the ultimate guide to agile procurement in the

1 The Ultimate Guide to Agile Procurement in the Manufacturing Industry Hartfordtechnologies.com

THE ULTIMATE GUIDE TO AGILE PROCUREMENT IN THE MANUFACTURING INDUSTRY

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For a long time, procurement in the manufacturing industry was a relatively static operation. Procurement specialists would build relationships with suppliers that they trusted, focusing on cutting costs and ensuring quality above all else, then rely on those relationships to develop a procurement strategy that changed very little from month to month and year to year. In other words, finding high-quality, low-cost components and ordering them over and over again from the same supplier within a set timeline used to be the primary role of procurement specialists in the manufacturing industry.

Today, however, many manufacturing operations are starting to make use of a different procurement strategy known as agile procurement in order to both reduce risk and better take advantage of opportunities that arise. But what is agile procurement, and how can procurement specialists best capitalize on this new approach?

THE ULTIMATE GUIDE TO AGILE PROCUREMENT IN THE MANUFACTURING INDUSTRY



To be agile - in the business sense of the term - means to be able to react and adapt quickly to changing circumstances. Agile procurement dictates that procurement specialists take the time to analyze market conditions, make predictions about how those conditions might change in the future, and be prepared to quickly react if their predictions come true. For example, a procurement specialist in the industry may be able to foresee a potential disruption in their supply chain and prepare a contingency plan that enables them to quickly pivot to a new supplier and avoid costly downtime.

Much of the recent prevalence of agile procurement in the industry and beyond has been born out of necessity. Today, market conditions across the world change and evolve at a rapid pace, forcing manufacturing operations to be agile in their procurement strategy if they want to stay ahead of the curve.

AGILE PROCUREMENT DEFINED



ADVANTAGES OF AGILE PROCUREMENT IN THE INDUSTRY



Agile procurement has enabled procurement specialists in the industry to offer value that extends well beyond cutting costs and securing high-quality components. Some of the advantages of agile procurement include:

Adapt to the Needs of the Business At one time, manufacturing operations were in many ways forced to adapt to what their procurement strategy allowed. With a procurement process that is static and unable to change, manufacturers were unable to quickly react to changes in customer demand and market conditions and instead were limited by their existing procurement process. With agile procurement, a manufacturer’s procurement operation is able to quickly adapt to the needs of the business, rather than the other way around, allowing the manufacturer to better capitalize on opportunities that arise.

Stay Ahead of the Competition Agile procurement enables manufacturers to capitalize on new opportunities in the market such as supply and demand imbalances, new technologies, and arbitrage before the competition, keeping the operation on the cutting-edge and ensuring they stay one step ahead of their competitors.

Avoid Risk An agile procurement strategy is one that is able to quickly adapt to disruptions and disasters in order to limit their consequences. While working with experienced, trusted suppliers can go a long way toward eliminating the risk of a supply chain disruption, combining these relationships with an agile procurement strategy that enables manufacturing operations to quickly pivot and fall back on contingencies is the best way to reduce the risk of disruption as much as possible.

ADVANTAGES OF AGILE PROCUREMENT IN THE INDUSTRY



Empower New Business Strategies Making use of agile procurement empowers manufacturing operations to explore new business opportunities with the confidence that their procurement team will be able to quickly adapt should those new strategies be put in place. For example, if a manufacturing company uncovers a new market that they would like to enter, agile procurement allows them to enter the new market more rapidly and efficiently.

Realize Opportunities for Improvement Adopting an agile procurement strategy forces procurement specialists to develop a much broader understanding of the market, the company’s procurement strategy, and the overall operation of the company. Procurement specialists are then able to use that understanding, combined with their unique perspective of the company, to realize opportunities for improvement and make suggestions about what changes need to be made.

ADVANTAGES OF AGILE PROCUREMENT IN THE INDUSTRY CONTINUED...



EXAMPLES OF AGILE PROCUREMENT



Looking at examples of how other companies successfully integrated agile procurement further shines a spotlight on the benefits that agile procurement is able to offer. Three such examples that are worthwhile case studies include:

An Aircraft Manufacturer Avoiding Disaster A report written by McKinsey and Co. detailed the story of a global aircraft manufacturer that had partnered with a key supplier near the Fukushima nuclear power plant in Japan. When an earthquake led to a meltdown at the power plant, the aircraft company’s supplier was shut down for a lengthy period of time. While the aircraft company in no way predicted that such a disaster would occur, they did have an agile procurement strategy in place that allowed them to quickly pivot to a new supplier and avoid having their operation halted by the disaster.

A Bubble Gum Manufacturer Gaining a Competitive Advantage The same McKinsey and Co. report also highlighted the story of a major bubblegum manufacturer whose procurement department developed a deep understanding of the factors affecting the price of the raw materials used to produce their gum. Rather than just using that knowledge to secure low-priced materials - as is the typical role of procurement specialists - the procurement department enacted an agile procurement strategy that had them working alongside the company’s marketing department in order to develop product pricing and promotional strategies that were based in part on the current and future price of raw materials. Aligning the money spent on promotions and the price of products with the projected price of raw materials allowed the company to better maintain their profit margins and stay ahead of the competition.

EXAMPLES OF AGILE PROCUREMENT



Agile Procurement in the Public Sector Examples of agile procurement aren’t confined to just the private sector. After a series of IT failures - most notably healthcare.gov - the US General Services Administration’s 18F program began relying on an agile procurement strategy that breaks up the sourcing and implementation of their technological systems into smaller, multiple projects that are more easily managed and overseen.

While not directly related to the industry, these examples of agile procurement being successfully used both in the private and public sector showcase the benefits that agile procurement can offer to manufacturers and beyond.

EXAMPLES OF AGILE PROCUREMENTCONTINUED



HOW MANUFACTURERS CAN DEVELOP AN AGILE PROCUREMENT STRATEGY



Procurement teams in the manufacturing industry can become more agile by focusing on areas such as being collaborative both within their department and within other departments in the organization, gathering data and figuring out how to make use of it to deliver results, and adopting a more action-oriented approach to procurement.

Developing an agile procurement strategy within the industry has a lot to do with adopting this type of mindset. Procurement teams must learn to act quickly, focus on the big picture, and develop ways to use data to deliver results that extend beyond cutting costs. In addition to adopting the right approach and mindset to procurement, procurement teams in the industry can also become more agile by making use of technology that enables them to better monitor their supply chain and gather data that can be turned into results.

HOW MANUFACTURERS CAN DEVELOP AN AGILE PROCUREMENT STRATEGY



From avoiding disruption to being able to better capitalize on opportunities as soon as they arise, adopting an agile procurement strategy offers tons of value to manufacturers in the industry.

At Hartford Technologies, we are proud to work alongside companies who have implemented an agile procurement process, helping to deliver the components they need quickly and efficiently in order to maximize the effectiveness of their procurement process. If you would like to learn more about why Hartford Technologies is an ideal manufacturer for companies who have implemented an agile procurement process, we invite you to contact us today. and gather data that can be turned into results.

CONCLUSION



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the ultimate guide to agile procurement in the

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