Organizations
need to grow, even in the face of market volatility, the need to reduce costs and delivery times, and the difficulty of forecasting in the modern world. As the economy becomes more competitive, organizations intensify their external activities. Better procurement enables them to substantially improve their margins as a result of the increased components of services and goods sourced externally at competitive ratio value/prices.
The increasing complexity of the business environment requires significant intervention in the management of processes and information within each organization and in inter-organization relationships. The main stimulus for change comes from the need for process improvement
and the opportunities offered by information and communication technology (ICT)
in terms of characteristics and potential benefitsāthe digital transformation. These changes have a major impact on the management of the organizationās value network
and hence on its main processes and systems.1
In the management of the value network
of the organization, the procurement process can be defined as the process of procuring goods, raw materials, services, infrastructure, and maintenance in exchange for financial considerations. Due to the trend of concentrating on the core business, relationships with vendors are increasingly important. Organizations have begun to review their procurement strategies. In the past, procurement was seen as a service to the other functions; now, however, it plays an increasingly central role in successful organizations thanks to innovations in the
value network. Consequently, its impact on an organizationās operations and creation of margins is significant. The expansion of outsourcing
and globalization leads to an increase in the amount of supplies and stocks of work-in-process. Quality is increasingly critical, and delivery lead-time
is fundamental to the competitiveness of the organization. Managers have to adopt new models that emphasize the procurement value network
as a strategic key to success rather than simply a support organization.
In the modern, volatile world, flexibility is essential to the survival and success of an organization. This flexibility requires an agile enterprise. Organization agility is the āability of a business system to rapidly respond to change2 by adapting its initial stable configurationā. Adapting fast goods and services to meet customer demands, adjusting rapidly to changes in a business environment, and taking quick advantage of new solutions and resources can achieve organization agility.3
Procurement is an essential function of any enterprise (it can represent up to 80 % of an organizationās costs). Therefore, it is fundamental to enterprise agility.
This book argues that in order for an organization to attain agility, it must itself act according to an agile business model. The second volume of this two-volume work analyzes in detail the components of the business model more directly related to improvements in processes. This volume analyzes in detail the basic components of the procurement business model that are most affected by technological innovations.
In terms of tools to be used to attain agility, this book underlines the importance of a digital transformation. This can be achieved with a Lean Six Sigma approach,4 in combination with smart digitization.5
The principles of agility, seen as a combination of lean processes and automation
, can enable organizations to meet increasing challenges, provide needed flexibility, and make their strategies successful in the short, medium, and long term.
This book discusses an approach referred to as agile procurement that contributes to improved value creation in procurement processes. The current digital transformation affects not only production (Smart Manufacturing/Factory)
and logistics (Logistics 4.0), but equally all other functional areas of an organization, especially procurement. The goal is to make procurement processes leaner and at the same time to take into account the opportunities provided by process automation
. Often one of the main problems is the excessive separation between the improvement of processes and digitization, or between the organization and the information and communication systems. This challenge is even more evident if one considers organizations of services, where digitization increasingly manages the processes.
This book discusses in detail the application of agile procurement for optimizing processes as well as digitizing them, in order to reduce waste and defects
and improve cycle time
. In so doing, it uses a business model applied to the procurement function. The vision
is that procurement is indeed a series of processes that should act as a business.
Agile procurement is a method and a set of tools. It is also, and above all, a culture aimed at an organizationās effectiveness, efficiency, economy, and ethics. It requires a change of paradigm. Agile procurement undoubtedly represents an important opportunity, especially considering there is already in the procurement organization a basic culture already oriented to the effectiveness, efficiency, economy, and ethics.
The agile procurement opportunity is especially important in this time of financial and economic crisis
. In moments of crisis
, any initiative to improve the value of business products for the customer, reduce waste, and especially become more flexible is a high priority.
Agile procurement can be of great help in improving sourcing, purchasing, logistics, and, in general, the end-to-end value network
In the past, organizations aimed to produce the best product in order to win the competition. Today, they must implement all necessary measures to avoid waste, add value for customers, and become more flexible. This is what the agile procurement approach aims to achieve. This approach requires adopting the perspective of the customer and endeavoring to increase the value of products, services, organizations, and business models for the benefit of the customer. The value added for the organization is a derived result.
The agile procurement culture must permeate all areas of the organization to achieve flexibility and, above all, ensure the survival and growth of the organization. This book examines all these areas of improvement in procurement systems in combination with process improvement
s and suggests the best practices with which to tackle them.
This book takes into account the existing challenges in terms of digital transformation. The final sections of the book look to the future and underline a number of interesting emerging trends.
While the book presents a series of models, it substantiates them with many real-life examples of their successful implementation. Good practice should be the basis of any theory.6
Footnotes
1
This book does not use the terms āsupply chainā or āvalue chain
.ā The term used is āvalue network
,ā which underlines the importance of taking into account the value provided by the organization
to the customers and the more and more non-sequential nature of processes in the organizations.
Ā
2
Leybourn, E. (2013). Directing the Agile Organisation: A Lean Approach to Business Management. IT Governance Publishing, Ely,
UK. Wieland, A., and Wallenburg, C.M. (2012). Dealing with supply chain: Linking risk management practices and strategies to performance. International Journal of Physical Distribution & Logistics Management, 42(10).
Ā
3
Tsourveloudis, N.C., and Valavanis, K.P. (2002). On the measurement of enterprise agility. Journal of Intelligent & Robotic Systems, 33(3): 329ā342.
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4
http://āhosteddocs.āittoolbox.ācom/āwp10-ways-to-use-erp-to-Lean-the-manufacturing-supply-chain.āpdf. Accessed 10 April 2017.
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5
Nicoletti, B. (2012).
Lean and Digitize
: An Integrated Approach to Process Improvement. Gower Publishing, Farnham,
UK.
Ā
6
Finocchiaro, M. A. (2012). Galileo and the Art of Reasoning: Rhetorical Foundation of Logic and Scientific Method (Vol. 61). Springer Science & Business Media, Berlin, Germany
.
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