1. Why is procurement as a profession so ripe for disruption?
Well, currently procurement, like many other functions, is going through a period of digitalisation. The main reason for that is the increased demand for time-to-market by the business and their end customers. As things have gotten faster, procurement has become in many cases a bottleneck instead of a business enabler. With Lean-Agile Procurement (LAP for short) we focus on the more complex sourcing cases (often strategic) that could not be digitalised. We provide procurement professionals with new tools to stay in business.
2. What are the main principles of lean-agile procurement?
In Lean-Agile Procurement we apply the same core agile principles and values that already work so well in other functions. Applied to procurement, this increases the focus on business value, early delivery, and establishes a feedback loop through internal and external collaboration. This substantially decreases risk and improves time-to-market from months to days/weeks. I recently explained LAP to a board of directors as an incremental sourcing approach similar to how investors do not invest all their money at once, but want to get a maximized return earlier and with minimized investment.
3. What are the key parts of the procurement process that cause bottlenecks?
First of all, we need to understand that the current RfX approach is more than 120 years old. It simply wasn’t designed for complex sourcing cases. It was created as a transactional process for commodity sourcing cases that could be specified/offered fast. But if we apply it to strategic sourcing cases where we are looking for innovation, co-development of products/services, and so on, we face challenges like:
- Long lead times because of multiple hand-overs, waiting times, trying to catch uncertainty with a specification, etc.
- Increased costs because of its transactional nature. There is just one shot and everybody adds their nice-to-haves, which leads to a fixed scope and an unpredictable number of changes as it hits the end users the first time.
- Increased risks through a huge scope and no feedback loop with the end-users, along with unpredictable budgets/timing due to uncertainty.
4. What are the main steps in the lean-agile process?
To cope with uncertainty we need a cross-functional team where the business takes the lead and the team members are the people that will also be involved in delivery together with the partner later on.
Step 1) Initialization – Set up, align and empower a cross-functional team.
Step 2) Preparation – The team does everything we’d do during normal sourcing (gather end-users needs, shortlist, create a draft agile contract, etc.), but as a team. Imagine you have a lawyer and a compliance officer at the table from the start; things could be done so much faster.
Step 3) Execution – We invite the shortlisted potential partners to a “big room event” simultaneously to co-create individual agile agreements/contracts together. The delivery team can make the decision and continue delivery the next day.
Step 4) Peer feedback.
5. What are the main benefits of lean-agile procurement for the purchasing organisation?
- Reduces preparation efforts as much as possible (reduce waste).
- Improves time to market dramatically (days instead of months), so that delivering business outcome starts earlier.
- Removes custom proposals, just ONE page in a predefined structure, so that creation and comparison of multiple proposals become as easy as possible.
- Puts the focus on partner evaluation (soft- & hard skills).
- Requires no additional translation step via Legal. The lean procurement canvas is an agile contract.
6. What are the benefits for suppliers?
Our aim is to achieve a win-win situation for all the parties involved. The most obvious benefit for the vendors involved is a minimized effort through direct collaboration. Collaboration also improves their proposals and so reduces their risks.
The collaborative environment drives a trust-culture even before a contract gets signed. 90% of the people involved in LAP, (even the parties that lost the bid), recommend LAP as an approach!
7. Are there any new skills procurement professionals have to develop to use Lean-agile?
Yes. As hard as it sounds, procurement professionals need to unlearn a lot of their current behaviours. In complex, strategic cases, agile leadership skills are getting more and more important. LAP requires procurement professionals to take an end-to-end facilitation role.
It’s important that we accept uncertainty – no single person can know everything, why is why we set up cross-functional teams to support each other.
8. Do you believe this will catch on and become a standard way of doing procurement?
Interestingly 15 years ago we asked us the same question about Agile software development. Today Agile is the only way of doing things in software dev if a business wants to keep its competitive advantage. Today’s world is all about business agility at all functions and levels.
Looking to the future, LAP could be the trigger to an even bigger development of Adaptive Partner Ecosystems. Because one supply-chain will be no supply chain in the future!
9. How can procurement professionals convince their superiors to give LAP a try?
I’ve found I haven’t needed to do much convincing. Once you understand what we do and “get” LAP, it just makes sense. Or as Phil Thomas (CPO of Barclays) recently said: “This is a game-changer!”
10. Where can we learn more?
I’m coming to Australia in March. PASA is hosting two special 2.5 hour briefings to introduce you to how agile is reinventing procurement.
The event is called An Introduction to Lean-agile Procurement with Mirko Kleiner, and will be held on the 26th March 2020 in Sydney and the 27th of March in Melbourne. It’s a fantastic opportunity to learn what LAP is really about and the opportunities it presents.
And if you want to go the whole way on Lean-agile Procurement, Mirko is delivering two-day COMPETITIVE ADVANTAGE VIA LEAN-AGILE PROCUREMENT WORKSHOPS (CREDENTIAL 1) in Sydney on 24th & 25th March and Auckland on 31st March and 1st April.