Strategy-Driven, Tech-Informed Procurement Agility

Procurement Agility: How to Harness Strategy & Tech to be more Proactive

STRATEGY, TALENT, ESG, ROI
Blogs, Rules, 1. Reimagine Strategy

Overview

Agile. Proactive. Strategic. Digitalisation. Great words that put the proverbial fire in the belly of procurement leaders… but when it comes down to it, how do you be more agile? How do you transform procurement from a back-office, reactive function to a proactive strategic role. How do you implement department-wide digitalisation rather than settling for digitisation of a few processes?

To reimagine your procurement strategy you must look at your people, processes and technology in terms of how they can be used to drive better, more agile decisions, plus how you can leverage intel from suppliers and internal feedback to ensure continuous improvement and business value.


 

In our New Rules of Procurement Engagement series we are engaging with leading procurement thought leaders and practitioners, from global powerhouses to tech wizards, to gain insight into the changing landscape taking place in procurement

Our previous article looked at how procurement needs to challenge preconceptions and dismantle outdated silos to build relationships within the organisation. This article takes a closer look at how to adopt a strategy-driven and tech-informed approach to your procurement initiatives.

Procurement Agility: How To Harness Strategy & Tech To Be More Proactive

People, Process, Technology – the trifecta of your procurement strategy

People

To be agile first requires having the right people, then the right processes and technology. But what does this really mean?

For people, it’s about having the right:

1) resources and skills to carry out the many different functions in procurement—supplier management, category expertise, data analysis—and coupling people’s skills and experience with easy to use tools

2) people with the right mindset, vision and aptitude and actively nurturing this talent

 

“You need the right people in your team that are best aligned to doing the right job whether that’s managing relationships with suppliers, running sourcing activities, or the data. There’s a big influx of good data coming to procurement now thanks to technology, so you need the right people that can understand that data and turn it into meaningful insight.” Nick Drewe, Market Dojo

Process

“In terms of the process, it’s all about making sure that procurement is there to best support the business.” Nick Drewe, Market Dojo.

And the processes need to allow that to happen, here are some practical examples

Business objectives:

  • Sustainability
  • Mitigating cost increases
  • Be more lean / tighten resources
Processes:

  • Process for how sustainability is embedded in what you’re delivering as procurement
  • Process to manage cost savings or fluctuations in prices through compliance to negotiated agreements
  • Processes that enable procurement to have zero touch of what’s going through business, e.g. using technology to assist with providing the best value goods/services without procurement having to get involved every time

Make sure that procurement is there to best support the business.

An agile process is facilitated by the ongoing development and implementation of your procurement  strategy to identify opportunities for innovation, for example

  • Understand your supply chain to help make better decisions – exploring alternatives where supply is scarce such as raw materials or textiles
  • In high risk categories, it might be advisable to use a core set of suppliers (already on-boarded) to avoid supply chain issues
  • Where cost savings are important a large number of suppliers will deliver better results – what is the optimum number of suppliers needed for each category
  • What level of approvals, risk assessment and compliance is required for each tender and how does this change based on goods/services, size of tender, or geography
  • What is the best type of negotiation – RFP, RFQ, reverse auction, Japanese auction etc. Without this knowledge and visibility employees may revert back to emails 

Need help choosing between your RFPs and RPQs or which auction to run? Download our one-page decision tree and keep it handy for the next time you need to answer the question “What Reverse Auction Should I Use?”

Technology

Technology helps drive better decisions and brings a greater level of professionalism to procurement activities but only when you first understand what the business needs and how technology will deliver it, for example

  • Spend and category management – gain data-driven visibility into spend and activities
  • Cost savings – access data to negotiate better deals with suppliers
  • Risk management – identify and mitigate risks associated with the supply chain
  • Cycle time – reduce the time it takes to go from identifying a need to awarding a contract and supplier on-boarding
  • Compliance – ensure compliance with all applicable laws and regulations
  • Supplier performance – track and manage performance against chosen KPIs
  • Procurement agility – help organisations to respond quickly to changes in the market and the needs of their customers

Procurement technology is a valuable tool for organisations of all sizes that are looking to improve their performance by creating a learner, smarter, more collaborative environment.

The impact of digitalisation within procurement using today’s best-of-breed tools is seamless interoperability and integration into existing suites to consolidate, automate and future-proof tech stacks.

 

“In really simple terms, I think technology has the ability to completely change the role of procurement and transform the way we do things and how we think about them.” Richard Nixon, SpendHQ

Supplier Intel

We have talked about how important stakeholder engagement is to your procurement strategy, now we turn our attention specifically to suppliers.

Engaging with suppliers is key with e-sourcing

It may seem obvious but you can’t buy goods and services without suppliers. And, after the last few tumultuous years, it’s become apparent that reliable suppliers should be valued highly. Moreover, procurement teams will benefit from having a process to actively gather data from suppliers to ensure supply chain resilience and to provide intel for executing your procurement strategy. “Engaging with suppliers is key. A lot of intellectual knowledge is locked up inside suppliers just ready for business to unlock by just engaging with them better.” Nick Drewe, Market Dojo

 

“Procurement has the ability to gather data either directly or indirectly from suppliers as a part of the sourcing process and as a part of your category management process that then can give you data which can really become a baseline for benchmarking.” Canda Rozier, ex-CPO

The new rules of supplier engagement is to embrace the subtle power shift from supplier selection to supplier relationships with the aim of creating a mutually beneficial situation. Proactive procurement professionals are shifting away from tactical suppliers to more strategic and collaborative supply partnerships, or ‘RFPartner’.

Market Dojo’s collaborative tools provide a better understanding of the marketplace and supplier relationships, providing a platform for trust, transparency and growth.

Close the Loop

A strategy is only as good as its execution. And strategy execution relies on continuously monitoring progress toward your goals and adjusting where necessary.

But, how do you know when to make adjustments?

In an ideal world, strategy is a linear process where a plan is formed, implemented, and the goals are achieved. In reality, regulations and policies change, macroeconomic factors fluctuate, customer needs shift, technology evolves and competitors get in the way.

So, to execute a strategy amongst all these potential changes, procurement professionals must gather information internally, from suppliers (see previous section) and through market sources to make informed decisions on any course corrections that are needed and, perhaps more critically, when to make them.

How do you know when to make a course correction?

By continually measuring progress and performance against the business needs. To effectively measure progress, numerical metrics, or key performance indicators (KPIs), need to be determined at the planning stage which are regularly tracked and monitored to assess performance or whether changes need to be made to the strategy.

Specific metrics will vary from company to company, but it’s important to identify the best KPIs in the context of the organisation’s goals and objectives. Here are some example KPIs:

  • ESG targets
  • Customer satisfaction
  • Procurement cycle time
  • Supplier risk
  • Supplier performance
  • Cost savings
  • Contract compliance
  • Quality

 

“We have two main KPIs: the coverage that we have – are we able to cover a huge percentage of all the categories per year? And then the savings that we get at the end of the year. But in order to have a better operation, to ensure our compliance, and ensure that we will get the savings (because we always present theoretical savings when we finish a project), the key thing is how we can ensure that these saving become a reality in the accounts.” Caroline-Patricia Huberdeau, Leroy Merlin

So, have you adopted a strategy-driven, tech-informed approach to your procurement initiatives?

Get more insight into the New Rules and join the Changemakers!

new rules of procurement engagement

 

July 6, 2023
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