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Brought to you by WBR Insights.

The past year has taught companies some valuable lessons about how to stay resilient. But agility is perhaps the most important factor in deciding how an organization can adapt to a rapidly changing business environment.

Procurement teams are playing an essential role in keeping organizations both resilient and agile. In recent years, the function has reached new levels of agility by collaborating with partners across the supply chain. According to Supply Chain Dive, "The notion of a successful, agile supply chain requires involvement with partners in design, procurement, customer service, legal, finance, IT, government affairs and other functions, depending upon the situation."

But there's one strategy that may have been overlooked in organizations' drive to become more agile. Group purchasing, which has long been sought after as a cost-saving strategy, has the potential to drive agile procurement transformation, especially in indirect procurement categories.

Driving Agile Procurement

Transforming procurement into an agile model has the potential to make resource allocation more fluid and adaptable. As a much more collaborative model of procurement, agile can help teams make faster, more informed decisions when they are needed most.

Agile procurement could also address many of the most significant challenges in traditional procurement models—primarily slow and cumbersome manual processes. Evaluating suppliers is often expensive and time-consuming, and the task of comparing and renegotiating contracts can slow time to market, even if it has the potential to help the organization reduce costs.

What is Agile Procurement?

Put simply, agile procurement is the process of applying the "agile" business concept to the procurement process. Agile is rooted in software development but has since become applicable to a wide range of industries and departments. As such, there are multiple aspects of agile that have the potential to transform procurement, including continuous evaluation and the ability to respond to change rapidly.

Agile purchasing and procurement departments can take a more proactive approach to solve problems. They can also adapt quickly to changes in strategy, regulation, and other factors, using real-time visibility into their category spending to gain insights and make decisions quickly.

Perhaps most importantly, an agile procurement department can draw on collective wisdom to make decisions. Rather than operating in a silo, the agile procurement department understands the strengths of teams both inside and outside the organization, so it can take lean on assets when an opportunity arises to produce value or save on costs.

Opportunities in Group Purchasing

In procurement, group purchasing is when multiple organizations come together to purchase from suppliers as a group, rather than individually. Often, group purchasing is facilitated by group purchasing organizations (GPOs). GPOs have the potential to benefit purchasers, but they can also benefit suppliers, as they enable suppliers to secure business with multiple buyers and move supplies and services more effectively.

Most importantly, group purchasing allows the procurement function to leverage the collective buying power of several organizations to earn larger discounts. It also improves collaboration and makes the negotiation of contracts much more streamlined.

While group purchasing might not be the best approach in every instance, it can be extremely beneficial for categories in which the organization only purchases a small number of supplies and services or in categories where an organization needs to purchase in bulk. For this reason, group purchasing agreements and GPOs are often found in industries like healthcare, hospitality, foodservice, and industrial manufacturing.

From the perspective of the agile procurement leader, group purchasing has significant potential to help transform the function. As a group, purchasers have more opportunities to collaborate to resolve problems. Furthermore, the agile mindset is focused entirely on delivering value, and group purchasing has the potential to help the function meet or exceed expectations in its purchase agreements.

Finally, group purchasing can help organizations achieve a maximum return for minimal resources. Rather than focusing time and energy on negotiating individual contracts or risking a loss in value due to high costs, the function can defer to the group to help them negotiate agreements that are beneficial to all parties.