Editor’s Note: Over the next few weeks on CPO Rising, we’re publishing some “best of” 2022 articles as we reflect on the year and prepare for the new year ahead.
In this week’s segment covering our CPO Rising 2022 Report, we’ll look at the characteristic of “procurement agility” and its criticality to Chief Procurement Officers and enterprises over the last 10 years. Today, agility is nearly table stakes to be competitive and mitigate risk.
In its State of Strategic Sourcing 2013: Speed is Good, Agility is Better report, Ardent Partners introduced the idea that “procurement agility” would be the defining characteristic of the next generation of procurement leaders. By 2015, Ardent had become a major evangelist for procurement agility, delivering the first detailed discussion of what makes a procurement department agile and a blueprint for how to build one (CPO Rising 2015: The Agility Agenda).
Throughout the ensuing years, the speed and complexity of business continued to accelerate, forcing procurement departments around the globe to adapt to new market conditions and react to new opportunities while maintaining discipline and efficiency. And, as the demand for procurement agility heightened, CPOs and other C-level executives took notice. Today there is no doubt that procurement’s ability to impact business processes, relationships, and results will continue well into the future. However, the depth and breadth of an individual organization’s impact will depend on each group’s ability to master its processes and technologies, and upon the ability of its leader, the CPO, to maintain the department’s focus and ensure fast, but assured, decision-making and crisp and agile execution.
The drive for innovation that has collapsed most product lifecycles means that the sourcing needs of a company are more apt to shift significantly within a business cycle than in any previous time. Managing and mitigating supply risk has become the top priority of the CPO in 2022 because missing a sales window due to short or poor supply can shake an enterprise to its core. And, in a business world that is increasingly focused on the short term, sourcing results are under much greater scrutiny by executives and, in some cases, external analysts, media, and investors. Ironically, after years of arguing that what happens in procurement and the supply chain is front-page news, coverage is consistent, particularly when it comes to supply disruptions and failures. The perception that a business cannot execute hurts its reputation and ultimately its overall value, which, in turn, means that an enterprise’s level of “procurement agility” is directly linked to its brand and overall value.
In this instance, the procurement market has moved fast. And by 2019, “procurement agility” was de rigueur, a key part of most CPOs’ agendas and their public discussions. In 2022, procurement agility is more important than ever, and a record number of procurement organizations claim they possess it. with 57% of the respondents in this year’s survey rating themselves as highly agile (13%) or agile (44%). Another 36% believe that they are somewhat-agile and just 7% do not believe their procurement departments are agile at all. And so, it remains that the procurement teams that adeptly connect their tools, resources, and expertise to support the evolving needs of the business will succeed above all others. And, it is a procurement team’s ability to utilize its data to become more intelligent and, therefore, more agile that is the next great frontier.
Characteristics of an Agile Procurement Department
The following are four characteristics that define an agile procurement department.
Agile organization. An agile procurement organization is one that has a fluid organizational structure and prizes skills over experience. The organization is regularly aligned with the strategic plan and objectives of the enterprise and operates with an open flow of information and communication. Individuals and the organization they comprise are adaptable, responsive, and looking for the next challenge or threat. Above all, an agile organization has fluid resource allocation, enabling it to get the right talent focused on the right opportunities at the right time.
Agile processes. Agile procurement processes are standardized, automated, streamlined, and scalable, but they are also managed in a cohesive and holistic manner by a procurement team that is continually looking to improve them by reducing and/or eliminating complexity as well as any barriers that impede progress. Agile procurement processes can be robust (but, not a requirement); but they are always pragmatic and adaptive and, above all else, effective at accomplishing desired tasks expeditiously and with a minimum investment of resources.
Agile strategies. Agile procurement strategies focus on regular and proactive management and operational improvement. These strategies interlink planning with execution to ensure that the procurement organization’s decisions and practices are responsive to the changing needs and requirements of the business’ customers, stakeholders, suppliers, and partners.
Agile technology. Agile supply management technology is cloud-based, easy to use, and easy to adopt. The solutions are robust but also intuitive, adaptable, and easy to deploy. The solutions support collaboration and advanced communication and offer strong reporting and analytics.
Next week’s CPO Rising 2022 Report coverage will focus on procurement performance and technology adoption. Where do chief procurement officers need to focus their performance today for better outcomes tomorrow?
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