4.6 Traditional and Agile Procurement
Traditional procurement works on legacy systems and frameworks. Decisions are slow. Much time is taken with each procurement stage – identifying the needs, outlining the procurement plan, selecting suppliers, issuing RFQ, tender evaluation, contract terms & conditions, and supply chain management.
With agile procurement, on the other hand, time and speed are of the essence, so some steps are combined– for example – contract negotiations can be entered upon during the sourcing process.
Where traditional procurement employs a large team of professionals, agile procurement may opt for a select handful of people to form a cross-functional team. Individuals are chosen from the stakeholders – and may include procurement professionals, IT, legal, customer representatives, suppliers, and finance experts.
Agile procurement provides greater efficiency, is more effective, and has a faster time (speed) to market compared to traditional procurement. The simple, agile procurement definition states that “agile procurement is a type of procurement approach that is less strict, less orthodox, and more open and collaborative” (CPO Rising Report).
Agile procurement is not promoted as an alternative to contemporary procurement. It is simply an ally, an aide to strengthen current procurement strategies, i.e. complimentary. For example, agile procurement is a favored model because of its lean and fast approach in IT industries.
Reflective Exercise
- What criteria will you use to select a contractor?
- Why is developing your negotiation skills important in procurement management?
Key Takeaways
- The procurement plan includes determining the category of materials or services, choosing the type of contractual relationship, soliciting bids, selecting bidders, managing the work, and closing the contracts.
- The decisions made when selecting the type of contract are based on whether the materials can be provided by suppliers, vendors, or partners; how well defined the work is; how the risk will be shared; the importance of the task to the schedule; and the need for certainty of the cost.
- Companies that bid on contracts are evaluated on past performance and current financial status. RFQs and RFPs are sent to those companies. RFQs are evaluated on price and RFPs are evaluated on price and method.
- As part of the procurement process, long lead time items are identified and monitored. Items that are critical to the schedule or delayed are assigned to an expediter. The logistics of handling delivery, storage, and transportation are determined. Work and materials are inspected for quality.
Additional Information
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