What lean supply chain management is - and why it matters

What lean supply chain management is – and why it matters

7 strategies for a more resilient Supply Chain

7 strategies for a more resilient Supply Chain

Supply Chain and the sharing economy

The impact of shared economy on supply chain

How to make Supply Chain more ethical?

How to make Supply Chain more ethical?

How to apply Circular Economy concept in supply chain

How to apply Circular Economy concept in supply chain

How to apply Agile methodology in the purchasing department

How to apply Agile methodology in the purchasing department

The current economic scenario requires faster responses from both companies and their employees. Aspects such as late deliveries of indirect material, for example, can generate a series of problems within the operations chain, impacting productivity and, consequently, financial return.

In order to try to respond to these demands, the Agile methodology becomes fundamental. In this text, we talk about the main concepts of agile mindset and give some tips on how to implement it in the purchasing sector.

What is the Agile mindset?

There are many cases that can exemplify the moment we live in: considering the field of technology, for example, extensive communication networks have been developed that allow instantaneous interaction between individuals in different parts of the world. Regarding the economy, we have seen supply chains become global, influencing and changing processes that involve a number of actors (suppliers, buyers, logistics companies, among others).

There are many experts and academics who seek to conceptualize what we live in the modern world. An example is the term VUCA, created by the US military to define scenarios and contexts of war, which has come to be used as a business strategy as well – long story short, VUCA is an acronym composed by the first letter of the words: Volatility, Uncertainty, Complexity and Ambiguity.

More recently, in order to expand this concept, the term MUVUCA was also introduced, with the addition of two new elements: Meaningful (all actions are guided by a purpose as a result of the search for a meaning for life and the world) and Universal (concern about the global impact of what we do).

In order to find a way to follow up a reality in constant change, the agile methodology emerges: coming from the Information Technology sector, it seeks to reduce the rigidity of traditional organizations’ processes and procedures, encouraging smaller and faster deliveries, constant reviews and collaborative work. Read our Agile Supply Chain article to understand more about it.

What are the agile principles?

Even though it emerged in the IT area, the set of principles and processes that make up the agile methodology started to be used by different types of departments and organizations. In the purchasing area it is also incorporated as an alternative to the traditional model of acquisitions.

It is important to emphasize that the adoption of agile thinking is not an easy task, it requires organizational changes and the willingness of employees to change. The use of this methodology also depends a lot on the context, but there are some topics that can be applied in all situations:

1- Consumer / customer satisfaction is the main element: highest priority, with a focus on deliveries happening correctly and in a short time. This customer or consumer can be thought of in many contexts: in the case of purchasing indirect materials, for example, it refers to the company that needs a spare part to continue its production.

2- Change as an opportunity: this new way of dealing with challenges is extremely important, regardless of the context in which the change occurs, helping to increase the competitive advantages and the satisfaction of the clients served. The focus now is on solving a problem and not on the problem itself.

3- Speed ​​and value go together: in short periods of time, high value-added deliveries must be made, whether the value is tangible or intangible. These deliverables can be products or services resulting from a process or project, which must be regularly revisited with updates. Here, “value” can be understood as the customer’s view (or expectation) of benefits and sacrifices in relation to what is offered.

4- Collaboration overcoming conflict: members of a project must develop the team mentality, in order to guarantee the transparency of communication and the shared commitment to guarantee success.

5- Power to people: projects are built and led by people and teams engaged. That is, they must be given the tools and working conditions necessary to succeed and complete the assigned tasks. Soluparts already understands and applies this concept since its creation, reflecting it in our purpose: Empowering Buyers, a maxim that reinforces the company’s focus on customer satisfaction.

6- Interpersonal focus: face-to-face communication is the most efficient way to share information between teams. Working with emotional and cultural intelligence can be very relevant in this case.

7- Demonstrable values ​​and results must guide each project: deliveries that meet or exceed expectations in terms of precision and value (tangible and intangible) become useful references for future initiatives and projects.

8- Keeping activities stable and sustainable: while delivering value is a priority, processes must be developed and optimized from a sustainable perspective to ensure that everyone is involved in a stable manner, without surprises that hinder decision-making.

9- Continuous improvement ensures agility: processes must be increasingly efficient through regular changes.

10- Simplicity is an essential element: maximizing returns using the least possible resources.

11- Self-managed teams are more successful: better results come from agile teams that are able to organize themselves.

12- There is always room for improvement: reassessing processes and making necessary changes to bring more efficiency and effectiveness are always welcome.

The twelve principles shown above, are based on the Agile Manifesto, which is the basis of mentality and all agile methodologies around the world. These principles were designed and coined by the Agile Alliance, a global non-profit organization committed to supporting people who explore and apply agile values, principles and practices to make the development of solutions and projects more effective, humane and sustainable.

This alliance was created by a group of 17 developers who, at a meeting in Utah, USA, from February 11 to 13, 2001, developed the Manifesto for Agile Software Development. Read more about the Manifesto and its principles on the alliance’s official website.

Agile thinking in the purchasing department

Unlike traditional models, most commonly focused on cost reduction, Agile thinking in purchasing seeks to generate value by supporting the organization’s objectives and business needs. Considering some crucial aspects of the procurement sector, it is possible to raise the main differences between the traditional and Agile forms of purchasing:

Deliveries:

Instead of fixed and extensive planning and documentation, with the Agile methodology, a more responsive, objective and iterative position is valued, attentive to the real needs of the moment. Thus, identifying priorities becomes very important for purchasing employees.

Contracts:

The focus should be on elaborate more collaborative terms and built stronger relationships with suppliers, having as a result the gaining of shared success (questioning the competitiveness and rigidity present in traditional format contracts). Learn more about the topic.

Supply chains:

They have to be iterative and responsive, in other words, suppliers can be changed after a round of work, as required by changing circumstances. On this topic, see the article we have specifically prepared on the application of agile methodology in the context of supply chains.

4 steps to make your purchasing department more agile, today

Below are some ways to make your purchasing process more agile:

1- Daily meetings at the beginning of the work day: lasting between 15 and 30 minutes, these meetings help to establish the day’s tasks, encouraging collaboration between team members to solve possible problems. In many companies, to encourage agility, it is proposed that participants remain standing;

2- Apply the notion of sprints, which would be small projects or project fragments, sequences of iterative work (with repetition of actions) in order to have a more compartmentalized notion of the whole, speeding up possible reevaluations and changes in the acquisition path;

3- Definition of priorities: in the face of frequent changes within the company, establishing priorities and regularly reviewing them helps to streamline the purchasing process;

4- of software that helps in Agile management: technology can help centralize data related to a purchase, in addition to facilitating communication and alignment between dispersed teams. There are a series of programs aimed at the application of Agile methodology in companies.

Conclusion

In this article, we show how Agile methodology can help a lot to optimize the projects and processes of purchasing departments. Even though the method was originated to meet the demands of software development, many business areas have adopted these guidelines, resulting in more effectiveness and efficiency. Responding quickly to market changes has become a competitive advantage.

The purchasing department has a lot to learn from Agile, but for that it is necessary to be sure that its organizational culture and professionals in the area are flexible and resilient. To help you optimize your purchasing department, we suggest the following readings:

Solving the 5 main problems of the purchasing department

4 ways to improve the management of indirect materials purchases

Strategic Sourcing: improving the purchasing process

The role of Strategic Force’s in Procurement 4.0

 

Another way to streamline the activities of your purchasing department is to count on a company specialized in the search for spare parts (MRO) from more than 15000 brands anywhere in the world, such as Soluparts.

Contact us today to find out how we can help your company!

 

6 tips to develop agile supply chain in your company

6 tips to develop agile supply chain in your company

 

The current economic context, filled with quick transformations, brings a number of challenges to supply chains. Issues such as slowbalization and the effects of the covid-19 pandemic, for example, impact an entire global distribution network for products and materials.

Given this scenario, managers and teams from different areas involved in supply chains need to develop the ability to quickly respond to demands, in addition to managing the new risks and uncertainties that arise. In this sense, an interesting path for companies is the use of agile methodologies in supply chains.

But what are agile supply chains?

According to an article published by Forbes magazine, agile thinking came from software developers, and consists in an alternative project management technique that designs processes by dividing them into small parts. This way, as soon as each small fragment of a project is finalized, it can be tested, validated and even implemented.

This methodology also allows new technologies developed and launched on the market to be immediately incorporated into a project under development. Also, when the dynamic world scenario implies some change in customer behavior, it is possible to redesign the product quickly and create new, refined versions to meet these trends.

Another strong feature of this methodology is the so called iteration (repetition of an action, in this case, testing and additions to the solution), flexibility and collaboration between team members. In addition, the team has more autonomy to make decisions related to its projects, without necessarily needing approvals from people in higher positions in the organization’s hierarchy.

However, considering the reality of supply chains, according to a report produced by Gartner, there is still no consensus on the use of the agile concept.

In short, different notions are shared between academics, researchers and companies, but all argue that the focus should be on breaking traditional paradigms and developing the agile mindset to manage changes in demand and the supply of materials which are necessary for operations – such as the indirect ones.

The following aspects are considered critical to making a supply chain or any other sector agile:

  • Responsiveness: identify and respond quickly to possible changes;
  • Adaptability: adjust processes within the chain according to changes in the scenario;
  • Coordination: knowing how to organize this complex network, composed of different agents and stages;
  • Speed: being able to act quickly in various situations;
  • Flexibility: changing the format of the chain, without resulting in additional expenses or loss of inventory, to meet an unusual situation;
  • Balance: knowing how to balance supply capacities and the needs of those who need the material.

6 Tips for developing an agile supply chain

To be able to implement this change in supply chains, the company needs to be aware of a few important points:

1. Define agile according to your reality:

Being clear about what agile means for your supply chain reality is crucial. Teams must come together and articulate the concept based on the six characteristics mentioned above (responsiveness, adaptability, coordination, speed, flexibility and balance). This step  is necessary to determine the level of importance of each one of them for the company, the maturity of the existing concepts and the necessary actions to improve them.

2. Define agile according to your reality:

Based on the definition, focus on establishing a program to make the supply chain agile from end to end, defining investments, choosing what critical areas to be prioritized and actions that can be replicated, involving the areas that participate in the chain (such as the purchasing sector).

3. Focus your transformation on people:

One of the most critical aspects, which must be worked on by everyone. A change of mentality and the development of new skills need to occur in order to make the employees able to develop and adopt new processes and frameworks. The involvement of all team members is crucial for the successful implementation of the agile mindset, rewarding efficiency and tolerating mistakes during the learning process.

4. Use technology to your advantage:

Consider it as a means to achieve this method, but not the focus. That is, do not prioritize acquiring and adopting the most advanced technology on the market without first focusing on people, processes and data.

5. Sustainability is essential:

Take ownership of the concept to develop socially and environmentally responsible chains, another important trend of the new century. Sustainability has been consolidated as a relevant element of competition, a requirement for regulatory restrictions and an opportunity for the development of more sustainable communities.

Therefore, it is a challenge for everyone to think about how sustainability can assist in the improvement of agile chains. For example, for the procurement sector, there are a number of advantages to making sustainable purchases.

6. Develop contracts with agile suppliers:

Until recent years, under a supply chain perspective,  risk has always been treated as something to be avoided. Today, it is seen as part of the process, along with the strategy of having ready solutions to deal with different crisis scenarios. One of the strategies to mitigate them is the so-called  redundancy – also known as having a series of suppliers available to fulfill an order.

In the agile context, it is important to have relationships with suppliers who accept to have more flexibility to serve in a constantly changing market and also to define contracts more aligned to this reality (such as smart contracts, made entirely online, generating reliability for transactions of this type).

Talking about contracts that serve you more flexibly, learn more about the annual option offered by Soluparts.

Conclusion

According to Mark Hermans, director of PwC, issues such as geopolitical tensions, changes in trade agreements and climate change, combined with the constant drive to reduce costs and improve productivity, will promote an increase in risks, uncertainties and pressures for performance.

Under this perspective, supply chains must, more than ever, be quick to respond to these changes. Faced with a world in constant transformation, the implementation of an agile mindset for supply chains becomes essential.

Several authors and courses on the subject focus on agile methodologies, which are many, Scrum, Lean, Kanban and Smart, among others, but experts on the subject say that before adopting or adapting one of these methodologies to their specific context, it is necessary to first break the way of traditional thinking and working so that the whole team develops an agile mindset, otherwise the implementation of the methodology, no matter what it may be, may not be successful. And it is in this change of mentality and paradigm that we focus on this article.

In order to measure the success of this initiative, it is important to collect, organize, analyze and monitor data and information (learn more about how to do this) of the following aspects: concern with the time to fulfill an order, costs involved, flexibility and compliance with deliveries.

It is also necessary to be careful with: the management of the people involved, who need to adopt an agile mentality in their routine; the definition of processes, being open to possible changes when necessary; and the use of data to plan activities and improvements to be carried out, with the support of technological resources.

Follow the trends about the future of supply chains on Soluparts blog.