8 Best Practices to Improve Agile Procurement: Preparing for Procurement Volatility

By: Margaret Wood Mar 9, 2020

Purchasing and Alignment

Companies that utilize high-performing MRO (maintenance, repair, and operations) procurement functions consistently outclass their competition. Procurement programs for buildings involve buying all materials necessary to keep buildings running and in top condition, including such things as paint, air conditioners, filters, uniforms, cleaning supplies, etc.

To determine whether your company can cope with procurement volatility, it is essential to ask yourself:

  • Do your maintenance, repair, and operation procurement practices follow best-in-class practices?
  • Are your buildings running smoothly, and are they in good condition?
  • Do your employees ONLY make purchases through your MRO procurement system, taking advantage of the negotiated discounts with vendors, or is the procurement system too difficult to navigate?

If your response was “no” to any of these questions, then the chances are that you are not only missing current opportunities, but you will not be ready for the challenges of the next decade. The volatility of all types of scenarios is going to make it much harder to get the supplies you need for your buildings on time and within budget. Agility will become increasingly tricky as volatility rises.

As the earth’s resources waver in the price—or worse, become depleted—the butterfly effect has a global impact. Resource consumption is showing no signs of slowing down, and environmental sustainability is already becoming the critical pressure point of the next decade.

Increased volatility – Many factors affect volatility, including global affairs, tariffs, Brexit, recession, rising oil prices, pandemics, currency markets, climate change, natural disasters, etc. And it is unpredictable to what degree they will affect.

A perfect example of how a global crisis impacts procurement volatility is evident in how COVID-19 is affecting supply and demand economics – factories and banks are shutting down. There are insufficient supplies of hazmat suits and NV95 masks. People can only withdraw limited funds from the banks, and so on.

At the base of the best companies’ success is the inclusion of advanced management strategies within their procurement strategies. By managing your MRO procurement, your company can better cope with new challenges and opportunities the global economy produces. Your MRO procurement strategies should be poised to turn volatility and scarcity into competitive yields.

Evaluate Your Risks

The primary objective of any purchasing organization is the ability to “turn on a dime.” By asking yourself some basic questions and staying informed on the increasing volatility of the global market, you will be able to:

  • Evaluate the various risks in your supply chain
  • Assess which risks need to examined more thoroughly, which risks require tempering, and which risks are acceptable
  • Evaluate your current business-continuity plans for coping with the most precarious supply risks

Agile Procurement; Purchasing and Alignment

Three of the most critical aspects of procurement are negotiating the best prices under contractmanaging and tracking suppliers effectively, turning procurement volatility into a competitive advantage.

Here we provide you 8 best practices to help you plan for procurement volatility, improve agile procurement, an effectively manage your MRO Procurement system:

  1. One of the ideal ways to prepare for procurement volatility is to study what leading organizations are doing to gain advantages.
  2. Negotiating contract prices with dedicated suppliers is an excellent practice to lock down pricing and volume purchasing
  3. By aligning your purchasing and becoming more deeply involved in global sourcing markets, you gain clarity on market trends and foresight into volatility.
  4. Agility and flexibility in procurement have quantifiable benefits. It takes both operational wisdom and strategy to become agile.
  5. Agility requires diligence –monitoring your vendors’ performance, and locating alternate suppliers in advance of a significant event can improve your company’s reaction time, gaining advantages over your competition in both cost and market share.
  6. Anticipate and prepare for change; locate dual sourcing for all critical components; this will help boost output from alternative suppliers, and provide multiple resources for products or materials.
  7. Know where your suppliers are located, including those you’ve only used occasionally – this becomes important when a location becomes an issue.
  8. Vet all suppliers, so you know who can rely on to accommodate your needs and who can call upon in the event your primary supplier cannot fulfill your needs.

Cross-functionality

Agile procurement anticipates uncertainty.

How cross-functionality can help you in times of need

  • You can improve cross-functionality by including Operations and Building Maintenance in agility planning; this provides you the ability to review the material assumptions more accurately
  • Alter your product orders based on the price levels of materials.
  • When negotiating contracts, a flexible contract that allows for volume adjustments will help you manage costs more effectively.
  • By establishing market intelligence teams, you can gain insight into trends and availability and price changes

All materials are property of LeadershipFlagship © 2020

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