Last fall, we participated in a sourcing day event organized by the Finnish Logy Ry.There were several interesting and topical speeches.
My own imagination was fueled especially by the comments related to agile sourcing. The discussions and presentations reminded me of the book written by Stanley McChrystal called Team of Teams.
Team of Teams
The main idea of the book is what follows when a highly specialized organization encounters a rapidly changing operating environment. In this situation, the ability to adapt to the situation and initiative can drive past the effectiveness of the organization's core process as success factors.
Team of Teams also discusses the impact of siloing on the agility of the entire organization.
What does Team of Teams have in common with Agile Sourcing?
With digitalization, the operating environment of companies changes radically and quickly. Of course on many areas it's better to be efficient than to agile. However in business areas where the speed of change is strong, agility can beat efficiency as a business strategy. In these instances sourcing plays an important role as a facilitator between the company and suppliers, so that the company is able to introduce new technologies quickly and utilize them effectively.
After all, it would be reasonable to assume that most innovations come not from within the organization, but from without. Team of Teams draws an analogy between the situation faced by McChrystal and the changing business environment. In principle, one could think of organizational agility and efficiency as being inversely proportional. The more precisely the value chain is broken down, the more rigid it becomes.
In sourcing, the following conclusions also apply
- A more open request for tenders supports agile sourcing,as it enables creative and customized solutions to be offered during the sourcing process. Open questions do not bind the sourcing unit to a specific definition or conditions to be acquired based on a predefined tender request. This gives the sourcing unit the opportunity to develop and adapt together with the suppliers during the sourcing process.
An agile sourcing unit is not enough for sourcing to be agile. Communication between internal stakeholders must also work. If it does not, the company runs into the same problem caused by siloing that McChrystal describes in his book.
McChrystal offers a solution for this by forming teams made up of representatives from different departments (Team of Teams). I recommend reading the book if you are interested in the topic. We believe that a modern sourcing system which enables open inquiries to be made efficiently and centralized information sharing internally can also help with communication.
- The success of agile sourcing requires more trust between suppliers and sourcing on both sides. The sourcing organization must openly communicate its challenges to suppliers or the offers it gets will not be relevant. Correspondingly, the Supplier needs to spend more working time and possibly share its know-how with the sourcing, without guarantees of cooperation, so that the agile sourcing process would produce value.
All in all highly specialized processes can be a bad strategy for sourcing in categories where the pace of technological (or other) change is fast.
In order for the sourcing to be agile, an effective communication between different business functions is required. If there are silos in management systems, they should be dealt with as well. Agile sourcing can be greatly helped with an agile sourcing platform, which enhances communication both inside the organization and towards suppliers.