Procurement 4.0 – The Future of Digitalisation

Procurement 4.0 is real. But opinions differ as to whether it is a key opportunity for the profession, or a supporting tool.

Download your copy of ‘Procurement 4.0 – The Digitalisation of Procurement’ on the Fraunhofer IML website.

The fourth industrial revolution is a reality. Over the past year we have heard experts discuss Industry 4.0 and its impact on global supply chains. Now, our attention is being turned to the concept of Procurement 4.0 – what it means, and the challenges and benefits facing the profession.

What is clear is that Industry 4.0 offers procurement a great opportunity to cement its strategic role in organisations. However, even now the role that digitalisation will play is still up for debate.

A pilot study from the Association Supply Chain Management,
Procurement and Logistics (BME) has highlighted a difference of opinion between procurement leaders on the role of Procurement 4.0. On one hand, some believe it will help drive procurement’s strategic presence. On the other, however, some also believe that it is no more than a supporting tool, rather than a driving force.

What is Procurement 4.0?

The concept of Procurement 4.0 encapsulates the array of terms being used to describe changes to global supply chains. One of the key changes is the increasing digitalisation of the profession. From the creation of digital networks, to the increasing use of technology in all facets of business, it represents a sea change in how businesses will run.

According to Prof. Dr Michael Henke, Head of Enterprise Logistics at TU Dortmund University, who helped to conduct the study with BME, so far procurement is lagging behind.

“In the fields of production and logistics, for example, the topics of Production 4.0 and Logistics 4.0 have already been a focus of discussion for several years. As a result, logistics is now often referred to as the area of application for cyber-physical systems and a driving force behind the fourth industrial revolution.

Henke continues, “The field of procurement, on the other hand, is barely ever mentioned in such discussions. This needs to change! As the business area with the most interfaces both within and outside of a company, procurement also needs to be a leading authority for questions concerning Industry 4.0 and its implementation alongside its current role as an innovation scout and expert for technology and management in the future.”

Procurement 4.0 – Starting the Conversation

As Professor Henke notes, this current situation needs to change. In order to create the conversations needed to do this, BME announced a pilot study on the digitalisation of procurement.

Procurement managers and CPOs from 25 organisations, as well as two universities took part in the survey. You can download a copy of the study’s findings at the Fraunhofer IML website. The key findings are also summarised below:

  • Procurement is shrinking, and operative procurement is becoming autonomous in most areas.
  • The demands placed on, and expectations of, strategic procurement are growing. And the demand for a higher value contribution is therefore increasing.
  • In the future, procurement will take on a completely different form, and traditional purchasers will be a thing of the past.
  • Personal relationships will also continue to be extremely important in Procurement 4.0.
  • Procurement is not fully responsible for the implementation of Industry 4.0, but it does play an essential role.
  • The changes taking place relate to all relevant dimensions: technologies and systems; organisation and processes; management and people; and also business models.
  • Creating transparency is the most important requirement in order to be able to implement Industry 4.0.
  • Big Data and data processing technologies are key technologies involved in digitalisation, and play a decisive role above all in connection with networking.
  • Procurement needs to adapt its own structures and processes to suit digitalisation.
  • Procurement needs to manage a procurement portfolio that has been partially modified and is becoming increasingly digitalised.
  • Vertical and horizontal networking (by means of technologies) facilitates the transformation from a functional perspective to a process-based perspective. This open up the possibility for the unrestricted digitalisation of procurement and the entire procurement portfolio.
  • Procurement is a driving force behind horizontal networking.

Big Ideas and Digitalisation

Though there is not a consensus on the role of digitalisation in procurement as yet, the pilot is sure to kick-start conversation in this area.

As part of Procurious’ lead in to the Big Ideas Summit 2017, we will be exploring the key findings of the study with help from BME. Over the course of this series of articles, topics will include:

  • The changing nature of Procurement in Industry 4.0
  • The continuing importance of personal relationships in Industry 4.0
  • The changes involved in implementation of Industry 4.0
  • Why transparency is important in implementation
  • The changing procurement portfolio

The Association Supply Chain Management, Procurement and Logistics (BME), founded in 1954, is the leading professional association for supply chain managers, buyers and logisticians in Germany and Central Europe.

Fraunhofer IML, founded in 1981, is a global expert on all fields of internal and external logistics. The Institute also currently heads up the largest logistics research centre in Europe.

To download your copy of the report, visit the Fraunhofer IML website.

Join the conversation and register as a digital delegate for Big Ideas 2017 in London.

Fortune Favours the Bravest Procurement Professionals

Don’t let a lack of confidence hold your career back- Sometimes it pays to throw yourself into the riskiest of situations.

Procurious recently launched Bravo, a new group seeking to address gender disparity in the workplace, and celebrate and empower women working within procurement.

As part of the Bravo campaign, Procurious will be interviewing a number of high profile leaders and seeking their advice on how we can help other women to get ahead in their procurement careers.

Deanna Lomas is the Chief Supply Chain Officer at Super Retail Group, one of Australasia’s largest retailers. Headquartered in Brisbane, Super Retail Group has over 630 retail stores and almost 12,000 team members across Australia, New Zealand and China. SRG provide solutions and engaging experiences that inspire their customers to live their leisure passions. SRG is the owner of iconic Australian brands including Amart Sports, BCF Boating Camping Fishing, Supercheap Auto, Rays and Rebel.

In this interview Deanna discusses her greatest achievements, gives her tips for reducing gender disparity in organisations and explains why confidence is so crucial.

How can procurement motivate more women to join the profession (and stay with it!) ? 

As procurement leaders, we have a role in advocating for the profession and showcasing possible career paths. Procurement and supply chain professionals do not always get a strong voice in the external environment so it’s important we proactively engage and participate in the conversation. Procurious is a great example of this!

We also have an obligation as leaders to support women entering into procurement, specifically to coach and encourage them. This takes a personal commitment of time and effort but we just simply need to do it.

What have been the most successful approaches organisations you know have taken to decrease gender disparity?

Organisations have to be brave and articulate some target aspirations. This focuses leaders on a goal that, with reporting and measurement of progress, has the best chance of success.

The biggest challenge is to ensure that, once you get momentum on increasing the representation of women, you also work to create a culture that welcomes them. This might mean improving and developing the inclusion behaviours in your team members.

Pay equity checks by organisations are a powerful way of reducing gender disparity.  I have worked for organisations that have made commitments to pay equity across the board and this reassures me that I am an equitable and valued team member.

What has been your most rewarding experience and greatest accomplishment to date? 

My greatest accomplishment was paying my own way through University to complete three Bachelor degrees and a Masters qualification. However, my most rewarding career experience was a being a leader of a large team that I had the opportunity to reshape and create, the best team I have led so far!  A big part of my approach was focusing on a ‘service of others’ model in the leadership brand for the team. This enabled us to attract and retain fabulous people that gave their best to the business.

What do you see as being the emerging trends for procurement?

Technology enablement continues to be both a challenge and an emerging opportunity.  Too few organisations have been able to create processes and systems that make procurement efficient, collaborative and real-time.  It’s easy to default to complex process, controls and governance that can restrict the ability of the business to be agile.

The other emerging trend I see is the move towards the creation of genuine collaborative eco-systems between multiple external partners and the organisation. The greatest opportunities will come from cross industry collaboration with the beneficiary – the organisation – who is at the heart of the value realisation. I see this as a reduction in traditional “two-party” partnerships and an increase in “multi-party” commercial partnerships.  This might be seen as an increased complexity level for the profession to manage, but I think it would, in fact, drive simplicity and a true focus on relationship management.

If you could offer your younger self two pieces of advice, what would they be?

Have the confidence to give things a go and find ways to help reduce the fear of failure. My confidence has grown as I have gained experience. However, early ison in my career I know this was something I struggled with which can hold you back at times. Be courageous and step into “risky” situations or opportunities as it can be highly valuable.

At Procurious, we want to make it easier for women to get into, stay in, and thrive in the procurement profession. This is why we are launching Bravo – a Procurious Group celebrating and promoting women in Procurement. Join the conversation here.