I’ve been giving a lot of though of late to the notion that procurement agility will nearly always mean different things to different organizations. But generally speaking, I’d argue that agile procurement functions bring five common capabilities or markers that are difficult to debate.
These include the ability:
- To adapt to the needs of the business (versus fitting the business to procurement)
- To enable new business strategies (e.g., more effective M&A, accelerating an entrance into new markets, localizing products/solutions)
- To adjust rapidly to market conditions (e.g., inventory levels in the channel, commodity and currency price fluctuations, customer demand) and ideally sense changes before or as they are occurring — and act as an early warning sign for the business
- To take advantage of situations as they present themselves before others (e.g., supply market imbalances, arbitrage, new technologies)
- To realize when a current strategy or program needs to change and to change quickly when necessary (i.e., “pivoting”)
Perhaps what is most curious about agile procurement is that, generally speaking, the more mature a procurement organization is — either overall or in specific areas such as sourcing, purchase to pay or supplier management — the more agile it becomes.
Agile procurement organizations tend to not “lock themselves in” to specific supply market constraints — and this includes technologies as well. As I observe in the Spend Matters paper, Reframing Maturity Models: Empirical Perspectives on Radically Improving Procurement Performance:
For procurement organizations looking to accelerate their path on the maturity curve, not locking themselves into a single technology provider or network is an approach that mirrors how one buys from suppliers in other categories. Think about it: better than a monolithic network is one that interoperates with the broader world, including third-party solutions, merchants, suppliers and other enabling technologies. In other words, a network that is truly a network rather than simply a proprietary application that sits between organizations. This is precisely the strategy Apple has pursued with the Apple Store, which has Apple apps but also sets a common standard for application development, interoperability, security, permissions, payments, collaboration and much more. SalesForce also has fostered a similar approach with Force.com.
What this says to me is that the suppliers we decide to do business with (or make strategic) can play a key role in helping us become more agile and more mature overall as a result. It’s our choice.
If you’re interested in learning more about the topic of procurement maturity and how it relates to creating greater agility in procurement (and the business overall), do check out Reframing Maturity Models: Empirical Perspectives on Radically Improving Procurement Performance.
It’s currently a free Spend Matters download (courtesy of Tradeshift). But it won’t be for long.