Agile procurement organisations: the best response to procurement risks

The end of traditional procurement processes

Recent years have tested many procurement processes that used to work perfectly well. Many of these processes have been unable to withstand the previously unimaginable pressure on supply chains. Global conflicts and risks, the resulting supply chain gaps, material shortages and a rapidly changing market have required a fundamental rethink in companies' procurement organisations. While their main concerns used to focus on cost, quality and time, the most pressing concern for companies today is probably supply chain resilience. On top of this, there are new sustainability requirements that were almost unheard of in the early 2000s.
 

Agility as a key competitive driver

Agility has been a key competitive driver for a long time. In most cases, the advantages of agile supply chains in terms of labour and system flexibility, risk management, inventory placement and integrated planning, outweigh the disadvantages, such as a higher number of defective goods or higher prices for certain types of goods. Future-oriented, agile supply chains are characterized by flexibility, transparency and cost efficiency.

But procurement organisations first need to do the groundwork to create agile working practices. Project management frameworks, such as Scrum or Kanban, or approaches such as design thinking, which support flexible work in interdisciplinary teams, are ideal for updating established procurement processes. These teams are not only made up of employees from procurement but include colleagues from other specialist departments, such as IT, quality management or production, when required for a project.

Take supplier management, for example. Here, suppliers are regularly reviewed and evaluated according to agile methods, which are not only about quality and price, but also the ability to adapt to the client’s changing requirements and needs.

Procurement organisations also need to examine corporate culture in general and the organisational structure of purchasing in particular. The organisation first needs to establish an agile mindset where rigid hierarchies make way for new work practices. This means giving employees, teams and departments greater decision-making power, with decisions being made independently based on feedback from customers or clients and without the need for lengthy consultations. Employees largely manage themselves, rather than being delegated to from above. Organisations must want and enable taking initiative and responsibility and be able to tolerate mistakes.
 

New stages of digital transformation in procurement

Artificial intelligence will change procurement forever. Some programmes such as ChatGPT have already been introduced and are used by buyers every day. Intelligent bots often only perform standardized routine tasks, so employees do not have to do them, but they are also already capable of performing far more complex activities. For example, AI applications can analyze historical data on supplier performance, price fluctuations and changes in demand to make precise predictions for the future. In addition, AI can help to identify potential risks and disruptions in the supply chain and implement measures to mitigate them.

Processes such as supplier qualification, evaluation and classification, which AI software can perform more comprehensively and on a broader data basis than human employees, are particularly important for agile procurement organisations. In the future, procurement will consist of more strategic roles that respond quickly to events in agile teams and can resolve complex issues quickly. AI will be very significant in this area.