Procurement 4.0 provides insights and guidance on how to best face the current and upcoming challenges for procurement organizations. Although digitization might be considered a driving factor behind Procurement 4.0 it is far too shortsighted to limit Procurement 4.0 solely on apps and automation.
To gain a clearer picture of future procurement, the authors conducted interviews with leading procurement heads of global corporates such as BMW, Lufthansa, Maersk, BP and Allianz. These industry examples combined with various other cases offer a practical view to shed light on this still rather theoretical construct.
Four dimensions of a 4.0 Procurement framework are further explored to address and react to business needs of the future: Competing value chains, co-creation, leadership and digital transformation. Besides industry examples, each chapter contains "survival tips" as impulses for procurement managers to lift their teams to the next level.
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Die Autorinnen und Autoren sind bei der Unternehmensberatung h&z tätig. h&z ist die konzeptionell führende Unternehmensberatung in Deutschland, wenn es um Einkauf und Thought Leadership im Bereich Einkauf 4.0 geht.
OVERVIEW OF INTERVIEWS
Discover your blind spot beyond tier 1
"Digitization comes second - process design comes first"
Matthias Krause-Uhrmann, Director, CPO, BP Europe SE
"Typical Apple users have to feel comfortable with procurement tools"
Andreas Abrath, Director, Project Head "Complexity Reduction in Procurement", BASF
Stop groping in the dark for innovation
"Supplier satisfaction is the key to improved supplier interaction"
Prof. Holger Schiele, Technology Management - Innovation of Operations, University of Twente
"We will raise the relationships with our suppliers to the next level"
Dr. Thomas Papke, VP Corporate Sourcing, Lufthansa
"We're going to the edge - to get our digital strategy ready by the end of the year"
Jochen Weyandt, EVP, Head of Group Business Services & CPO, OC Oerlikon Corporation AG
"We got the wake-up call some time ago"
Martin Austermann, Senior Vice President Group Sourcing, Husqvarna Group
Solving the 4.0 leadership challenge
"Procurement is about to reach new heights as an end-to-end solutions provider"
Dr. Michael Nießen, CPO, Deutsche Post DHL
"From good to great - we supply for success"
Dr. Johann Wieland, Former Head of Indirect Purchasing, BMW Group, now CEO of BMW Group and Brilliance Automotive (China) Holding
"Unleash the power of data"
Dr. Armin Beckert, VP, Head of Supply Chain Strategy & Business Support, Airbus Defence v& Space
The truth lies in the cloud
"Speed is the real deal"
Claus Hahne, VP Corporate Procurement, ProSiebenSat.1 Media AG
"Digitization of procurement is spot on what we are doing"
Jacob Gorm Larsen, Director of Digital Procurement, Maersk
"Time is money - we need to accelerate the speed of procurement processes"
Dr. Turan Sahin, CPO, Allianz Managed Operations & Services SE
PREFACE
Procurement is without a doubt at an important turning point and might have to redefine itself in terms of its role as a business function or even regarding its reason for being. In such uncertain and fuzzy times, it can be helpful to stop for a moment and freeze the status quo.
At this special moment in time, we from h&z decided to write a book on "Procurement 4.0", addressing the huge challenges procurement will have to face. There will not be fewer tasks, but definitely different ones in terms of what we buy and how we buy.
With this book, we dare to take a glimpse into the future while broadening the overall picture: "Digital" is only a small aspect of Procurement 4.0, even more challenges lie, for example, in the organizations we need to design for tomorrow or the people we need to choose, leveraging the supply base while creating winning value chains.
And, as one CPO put it recently: "We want Procurement 4.0, but we have Staff 2.0 and even Leadership 1.0."
Fortunately, we didn't have to go all the way on our own. We'd like to thank the contributors from leading industrial corporations for sharing their opinions and insights in the form of interviews and use cases.
Stefan Aichbauer
Managing Partner at h&z
A LETTER FROM PROCUREMENT LEADERS BY DAVID RAE
Challenges ahead - an outlook by Procurement Leaders
There has been a great deal of debate over recent years about how the ongoing march of technology might undermine our way of life; with robots stealing our jobs, computers driving our cars and artificial intelligence (AI) systems surpassing human intelligence on their way to taking over the world.
While much of this debate is fueled by headline-loving journalists' and entrepreneurs' intent on creating a feeding frenzy around a particular trend or technology, the fact remains that we are living through an intense and unprecedented period of change. Not only is technology advancing at an astonishing rate, when coupled with other trends such as population growth, rapid urbanization, climate change and an intense and increasing energy dependency, we face some interesting challenges ahead.
The advances made in technology, of course, are in many cases a commercial reaction to the challenges we face as a society. Tesla CEO Elon Musk's vision and determination to disrupt both the energy and automotive sectors are a good example; but so are the advances made in the pharmaceutical and healthcare sectors on disease control and the focus on genetically-enhanced farming methods. All direct responses to current and emerging global trends.
The point here is that the commercial sector is as responsible for solving our future challenges as our governments. We are living through a period of social entrepreneurialism; where, for many, a desire to make money is matched by a desire to solve the most pressing issues we face as a society.
So, why is this important to procurement?
The reality is that the pace of change and scale of challenge that we are faced with demand a new approach to how we do business. Call it what you will; but in simple terms it demands gaining a greater understanding of our world through advanced data analytics, being quick to react to situations as they arise and being more open to collaboration with third parties to help solve those challenges. In each of these areas, digital technologies are a key enabler and in each of these areas, CPOs must assess their own capabilities and approaches and determine how they can support and contribute to the overall strategy.
Knowledge is power
There are many examples of how procurement can make better use of data, both in the traditional sense through improved spend and category analysis; but also in new and emerging areas such as advanced data analytics and the Internet of Things (IoT).
Advanced data analytics can be used to provide more visibility to the business for planning and forecasting purposes, using real-time data such as commodity and labor prices to help predict individual-product production costs on an ongoing basis. In theory, this can help companies work to rolling forecasts and mean procurement can be much closer aligned with, and supporting of, sales and marketing tactics.
Meanwhile, the impact of IoT continues to be felt, with the supply chain a key playground - visibility of individual goods and components in the supply chain can be greatly improved, with a subsequent improvement in efficiency, which in many cases can lead to a significant cash benefit. At the recent Procurement Leaders World Procurement Congress, Flextronics' CPO Tom Linton provided a good example, explaining how taking five days out of his 65-day supply chain through enhanced visibility provided $350 million in cash to the business.
Speed is of the essence
The same thinking can be extended to agility and the benefits that come from being able to react to market conditions and opportunities. Being able to easily ramp up or slow down production to take advantage of peaks and troughs in consumer demand without holding large quantities of inventory is a growing differentiator in corporate performance and, ultimately, shareholder return.
Being able to react quickly to global events - whether positive or negative - is another key differentiator, and something CPOs can look to digital technologies for to help solve. For example, digital dashboards that offer a real-time view of a supply chain and suppliers, and how wider political and economic issues are affecting them, can help drive faster, more effective decisions.
However, perhaps the largest, or, at least, most widely experienced, impact of digital technology over the past 20 years, is in the world of communication. Thanks to this technology, we are permanently connected with and have immediate visibility into the...
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