What is Procurement Management?
Project procurement management is a facet of project that can easily be overlooked at first but is in fact a vitally important part of project management and crucial to the success of most projects. Project procurement is the process of acquiring goods, services, or workers from outside sources for a project [1].
Procurement management includes everything from identifying what’s needed for a project and sourcing suppliers to negotiating contracts and managing vendor relationships. In essence, procurement is about ensuring a project has everything it needs, when it needs it, at a reasonable cost.
Successful procurement management requires not only planning and risk assessment skills but also the ability to navigate social relationships to effectively negotiate and collaborate with suppliers [1].
How Does the Procurement Process Fit into the Agile Development Process?
Regardless of the methodology used, procurement is a vital part of almost any project past a certain size. The vast majority of businesses don’t have 100% of the resources needed to complete a project and almost always have to use an outside source for at least one aspect of the project.
There are many similarities between Agile and traditional procurement but one of the largest differences between them is that the thought process of how the procurement process is approached is fundamentally different when using Agile methodologies.
In traditional project management methodologies, communication within the procurement process often follows a hierarchical structure, where requirements are defined upfront and communicated to suppliers through formal documentation and contracts [4] [5].
This approach tends to be one-directional, putting minimal importance on relationships and collaboration and limiting the opportunities for feedback or adjustments between project teams and outside suppliers.
In contrast, two of the core principles Agile was built on are “Individuals and interactions over processes and tools” and “Customer collaboration over contract negotiation” [2].
Like pretty much every other aspect of Agile, frequent, transparent communication is critical to success. Agile teams engage suppliers early and often to discuss project requirements, priorities, and potential changes.
Suppliers and procurement is also a topic included in the retrospective process which encourages teams to frequently reflect on any issues or roadblocks related to suppliers, and make changes and adjustments if necessary [5].
Benefits Agile Procurement Practices Can Bring to a Project
Faster Delivery Time
Agile procurement, like other aspects of Agile focuses on flexibility and doing over planning. Agile procurement focuses on getting the resources necessary for the next iteration of the project to proceed and forming functional relationships with suppliers.
This means using a less structured approach and instead of spending weeks planning, negotiating, and finalizing formal contracts for the entire project and following a rigid step-by-step process the way traditional procurement does [3].
As a result, since the project has what it needs to move forward quicker, a working product can often be delivered to the product owner sooner than with traditional waterfall development methods [5].
Lower Project Costs
Another possible benefit of Agile procurement is saving money and lowering the overall costs for the project. The fact that Agile procurement puts communication and relationships at the forefront of the process accounts for a large portion of these savings.
Reduced Waste: Agile procurement focuses on delivering value incrementally, allowing project teams to prioritize and implement only the most critical features or aspects of the project. By avoiding unnecessary spending on non-critical aspects of the project, Agile procurement minimize waste and optimize resource utilization, resulting in cost savings [3] [4].
Negotiation and Engagement Earlier in Project Development: Agile procurement involves engaging suppliers early in project development and negotiating contracts incrementally as requirements evolve throughout the project.
This proactive approach enables project teams to negotiate more favorable terms, including things like volume discounts or flexible pricing structures, which can lead to significant cost reductions over the duration of the project [3].
Rapid Feedback and Flexibility in Resource Allocation: Due to how the procurement process fits into the iterative structure of Agile it leads to a continuous series of frequent feedback loops between project teams and suppliers.
This enables the timely identification and resolution of issues through quickly addressing concerns, refining deliverables, and incorporating feedback from the product owner and stakeholders [5].
As a result, Agile projects minimize the risk of costly rework or delays, ultimately saving both time and money [3].
Better Short Term and Long Term Supplier Relations
If you’ve gotten this far you can probably already see that open communication and interpersonal relationships are at the core of the Agile approach to the procurement process. I can’t list the benefits of Agile procurement without also giving supplier relations a spot in the list [3] [4].
Agile approaches procurement management from the perspective of partnerships between the project team and outside suppliers.
It may seem like common sense to approach procurement from a more human perspective and focus on fostering transparent communication and strong relationships with suppliers, but unfortunately this often isn’t the case for the procurement process for traditionally developed projects [3] [4].
Summary
Procurement management is a critically important part of almost any project regardless of whether it uses a traditional waterfall methodology or an Agile one.
When it comes to the Agile procurement process the most important thing to remember is that it must be approached from a human first prospective that emphasizes transparent communication and the fostering of strong relationships with suppliers.
There are many possible benefits to be gained from the Agile procurement process but this post only focused on some of the largest including:
Faster Delivery Times: Agile’s flexible and iterative nature reduces the amount of upfront planning and contract negotiation needed, facilitates quicker decision-making and resource allocation, leading to expedited product delivery compared to the procurement process of traditional project management methodologies.
Lower Project Costs: Agile procurement minimizes waste and optimizes resource utilization and allocation by prioritizing the development of critical features and engaging in a cycle of continuous improvement. Through early engagement, iterative negotiation, and flexible resource allocation, Agile projects achieve significant cost savings.
Better Supplier Relations: Agile’s approach to procurement emphasizes transparent communication and partnership with suppliers, fostering stronger and more collaborative relationships.
By treating suppliers as partners in the project and fostering open dialogue, Agile procurement often has better negotiation outcomes and stronger more cohesive long term and short term relationships with suppliers.
Sources
Comments