Technology was designed to make our lives simpler so you can bet it has a huge role  plays a in optimizing agile procurement. 

Working  with digital solutions like automation or  data analytics, gives you the chance to not only streamline procurement workflows but also improve the way you make relevant decisions. 

Key technological tools include:

• E-Procurement platforms: Digital tools that facilitate streamlined purchasing and supplier collaboration.
• Artificial intelligence : AI-driven analytics can improve supplier selection and risk assessment.
• Blockchain technology: Enhances transparency and security in procurement transactions.
• Cloud-based solutions: Enable real-time collaboration and accessibility across teams.

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What’s Next for Agile Procurement?

Agile procurement is the kind of approach that can help your company to respond better to unexpected things, so it's not really a surprise to say that the future of agile procurement is being shaped by several emerging trends that will enhance efficiency and adaptability.

For example, AI-driven procurement will leverage machine learning and automation to optimize the way you manage your decisions, while sustainable sourcing will place greater emphasis on ethical and environmentally responsible procurement practices, something that can make your customers more loyal and happier with your brand. 

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Increased supplier collaboration will lead to co-innovation models that drive mutual success, and the integration of digital technologies will further streamline procurement processes. As these trends continue to develop, agile procurement will become even more effective in responding to market dynamics and delivering value.

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