4 Keys to Purchasing 4.0

The global economy is undergoing a Digital Transformation at record pace.  Declining costs in bandwidth, storage and computing enable organizations to optimize, connect and model data to improve decision making and to drive results.

Whatever the experts call it:  Industry 4.0, Digital Economy, Internet of Things, Harnessing the Power of Artificial Intelligence and Machine Learning – its potential can help purchasing organizations ensure that they are buying at optimal cost levels, from optimal suppliers at optimal quality levels.

Moving to optimal will require addressing the fact that buying organizations are far too often straddling between enterprise systems and Excel spreadsheets to conduct everyday business.  Challenged by time for completing typical purchasing activities to find cost savings, resource suppliers, support new business, and all the other daily activities, the chasm between an excel based world and the vision for Digital Transformation seems too large.

However, we have found the four following keys to success in meeting the challenges and moving to Purchasing 4.0:

1. Develop Digital Fluency

The rise in robotics, algorithms and artificial intelligence will continue taking over many activities that were previously part of a procurement professional’s jobs. To close the skill gap and turn it into a competitive differentiator, more organizations will invest in up skilling of their workforce through continuous learning and certification initiatives.
The reality is that a Cost Management and Digital Transformation cannot occur without a People Transformation, which requires an investment in elevating the organizational skill set. The days are quickly waning where the mentality of buying on piece price with “3 quotes and a cloud of dust” are effectively serving the needs of buying organizations. Unfortunately, most buying organizations are placed in this situation simply because of the shear amount of daily activities and stresses being forced upon them. High Performing Purchasing Organizations have embraced People Transformation which positions their company for a New World of Purchasing.

APD’s Cost Management Certification Program provides tools and understanding purchasing organizations and individuals need to excel in a Purchasing 4.0 world:

2. Determine the Destination

Before starting down the road to Purchasing 4.0 organizations need to determine where they want that road to take them. Does the organization want to arrive at optimal cost, optimal suppliers and/or optimal quality?
They then need to determine the data required to determine optimal, define the gap between current and optimal and, implement strategies to achieve optimal.

3. Assess the Current Data State

With the questions and the data required to answer them understood, it’s time to assess the current state of data:

  • What is available? Is it accessible?
  • What is the quality of the data? How can it be improved, freshened and cleansed?
  • What is missing? Where can you find it internally or externally?

4. Develop Technical & Process Roadmaps

To date, most computing power in manufacturing organizations has been designed to achieve transactional efficiency – completing more tasks in less time. Data acquisition and storage has been architected to ensure efficiency not to build and use intelligence in the pursuit of optimal.
Technical and process roadmaps need to be developed that identify how current processes are modified to acquire, store and model data to achieve their Purchasing 4.0 destination.

Our clients have invested in their people to heighten skill levels in the areas of Cost Management; optimized processes to improve data and invested in cutting edge technology in the pursuit of optimal. As a result, they have experienced savings levels of 8-18%.

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