THE FUTURE OF PROCUREMENT

18 August 2020

Procurement 4.0 The fourth industrial revolution is in full swing - with or without us.

Industry 4.0 has already caused ­significant changes along the entire value chain - just think of changes towards self-organisation­ and self-control of­ systems and the autonomy of machines. The factory of the future and all the­ associated functional areas along the value chain must be completely rethought. It is therefore obvious that, in addition to production, logistics, procurement and supply chain management (SCM) will also address the topic and become aware of how Industry 4.0 will influence and change the current organization, its processes and its employees. 

Are we ready?

 

It is particularly interesting to compare how the companies assess the importance of Industry 4.0 for the future viability of their own company on the one hand and how they assess­ their current level of knowledge about Industry 4.0 on the other. While more than 80 percent of the respondents in a survey conducted by procure.ch, VNL and IPG, in which over 250 Swiss buyers from the­ upper and middle management levels took part­, rated­ Industry 4.0 and the revolutionary­ developments of digitization as relevant to very relevant for the future viability of their own company, almost the same number assessed their current level of knowledge about Industry 4.0 and digitization as low to insufficient­.

The results of the survey­ clearly show that­ many companies are still in the­ early stages. But right now they have the chance to take advantage of Industry 4.0 and gain a head start. We must pay­ special attention to procurement­, because it is expected to­ develop ­from a cost­ center into a profit­ center with innovative power.

Trends and developments in procurement

 

Industry 4.0 and the resulting­ developments will­ fundamentally change ­the­ procurement process. Procurement will be rationalised and the culture of negotiation will disappear. Figures will decide whether a supplier is awarded or rejected. The automation of core businesses will­ lead to cost­ and time savings. The resources freed up as a result can then be profitably reinvested­; for example, one can­ concentrate ­on working with the­ selected supplier and innovations can be driven forward.

Systems will­ communicate with each other­ and autonomous order processing will be­ achieved. Sensors will measure the stock level in real time and, based on data that can be called up online, decide which quantity­ is ordered­ from which supplier­ - without human intervention. Requirements are primarily­ forecast on the­ basis of statistical analyses and forecasts. ­For an efficient value-added process, it will be­ decisive how well requirements are anticipated­ - the autonomous forecast will become a competitive advantage.

Other trends that­ will change the role of­ procurement in the long term: ­Further shifting of value creation outside the company; corporate environments are­ becoming increasingly complex and­ dynamic, and thus also the ability of­ companies­ to react­; the role of procurement is increasingly to bring new, success-critical­ competencies into the company; procurement is thus developing away from the classic standard organization of commodity group management into a role that ­is ­not a standard organization of innovation sourcing and ­scouting.

The question will be whether the company will succeed in­ using Procurement 4.0 as a­ profitable driver and thus­ fully exploit ­the potential of the fourth­ industrial revolution.

New roles and competences

 

The new roles of procurement will be ­assumed by a small core team­ that must be able to handle more complex tasks. The requirements profile of the purchaser will therefore increase significantly. In the long term, the procurement department will­ tie up fewer resources and still become an increasingly important­ part of the company. Some keywords:

Real-time data analysis

 

In the future, more and more data will be­ evaluated in real time in procurement­ and actions­ derived­ from it.­ This will increasingly turn the purchaser into an analyst. Among other things,­ a purchaser will be able to predict maintenance work that will be necessary­ and­ minimize ­the downtime­ of the machines ­through planning.

Consultant/product developer

 

Procurement will have more and more influence on the­ business model and strategic­ decisions of a company­. The purchaser is the first to ­notice changes in the market and is therefore in a position to react to these changes and transfer them to the products and business models in an advisory capacity.

Value-added provider

 

In the future,­ increasingly dynamic, hybrid­ value-added bundles of product, process, people and IT will be­ managed - physical procurement and IT ­procurement will merge analogous to the­ Internet and the physical world. The proactive management of the entire value chain­ ensures sustainable­ competitive advantages and growth opportunities for your own company.

Connector

 

Personal relationships­ remain important. Technology is no substitute for personal relationships. They­ simplify communication,­ but do not necessarily improve it. Especially in procurement, personal­ relationships with suppliers and internal customers remain­ an important basis.

While vertical networking will­ continue to be the task of the management and the individual departments, procurement will have to deal with horizontal networking. It creates the platform­ for networking all supply­ chain-relevant­ issues. To this end, Procurement must also­ build up ­the necessary technology and know-how.

Interdisciplinary networking becomes a significant part of his value proposition­. This includes: thinking in terms of suppliers­ and value networks and­ constantly questioning the value creation architecture­ of one's own company.

Procurement must­ network across company boundaries and thus actively seek out innovations. It must effectively and­ efficiently integrate the­ innovations­ into the company and make them available. Close cooperation with suppliers based on trust will also become­ increasingly important in the­ future. ­The reason for this is the­ increasing innovative strength that can be generated by more intensive supplier cooperation. At the same time, this extremely reduces the time to market - a key factor in­ Industry 4.0.

Circuit Manager

 

The buyer­ manages the further increasing supply risks­ in increasingly volatile markets and actively seeks new material­ and raw material logics.

Key competencies in Procurement 4.0

 

With the new roles, qualifications and­ skills in procurement must also­ develop. Seven fields of competence are emerging that are indispensable on the way to Procurement 4.0:

  1. Procurement Business Intelligence
  2. Digital process management
  3. Cross-departmental integration
  4. Cooperation with and retention of suppliers
  5. Driving innovation
  6. Thinking in business models
  7. Digital networking and alignment of corporate strategy (e.g. IPG, working group Procurement 4.0)

Please explore our Procurement Excellence solution portfolio for more information.

This article was originally published by: HANDELSZEITUNG

 

Author:
Carsten Vollrath
CEO @ Swiss IPG Partners Group

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