Today, Procurement teams need to embrace the agile ways of working in order to work in synch with their stakeholders. The present article describes how an agile vendor selection process has been adopted by a Software procurement team. It describes its advantage, how it is performed and when it is relevant. This methodology can be adapted to other market domains if the mindset and the success factors are maintained.
Agile methodology has been rocking the IT World in recent years. Companies use it for developing software; it helps them to be more collaborative and effective when uncertainty prevails. The Agile transformation is now calling for change in the Procurement function as the standard supplier selection process does not fit the agile mindset. The present article will outline what agile means for procurement; how a Software Procurement team has embraced agile to select suppliers for software packages like Microsoft Power Apps; and what the success factors for agility in procurement area.
What is Agile?
The word agile appears everywhere today. On a day to day basis, being agile is often associated with short daily stand-up meetings where people share feedback on projects and prioritise their next steps. Agile project management is an iterative development process, where feedback is continuously gathered from users and stakeholders to create the right user experience. This is very common for software development. Developers focus on producing manageable chunks of projects; they update their priorities daily, thanks to the feedback provided to them. Different methods can be used to perform an Agile process, these include Scrum, eXtreme Programming, Lean and Kanban. Agile project management metrics help reduce confusion, identify weak points, and measure team’s performance throughout the development cycle. Supply chain agility is the ability of a supply chain to cope with uncertainty and variability on offer and demand. An agile supply chain can increase and reduce its capacity rapidly, so it can adapt to a fast-changing customer demand. Finally, strategic agility is the ability of an organisation to change its course of action as its environment is evolving. The key for strategic agility is to recognise external changes early enough and to allocate resources to adapt to these changing environments.
Why must Procurement become Agile?
For many market segments such as software, anticipating the needs of our stakeholders and delivering the right value to each of them is an ongoing challenge. Over the years, Procurement teams have moved well beyond placing orders and helping to finalise contracts. They support the business. They deliver value. They help to gain new competitive advantages. Saving is no more the sole focus and the unique yardstick of Procurement teams. They need to bring speed; expertise and to actively manage demand. Moving towards an Agile vendor selection process is one of the steppingstones that can help procurement teams with this. Mirko Kleiner, Agile Enterprise Coach and co-founder of Flowdays, pioneered the introduction of agile to Procurement by implementing Lean in the supplier selection process. He describes it as transforming months into days, wants into needs and pain into fun. The traditional supplier selection process we use today remains useful in a predictable and easy to understand world. Procurement teams can focus on exploiting what they know about the needs and the market, to come up with the best and most economical solution. However, such a process is becoming less relevant as companies are changing at a rapid pace. They become more digital and employee centric. Solutions evolve fast and new ideas pop up across global and dynamic business ecosystems. In this context we need to re-invent the supplier selection process to rapidly explore opportunities. By making the supplier selection process agile, we can investigate new ideas while strengthening our relationship with “business owners”. We can create more value while simplifying our ways of working. We can gain efficiency and speed while being more collaborative. And as we do it well, everyone will gain motivation and engagement will be reinforced. The following diagram explains the core principles behind implementing an agile vendor selection process. It works well when requirements are difficult to formalise due to the diversity of users and the variety of solutions available. To address this unpredictability, we need face to face interactions and teamwork with internal stakeholders and representatives from suppliers. Collaborating is the only way to generate feedback, transparency and to ensure adjustments are rapidly taken on board as people learn from each other. Working like this is an opportunity to simplify how we work; the quality of the discussions across all parties involved helps to focus on the essentials and to spot issues early. This creates speed and efficiency as the team progress at a steady pace with deep engagement. It also generates motivation as people feel safe to speak and enjoy working in an environment that fosters engagement. All this reinforces the spirit of collaboration and creates speed, value and satisfaction.
Agile Vendor selection: How does it work?
In an Agile vendor selection process, the same steps are followed, but these steps are performed with a different mindset and approach. A dedicated team with full decision-making power is established from the start of a project. Each step of the process becomes a sprint performed in a collaborative mode. Responsibilities are clear from the start and everyone has visibility on what takes place from the beginning to the end. Face to face team meetings enable creativity, efficiency and rapidity. And as the Team members complete the tender process in about 10 weeks, they can focus on the project during this short time period.
The agile vendor selection process can now be described:
Step 1: Preparation
The team consists of representatives from the business, Procurement, IT technical team, Data Protection Officer, Legal department, etc. During the preparation stage, responsibilities are assigned to them. A project plan is developed to ensure each responsibility is performed with the right mindset. The development of a team charter brings strategy alignment and builds the foundations for effective teamwork. Requirements are expressed as user needs. They are not technical specifications, but “personas” that describe the users and “user journeys’ that illustrate a desirable user experience. One of the business owners within the Core Project team described the benefits of this: “This process is pragmatic and focused on the user needs. Before we used to describe in detail all the requirements as they came into our heads, now we don’t spend hours writing detailed requirements that were rarely fully considered by the suppliers”.
Step 2: The invitation letter
The suppliers receive an invitation letter requesting their participation in the agile vendor selection process. This letter outlines the “5 WH” of the tender (Who? What? When? Where? Why? How?). The user needs are communicated with the invitation letter. Suppliers are asked to focus on how they can integrate them in their systems.
Step 3: Briefing and Q&A call
Following the invitation letters, suppliers are invited to a conference call to further explain the Agile vendor selection process. The Core Team presents the goals of the project, the project team, the agenda of the Agile vendor selection event and the needs. The “User Journey” presents both the touch point where humans meet and the virtual interactions. Everything is summarised in one page. This helps everyone to be concise and to focus on the key points.
Step 4: The Agile vendor selection event
A two-day event is organised with all the suppliers, the agile vendor selection team (also called Core Team) and some end-users. This event is an opportunity to stimulate competition amongst suppliers, while favouring collaboration with them. It is also a great opportunity to have a “live” presentation of the solutions and direct exchanges with the suppliers. The agenda of the Agile vendor selection event consists of:
- A plenary session to present the event and its goals
- A description of the needs, the “Personas” and the “user journey”
- Suppliers are given some time to adjust their solutions. They call the Core project team to ask additional questions.
- Individual sessions with each supplier take place. Members of the Core Project team evaluate the suppliers on technical and business requirements, on commercial, legal, data privacy, security and implementation matters. The focus is on how to be successful together. Having all the suppliers and the Internal subject matter experts in the same room helps avoid misunderstanding and vague answers to questions
- Individual final presentation of the offers to the Core Project team by each supplier.
- During these events you get capture the real creativity from the suppliers. This prevents copy paste solutions. One of the Core Project team members we interviewed for this article is very keen on the agile vendor selection event. “There is no misinterpretation thanks to the prototypes and the exchanges. We can perform on the spot clarifications if needed. As a point is mentioned by one supplier you can easily check with another. This helps solve problems fast. It is very powerful”. The Legal teams also appreciate having breakout sessions with each supplier. This helps to gain speed on the contract side, related blocking points are discussed on the spot. It also helps to understand if the negotiation will be demanding or not.
Step 5: Evaluation
Following the presentation of the offers during the agile vendor selection event, the Core Project team develop a consensus on the findings and evaluations. Some calls to reference customers provided by suppliers can be placed to validate key assumptions.
Step 6: Contract Negotiation and Final Offer
This step enables the conclusion of contractual negotiations, building on all the discussions that have already taken place during the Agile vendor selection event. This is the opportunity to negotiate the supplier’s final offer.
Step 7: Award
Following the negotiations with the suppliers, the project team selects the contract awardee. Feedback is shared with the other suppliers who participated in the vendor
The benefits of an Agile vendor selection process
This Agile vendor selection process is first a mindset change. The Team members lead together the tender thanks to the support of a Procurement facilitator. They are empowered, equally considered and they feel safe to intervene. It also creates high degree of engagement and ownership. The Agile vendor selection process helps gain considerable speed. The team focuses on the major commercial aspects that matter and low importance details are put on a back burner. This improves tremendously the efficiency and speed. Agile vendor selections also provide transparency for both Core Project teams and suppliers on the needs, and the decision-making process during the call for tenders. This transparency stimulates competition between suppliers as they are physically face to face to win the project. By adopting an agile approach, internal stakeholders perceive a heightened value delivered by the procurement teams. The following cases illustrate when and how the agile vendor selection process has been used when Selection Software Vendors for a large Company.
Case 1 – Real time Employee Performance Management Solution
First, the Agile vendor selection process was applied to select a Software Vendor for Real Time Performance Management. Four vendors were invited to this process. Their size, scope and solutions were quite different from each other. During the Plenary Session of the agile vendor selection event a Business HR Executive presented the business view of the current problems, existing processes and expectations around the solution. One of the vendors invited was an internal area who developed its own solution; however, they were also considered as a vendor on the selection process and no favourite approach was given to them. The Core Project Team and the suppliers saw this project as innovative, fun, motivating and collaborative. One of them concluded “Without the agile vendor selection event, we would have received a lot of nice slides, but slides don’t tell you what it is like to work the vendors. With such project you need to be sure you can work in a collaborative mode with the supplier.”
Case 2 – Asset Management Solution
The second case is the purchase of an Asset Management solution. The agile vendor selection event took place in an Indian office in since key decision stakeholders where based out there. The team members were engaged from the beginning even if Internal workshops were carried out remotely. Due to the complexity of the case and to the number of suppliers invited, the event was performed over three days. Seven vendors were invited and were extensively questioned on the architecture of their solution, on their implementation strategy. They had to perform a demo using the “personas” and “user cases” shared with them in advance. The three days enabled the selection of the right solution that matches the requirements and the creation of a straightforward relationship with the vendors. One team member was enthusiastic “the event was memorable; the vendors were surprised It was great to discuss with them and to see their reactions. Vendors did a great work. It was motivating on both sides. I was impressed by the change procurement had brought to the process”
Case 3 – Procurement Source to Contract Solution
In this case, the Agile vendor selection process was used as a second round of a request for proposal that was not providing the expected outputs. The first round of the procurement project had covered all the standard process steps of sending the written requirements to the vendors and receiving their formal responses with lots of documentation to evaluate. The outcome was unsatisfactory, and the Agile approach was adopted to rebuild the interest of the suppliers and reduce the full cost of the software adoption. The three finalists from the first round were invited to the event. They had the opportunity to exchange with Core project team members and to align on multiple fronts including technical, business and commercials aspects. Best and final offers were presented during the second day of the event. The Core Project team could see that vendors had aligned their proposals to the information received and that they decreased their price. A considerable amount of misunderstanding about the needs had been adjusted thanks to the event. The intimacy established with the vendors contributed to better contract negotiation and a more collaborative finalisation of the project. One of the Core Project team members summarised it “We were able to demonstrate that competing vendors could be in the same event. The energy in the room was remarkable. When they shared the results, it was good to see they understood the requirement.”
Agile vendor selection: Four success factors Building a great team
Throughout an agile vendor selection, the right people need to be involved from beginning to end otherwise the process can easily derail. Everyone within the team needs to be fully engaged and to fulfil their role. It requires business owners with the right expertise and the power to take decisions. The Procurement Project Manager is there to orchestrate the work of the team and to promote the agile mindset.
Diversity and attitude
An agile vendor selection brings together a diverse set of skills capable of tackling the complexity and the uncertainty of the project. Team members need to be proactive, open minded, capable of challenging their initial assumptions and flexible enough to tackle issues as they emerge. They are guided throughout the process, but they need to be at ease with working in an informal process.
Company readiness is essential to succeed with an agile vendor selection, you need a supportive business sponsor. An agile vendor selection process is not suited to a risk-averse culture. Everyone should be ready to embrace changing requirements and to transform mistakes into opportunities in order to do better.
The logistics of an agile vendor selection event are essential, the facilities need to be right. Performing it in an innovation centre with the support of facilitators is ideal. It is demanding in terms of organisation as it is essential to ensure that everyone attends the full event.
When Is an Agile vendor selection the right approach?
Not all RFPs can be performed using an Agile methodology. The following picture can help assess when it is best suited. The agile vendor selection process is well suited when there is a high degree of novelty in what is purchased, but a limited set of risks and stakes associated with the purchase.
The Agile vendor selection process is particularly compatible with projects that are inherently low risk and that do not meet highly technical and demanding requirements. The agile vendor selection team needs a good knowledge of the problem that needs to be solved, and the suppliers need to be able to rapidly demonstrate an effective response to the problems. When higher stakes and risks are at play, if the solution is easy to develop, a classic tender process performed in a systematic way is best suited; if the problem is hard to define, the solution very new, this requires a comprehensive open innovation process with multiple workshops that help stimulate creativity and ensure solid validations
The Agile vendor selection process is a great way to meet a small number of suppliers in a short amount of time. This avoids all the emails; the long-winded conversations; the full process can be completed in less than two months. It makes the selection fair as you can collect comparable information across vendors on the spot. It provides an objective view of which one is the best and leaves no room for political manoeuvres. Nothing is hidden. You see the limits and the future perspectives of each of the suppliers. The quality of the decision-making is enhanced, and it creates great conditions for a quick start after the tender is completed. This helps to gain time for everyone. The requirement collection phase avoids going into details that don’t add value. The supplier assessment can be performed without re-assessing consistency along disjointed flows of information. It also saves time as you can quickly start a collaborative project with the supplier. But most importantly, it is a fun and enjoyable team experience where everyone ends with a great sense of achievement. The CPO of Capgemini, Emmanuel ERBA, sees the agile vendor selection process as a great asset for his organisation. It is for him a mean to address complex cross-functional topics: “Describing real life user journey, confronting in an open way the service delivered by vendors and walking the participants from several functions through a process is a rapid and valuable selection process. Obviously, it won’t replace hard commitments, but it will bring an organisation more efficiently towards the most viable solution in a given environment.
About the Authors
Andressa Reis has worked as an IT Procurement buyer in several industries over the past 7 years. She has a Master in Computer Science for Business Management (Brazil) and works as a Global Category Buyer in Heineken Global Procurement (Netherlands) specialised in Software and IT purchases. She developed the Agile Vendor Selection process in 2018 while concluding her certification of Purchasing Manager in EIPM.
Hervé Legenvre is Professor and Research Director at EIPM, an Education and Training Institute for Purchasing and Supply Management. He manages educational programmes for global clients, conducts researches and teaches on innovation and purchasing transformation, Hervé holds a PhD from Université Paris Sud.