Overview

Purchasing 4.0 – digital processes are the prerequisite

When people think of Industry 4.0, they usually think of production and logistics: in smart factories, intelligent and networked machines and systems, parts and products exchange information with each other and organize value creation independently. In contrast, the role of purchasing is given much less thought – and talked about. This is precisely why the preliminary study “Purchasing 4.0 – Digitalization of Purchasing” by Fraunhofer IML and the German Association of Materials Management, Purchasing and Logistics is so interesting. The starting point for the authors is the thesis that digitalization enables procurement to take on a strategic role in the company. To investigate this assumption, purchasing managers and CPOs from 25 companies and two universities were asked for their assessment. The purchasers are extremely positive about their own importance for the digitalization of the company: 72% of them see procurement as an active shaper and pioneer in the implementation of Industry 4.0. 28% even describe procurement as a pioneer and driver. None of the respondents perceive themselves as followers.

Purchasing must digitize structures and processes

However, according to the study, transparency is the most important prerequisite for actually implementing Industry 4.0. Industry 4.0-relevant knowledge must be provided in clear structures and be available to everyone. Another task: procurement must digitalize its structures and processes – because this is the only way it can react in real time and provide meaningful information. It is true that companies are working on this. In the study, only 23% state that no digitalization activities have yet been implemented or are in the process of being implemented. Nevertheless, the potential is far from exhausted. In some cases, the basics are still lacking.
A lot has already happened in recent years under the heading of e-procurement. Various procurement platforms have become established and electronic data exchange has now also arrived in medium-sized and small companies. However, it is mainly used to purchase standardized materials. The situation is still very different for non-standardized products. There is a great need for coordination across departmental boundaries, numerous documents are created – and there is a lack of end-to-end IT support.

Complex coordination with many parties involved

This leads to the following scenario, for example: In order to fulfill the order of a large customer, production needs a special machine tool. The customer’s requirements specify exactly what this machine needs to do. The sales department has already recorded these – notes from conversations, emails, sketches from the customer – stored them locally and forwarded at least some of them to production engineering. Production Engineering now has to specify which machine tool is to be purchased. Again, documents are created, this time stored locally at the production engineering department. And now it’s the purchasing department’s turn: it has to obtain quotations from various manufacturers according to the production engineering specifications. Unfortunately, this is not so easy because they don’t have the necessary information. So the purchasing department coordinates with the production engineering department, asks the sales department and perhaps even approaches the customer directly. When he has finally gathered all the information, the purchasing department contacts various suppliers – who in turn make inquiries. At some point, the offers are available, a decision is made internally – naturally with a lot of coordination between all departments involved – and the purchasing department can order the required machine tool. By then, masses of documents have been created – emails, Word and Excel documents, scanned sketches and SAP documents. Maintaining an overview, monitoring deadlines and regularly communicating the status to the various parties involved is an enormous challenge for the purchasing department. A challenge that is worth it – because at the end of the day, there is a new order, a satisfied customer and probably a few follow-up orders.

Digital documents alone are not enough

Even if paper is still used in purchasing – for example, when approvals are only possible with a signature on a printout: Most documents are already available in digital form. However, this does not yet ensure a consistent and therefore efficient process. This is because information about a process is usually stored locally and is not linked to one another. This makes it difficult for those involved to keep track of the status of a project – especially if they do not come from the same department. This results in redundant data storage. News on the progress of the project only reaches the addressee with delays. And information has to be actively obtained. The lack of digitization causes unnecessary effort and costs the company time and therefore money.

Digital processes: monitor and control

Centralized and networked storage of all data is much more effective. Today, innovative IT solutions are able to automatically structure all documents relating to a project – such as the purchase of a machine tool – in such a way that they are easy to find and are available across all departments. They also digitize the entire purchasing process. After all, if documents are stored digitally, centrally and in a structured manner, they can also be used to monitor and control processes: Sales can therefore see directly whether Purchasing has already requested quotations and where exactly the overall process stands. Purchasing, in turn, can automatically inform Production Engineering about the receipt of quotations and request a technical evaluation by a fixed deadline. Of course, this is then also done digitally and according to defined specifications.

Purchasing 4.0 has not yet been realized, of course. But further scenarios can only be implemented if the internal processes run smoothly and documents are available regardless of location and time. Purchasing can therefore not only take on a strategic role. It can also really become a driver of digitalization in the company.