Why Adopting And Following An Agile Approach to Procurement in 2022
Keeping up with the competition has never been a piece of cake. And a line of the well-known events of 2022 proved that businesses have to fit in today’s market, undergoing changes with time.
Of all the factors, increasing the flexibility of procurement management is fundamental to the company’s survival. This may help to prevent manufacturing downtime driven by the next worldwide event.
In this blog post, LeverX Group, an SAP integrator, will discuss this and other factors that help companies to stay afloat within the ever-changing business environment.
Why should companies streamline the procurement process?
At least because the market is too volatile today. If earlier you could update critical information once a day, today, all the data related to the procurement area must be updated every second.
The earlier you update the essential information, the more resilient you are to the volatile market. Ideally, all procurement-related data should be updated every second.
Why is updating data with this frequency important?
The answer is economic turmoil. One pivotal event can disrupt the entire supply chain that has been built up over the years. When you continuously supplement and update your database, you can easily adapt to fluctuations. Also, you can prepare instructions so that your team can amend the processes appropriately.
Processes in the sales and marketing department, as well as in procurement, warehousing, and manufacturing, are closely related. If one of them is changed, it entails further changes and updates. Paperwork lasts for months or even gets lost, thus slowing down the entire workflow while your competitors bring new products to market.
Which procurement processes require modifying primarily?
First and foremost, it is sourcing and all connected processes. Purchase approval, justification, and compliance with all legal norms and tech specifications take a lot of time, while the supplier must wait.
This is not the final step. After sourcing, you need to create a request, align it with an internal customer, transform the request to RFQ (request for quote) or RFP (request for proposal), and send it to a tendering portal.
As many state-owned businesses nowadays do, you can send query letters to potential vendors. The resulting exchange of correspondence delays the process even more. However, you can digitize many such activities. The data can be gathered online and integrated with an existing ERP system. Finally, you’ll be able to send the request to the bid portal from that system.
Working with suppliers takes a lot of paperwork. How to fasten the process in this case?
As we mentioned before, contract-related communication within the company and between the customer and the supplier can take a long time. In particular, when two or more departments are involved in this process, their managers can need a week or more to provide feedback.
These days, more and more companies are trying to fasten contracts by attaching contract forms to projects simultaneously with the tendering processes. Therefore, suppliers can review the terms and conditions while you are collecting applications. With half of the work being done along the way, you can save time on negotiations after a necessary supplier is found and initiate the delivery process immediately after bid closing.
Is the procurement process agility based on time savings?
That’s right. No doubt, some businesses may allow themselves not to save on this resource. Most often, these are organizations that produce products to order. But discrete manufacturers such as the FMCG industry can stop production for a single moment. Any downtime is a financial loss for them.
What else may influence procurement process agility?
Negotiation between internal departments. There should always be room for discussion of any questions. The main idea of agile procurement management is solving the majority of arising problems without an order from above and avoiding excessive formalism. Moreover, businesses should encourage managers’ initiatives and suggestions on how to make processes faster and more efficient.
The uninterrupted production process is more important than paperwork because downtime means thousands of dollars in losses.
What is more important, planning or agility?
Fast response to changes and flexibility concerning decisions. For example, a company creates a request to purchase servers. But at a particular moment, the situation changes, and the company has to move to a smaller office. An “inflexible” manager will appeal to an already aligned and created request and, most likely, will not change anything.
However, knowing that we have to move to a smaller office, we can adjust the number of required servers and our plan.
What solutions help businesses increase procurement process agility?
If we talk about sourcing, these are SAP Ariba and SAP S/4HANA. You create a request in the SAP S/4HANA system and send it to SAP Ariba, where the sourcing process can be launched within a few minutes.
SAP Ariba also offers a tool, Contract Management, which allows you to negotiate contracts online both within the company and with suppliers.
The digital signature feature helps to boost the negotiation process significantly. You no longer need to keep reminding the manager for days; you can quickly coordinate and negotiate the necessary documents within the system.
Is SAP Ariba only for SAP users?
No. SAP Ariba is a unique solution; even non-SAP suppliers can work with it. They can sign up for SAP Business Network and interact with SAP users with this portal. You need to send your supplier an invitation. They fill in a form, pass the verification, and immediately get the opportunity to participate in tenders.
Moreover, the SAP Quality Management solution creates a supplier rating within this portal. If you have already successfully cooperated with suppliers, they can participate in your tenders without additional approval. If you have problems with suppliers, the system automatically doesn’t include them when a new tender is launched.
Do you constantly face any of the challenges mentioned above in procurement processes? Contact LeverX Group’s SAP consultants, and they will provide you with a profound consultation regarding your current business needs.