Agile Procurement - Supplier Selection

Ever since software developers coined the term back at the turn of the century in relation to bringing their products to market faster, agile has become a core component of business strategy in almost every industry on the planet.

Agile is a method of working which allows an organization to operate in an effective and efficient manner while retaining the flexibility necessary to change direction at a moment's notice in order to adapt to an evolving business landscape.

In manufacturing, for example, agile means production can be easily ramped up or scaled back in response to shifting demand from procurement teams. This reduces the need for overstocking, produces less waste, and cuts costs - benefits which not only boost the manufacturer's bottom line, but also generate savings which can be passed on to the customer.

Procurement is also seeing the benefits of adopting the agile business philosophy, especially when it comes to the traditionally arduous task of supplier selection.

Agile Procurement

Bringing agile into your procurement department means getting all purchasing officers on the same page and adopting a spirit of anticipation, flexibility, and teamwork.

Agile procurement means having the initiative to tackle issues head on and be proactive in recognizing weaknesses in the purchasing process and addressing them before they develop into large scale problems. Think of the way modern field service engineers use sensors to detect equipment faults before machines break down - your procurement officers are the sensors which constantly analyze the situation and feed back to decision-makers.

They need to be adaptable - this lies at the heart of agile - and be able to carry out the above while simultaneously remaining focused on business objectives, the needs of stakeholders, and the organization as a whole. Achieving this means knowing and understanding where in your procurement teams particular strengths lie and making full use of them to become more efficient and take advantage of opportunities as they are presented.

Supplier Selection

Imagine your procurement team isn't working with agile in mind. Each person will be processing orders, placing them with suppliers, and facilitating payment, without any consideration for the larger goings on within and without your organization. No new business opportunities are likely to present themselves and, unless a supplier sends a rep or makes a sales call, business will continue along that stable trajectory.

However, an agile procurement team will be constantly monitoring the supplier market and be aware of any fresh players which have entered the game. If a new supplier opens up in your area, an agile procurement team will be able to identify the opportunity and contact that supplier to secure an early contract and potentially acquire a better deal than you have with your current one.

Your team will also be able to identify your strongest negotiator to send to the meeting and further increase the chance of securing a better deal.

Choosing the best and most appropriate supplier is essential to the ongoing success of your organization and can have a significant impact on your ability to serve your customers. An unreliable or overpriced supplier can damage your business in many ways. Delays to products coming in can force your customers to seek an alternative provider, while using an expensive supplier will reduce your ability to remain competitive in your market.

Take the case of Boeing. Back in 2007, Boeing experienced a delay when a supplier couldn't meet its demand for the fasteners it needed to build its 787 Dreamliner. Boeing had 900 orders outstanding and was forced to delay delivery of the planes on multiple occasions.

"Boeing originally was scheduled to deliver the Dreamliner to airline customers in mid-2008," reads a case study on the incident. "However, after five announced delays over two years, the company was forced to postpone the first test flight. As of August 2009, the exact flight test schedule was still pending. Deliveries to customers were expected to be delayed until at least the second quarter of 2010. A delay of this magnitude was unparalleled in the history of Boeing commercial airplane development."

And, if that can happen to Boeing, it can happen to anyone. Agile supplier selection, however, would allow your business to quickly pivot to a new supplier when your primary option lets you down.

Final Thoughts

Agility in procurement and especially in supplier selection should be a priority for your organization. With a procurement team focused on agile, your buyer/supplier relationships can be kept in a manner which gives your business the absolute best chance of success.

Agile procurement is set to be a hot topic at ProcureCon Indirect West 2022, taking place in April at the Sheraton Grand at Wild Horse Pass, Phoenix, AZ.

Download the agenda for more information and insights.