These days many corporations follow an agile approach in software development. The agile model is based on the awareness and experience that many development projects become too complex to be planned from beginning to end.The focus has therefore switched to delivering the right partial results at the right point in time based on a seamless coordination between all stakeholders.
The basic principles of an agile approach deal with enhanced interaction and communication in smaller teams, also allowing the adoption of the development to changes in the business environment (see the agile manifesto. Interaction especially relates to the inclusion of all stakeholders into the process to ensure that the results achieved - in smaller steps - will match the expectations and requirements.
Mapping this approach to demand and supplier management, several interesting aspects for a more efficient organization and process design will become mandatory. A complex outsourcing contract can be compared with a multiyear complex development project (see pliXos Blog: Building on Agile Process and Automated Governance).At the end of this project – or even better latest at the end of the contract life-time – the cost savings, qualitative improvements, innovations, and other targets built into the business case for this outsourcing transaction should be achieved. Applying an agile model to demand and supplier management will therefore require a new type of sourcing contracts, which support this agile approach.
To compare an agile approach for demand and supplier management with agile software development the key questions regarding team composition and assignment of roles need to be answered. Furthermore, the contract life-time needs to be segmented into much smaller steps (Sprints), besides the old fashioned phases from transition/transformations up to renewal. An important element for implementing an agile approach for demand and supplier management is shared and complete information to create a maximum of transparency on the progress made in each step. This implies that from supplier to the end-user of the services delivered, all stakeholders need to have access to the same set of data. In addition, processes need to be designed in a way that the agile model is supported and that, e.g. for ordering a new service, a team approach including supplier and end-user can be applied to avoid lengthy and sequential processing of the order. The team would have a lot of freedom and would not be tied to a strict set of rules and procedures, while still being compliant.
In an agile approach for governance of an outsourcing contract there will be a much more dynamic interaction with the supplier – they are part of the team. Therefore, the team can react much faster to changes in the business environment. This still requires compliance to the underlying contract and a comprehensive documentation. Driving supplier governance in an agile model also requires different and additional measurements to track progress and success. Especially when it comes to quality of the outsourcing relationship a client satisfaction survey will be meaningless, as the clients are part of the demand and supplier management team.
There are surely many more aspects to be considered when it comes to designing an agile approach for demand and supplier management. Comparable to agile software development, which uses suitable KPIs (Cycle Time, Velocity etc.) to evaluate and improve these projects, there are matching indicators and tools to measure and evaluate an agile demand and supplier management.
In line with the agile approach for demand and supplier management, a project to implement such an approach will be treated in an agile manner - with small steps (Sprints), which are adaptive to the requirements and organizational capabilities. A typical project plan could evolve like depicted below:
The transformation of demand and supplier management into an agile model will provide many opportunities to react to the digital challenges corporations are faced with and allow to establish a sustainable, efficient collaboration between suppliers, governance organizations and client end-users.
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