The ‘Fourth Industrial Revolution’ is transforming the world by digitising processes and devices, and disrupting established business models.
While it is bringing about new technologies and threatening the existence of some organisations, this revolution is also delivering solutions that will accelerate the development of all functions – including procurement.
The introduction of e-procurement systems has enabled procurement professionals to automate processes, disrupting the way in which the function operates. This technology has made buying more efficient and effective, and has brought about a redeployment of skills and tasks by relieving employees of low-value tasks.
As a result, organisations have been able to decrease requisitionto-order costs, cycle times and maverick spend. In addition, procurement has increased spend under management, compliance, average orders processed and data management efficiency. The ‘no touch’ purchase order has become the standard. All this has facilitated a shift in focus towards more strategic opportunities, which necessitates wider process and organisational changes.
Today, procurement executives need to sense market changes and take advantage of disruptive offerings to deliver value beyond price reduction and deliver a competitive advantage to the business.
To thrive in this era, CPOs must exploit game-changing data analytics software, deploy process automation and implement resource management.
The opening up of big data provides procurement professionals with more information than ever before and can significantly improve both buying and inventory decisions. Procurement chiefs can use such data to predict outcomes and drive decisions that impact the total cost of ownership – rather than just price. For instance, companies today hire temporary labour by negotiating the best possible rate and attempting to commoditise the market. Tomorrow, they will use data to hire the best providers, possibly at a higher price, because they will be able to objectively demonstrate performance, which will lead to a measurable increase in overall productivity.
To be more efficient and effective in this new world, the function needs to automate more of what it does. Those that did not leverage e-procurement and the associated process efficiencies will have to determine how to enact these changes quickly. The minimum expectation will be to have more than 90% of purchasing requirements processed automatically with little or no labour.
Blockchain is a technology in which records are made and stored, related to any product or process. These records, called blocks, are linked and secured using cryptography. This system provides an opportunity to use private internet technologies, enabling instant and secure connectivity between buyers and sellers.
Finally, procurement functions will have to bring in the right people with the right skills to ensure they can navigate these changes. Functions will also need to be structured to develop automation for noncore categories and create space to focus on new and emerging categories. Teams need to be more agile so they can quickly and easily shift to areas of new opportunities. CPOs should create centres of excellence to industrialise parts of the function and focus on services and more complex purchases.
The Fourth Industrial Revolution is bringing about significant change. Those who embrace it will deliver significant value to their organisations. Those who fail to adapt will be replaced with self-service applications and will, in turn, be disrupted.
Wayne Evans, VP and head of procurement Americas at Deutsche Post DHL, will be speaking about how you can make sure procurement is the disruptor, not the disrupted, at the Americas Congress 2018 in March
To find out more about Procurement Leaders Americas Congress 2018 click here
This article is a piece of independent writing by a member of Procurement Leaders’ content team.