The digitisation of everyday, transactional sourcing has had the positive effect of freeing up procurement professionals’ time to concentrate on more complex and strategic sourcing. A whitepaper from Lean-Agile Procurement notes that when it comes to these complex events, “our existing tools such as RFI, RFP, Reverse Auction, etc. are inadequate”.
With customers and stakeholders increasingly demanding that value is delivered faster, what has become clear is that complexity is not a licence for procurement teams to take months to complete a sourcing event.
Mirko Kleiner, thought-leader and President of the Lean-Agile Procurement Alliance, has introduced a new mindset to procurement with techniques drawn from the start-up scene. Rapid time-to-market can be achieved using approaches including LeanStartup, Scrum, Agile, and the Business Model Canvas.
Lean-Agile Procurement is suitable for complex sourcing (in both direct and indirect procurement) but is unsuitable for commodity sourcing, where it may generate unnecessary overhead.
The benefits of Mirko’s Lean-Agile Procurement approach include:
- Up to 400% increased time-to-market compared to classic approaches.
- The removal of uncertainty through continuous customer feedback can save ~80% through focusing on business goals and avoiding non-essential requirements.
- Agile contracts mean partnerships can be adapted or even stopped at any time, radically reducing risk.
- Reduced overheads on the buyer side by ~50% through more effective procurement.
- New ideas (innovation) through increased customer collaboration.
- Positive changes in behaviour through true partnerships.
How does it work?
Four of the guiding principles for Lean-Agile Procurement are:
- Team effort: Having everyone with expertise relevant to the product at one table and involved from the very beginning of the project right up until the conclusion. Importantly, teams must be empowered to minimise waiting times for decision-making.
- Incremental process: Tackling ideas in order of the highest priority ensures the team is working on the most valuable things first. Each idea is sliced into smaller batches to deliver incremental value, with customer feedback sought and acted upon after each batch.
- Speed over costs: A fundamental mindset shift means that staying ahead of the competition is seen as more important than taking weeks to optimise a few percent of costs.
- Effectiveness: A focus on doing the right things while accepting that anything can change at any time. A one-page Lean Procurement Canvas is used instead of detailed specifications or 100-page business cases.
The process involves firstly setting up an agile, empowered, cross-functional product team. High-level needs are then defined by the team and stakeholders (customers), and a one-page “Lean Procurement Canvas” is partially filled in. All potential suppliers are then invited to a “Big Room Evaluation Day” but not provided with any information gathered so far.
At the Evaluation Day, the Lean Procurement Canvas is co-created with each of the vendors. The project team uses this opportunity to analyse the value and skills of the potential partners, along with soft facts such as how they behaved during the event. The team then gathers everything together to make a decision. Finally, the Lean Procurement Canvas (incorporating a collaboration model and an agile contract) is also used as a partner management tool.
Read more about Mirko Kleiner’s Lean-Agile Procurement approach.
Join PASA’s Competitive Advantage Via Lean-Agile Procurement workshop, a two-day certification workshop (LAP1) taking place from 18-19 September 2019 in the Sydney CBD.
The workshop will be facilitated by Lean-Agile Procurement’s Mirko Kleiner, Thought Leader in Lean-Agile Procurement, CIPS Award Winner 2018, international Speaker, Author, President of LAP Alliance, co-founder Flowdays, Agile Enterprise Coach, Certified Scrum@Scale Trainer. Register here.