Fast changes, short reaction times – agile procurement as a solution approach
The fear of a further lock-down by Covid-19 and the associated supply risk poses an enormous global challenge for procurement. How can a company react adequately to the latest events at any time?
The goal of reducing costs is higher on the to-do list, but no longer at the top of it. The priorities are shifting day by day, because the top priority is currently to have or be able to call up the required materials, whether raw materials, vendor parts or the entire product range in sufficient quantities. Several times a day there are new reports about corona risk areas, border closures and curfews. If procurers do not react spontaneously and at short notice to changes, there is a risk that material bottlenecks will occur and that their own production will come to a standstill because the supply chains are not stable and wide enough. Since Covid-19 began at the beginning of this year, all companies should already have adapted their global risk management with a view to supply chain security and have a „contingency plan“ at hand.
Theory vs. practice
The theory is all well and good and everyone knows what should have been done. However, we also know that the reality has often been different in recent months:
- Putting out fires at the first lockdown to ensure emergency supplies
- partial production stops or plant closures for a few weeks
- Creation of workplace utilization and hygiene concepts
- Creation of a digital infrastructure for home office workplaces
A few months have passed since then and a new normality has been established with new workstation assignments, digitalized processes and adapted core tasks. And no sooner does a bit of peace return to everyday work than the economy seems to collapse once again overnight.
The closed season is over, and those who fail to react just as quickly to ad hoc changes in the underlying conditions run the risk of plunging into an even deeper economic crisis and possibly not surviving it.
The agile manifesto as a problem-solving approach
Preventive action must be taken quickly for the smallest risk indicators. Agile procurement has proven to be successful in this respect. Agile procurement is based on the same basic rules as Agile Project Management: Achieve small goals, work together to achieve them and end unsuccessful approaches.
Although the Agile Manifesto is not new and originated in software development, the values and principles are still up to date and can therefore also be applied to the procurement – supplier relationship:
- Satisfaction, securing business capability, customers (both sides) is the top priority.
- The rapidly changing conditions within a project must always be considered and adapted in favor of the customer.
- Services, services or to the product are delivered in shorter regular time spans updates, the project work is done in milestones.
- The close cooperation between procurement and suppliers must take place daily.
- The teams always receive the necessary tools for their work and remain motivated to deliver consistently good results.
- Regular face-to-face meetings for quick success, in Covid-19 times of course as video conference.
- A ready functioning product (e.g. a stable supply chain) is the measure of success.
- Agile processes should ensure the security of supply in acute and sustainable cases.
- The increase of agility by focusing on technical excellence and appropriate design.
- Keeping work processes as simple as possible.a
- Self-organization and the development of own structures should be the focus of the teams.
- Regularly review and improve teamwork.
Agile procurement applied in a procurement – supplier relationship leads very quickly to success. By setting up separate teams for the various risk factors and ensuring exchange through comprehensive communication, starting points for avoiding risks within the supply chain quickly become clear.
An open exchange and a constructive cooperation of both sides is the condition for success. The respective management teams are to be defined as customers. The objective is to ensure the supply chain with optimal yield and security for all parties involved. Through joint consideration and short-term reaction, the most important risk factors can be identified in a short time. But only if both sides adhere to the rules of the agile manifesto and are accordingly ready for the necessary transparency and joint responsibility. Agile procurement helps you.
Managing Director, ADCONIA GmbH
Consultant, ADCONIA GmbH