With rapidly evolving technology set to dramatically impact the indirect procurement supply chain, procurement teams need to stay ahead of the curve to avoid drifting into obscurity
Blockbuster, MySpace, Kodak, Blackberry – names that were once at the forefront of their respective industries that didn’t move with the times and have stagnated or, in Blockbuster’s case, disappeared altogether. The common theme among these businesses was a failure to adapt to change – whether it was changing customer demands or new technology changing the marketplace.
According to recent research conducted by RS and the Chartered Institute of Procurement and Supply (CIPS), procurement professionals are anticipating significant change in the indirect procurement world in the near future. The survey of procurement and supply professionals found that 74% expect either ‘some change’ or ‘a great deal of change’ to their indirect procurement strategy over the next five years.
“Change, driven by technological advances, is inevitable,” says Helen Alder, Head of Knowledge at CIPS. “The pace of the Fourth Industrial Revolution – which encompasses the Industrial Internet of Things – is picking up rapidly and any business that doesn’t adapt will struggle.
“In terms of MRO procurement, teams are being challenged to think outside the box for different solutions,” she adds. “There is a need for the procurement function in an organisation to be more of an innovative, creative, solution-finding department rather than just controlling spending.”
The amount of disruptive technology and the pace at which change is coming can be daunting for procurement teams, according to Mike England, Managing Director for Northern Europe at RS. “There is a lot of fear around adopting new technology, simply because people are nervous of change and technology is moving very quickly,” he says. “This makes it hard to have a definitive plan for the next five years – organisations need to be flexible.
"There is a lot of fear around adopting new technology, simply because people are nervous of change and technology is moving very quickly" Mike England, Managing Director for Northern Europe,RS
“Fundamentally, my view is that if companies don’t adapt to change they won’t survive,” he continues. “I’ve worked with manufacturers who have been looking to work towards installing new technology in their factories and they’re talking about anything up to 30% in productivity gains and efficiency gains. When you are competing with other factories making similar products globally, it will come down to the ability to produce as efficiently as possible from a cost perspective, so those businesses that adopt new technologies and approaches to improve their operating efficiency will ultimately have a competitive advantage in the market.”
The risk is clear according to England – there will be some companies and procurement professionals who steal a march on their rivals by being early adopters of new technology and processes, while others those who leave it too late could be left behind. However, while the dangers of standing still are clear, England believes there are straightforward steps that organisations and procurement teams can take to keep up with change.
“I think the best thing that companies can do is to go and benchmark themselves against other organisations, and while you can’t necessarily go and talk to your competitors directly, we can all learn from what other companies are doing,” explains England. “A recent example of this was one of our biggest customers visited RS because they really wanted to understand more about our own digital transformation journey.
“They came away with an enormous amount of knowledge and a new perspective in terms of how a very digitally enabled company is using technology and driving change culturally in order to drive improvement,” he adds. “It’s no different to a manufacturing business that doesn’t work to a preventative maintenance regime, which chooses to talk to a manufacturer that does.”
Learn from others
This sort of benchmark matchmaking is an area where organisations such as CIPS and RS can play a part, by introducing non-competing businesses to each other for their mutual benefit.
“I think RS can connect businesses because we have a million customers worldwide across a wide range of sectors and can introduce people so that they can share,” says England. “Sometimes the only way a business might be willing to make significant, fundamental changes to the way they operate is to physically see what other businesses are doing and how that’s driving positive improvement.”
" Fundamentally, if companies don’t adapt to change they won’t survive" Mike England, Managing Director for Northern Europe, RS
Another challenge on the horizon for organisations’ procurement and supply teams is Brexit – RS and CIPS’ research shows that 38% of procurement professionals are concerned about how Brexit will impact their role. The exact terms of the UK’s exit from the EU are currently unknown, but it is unlikely that the MRO procurement world will be left untouched. “The procurement team and the role of the chief procurement officer are going to be more important than ever as a result of Brexit,” says Alder. “The positive is that procurement professionals are naturally good at problem-solving and reacting to issues that come up, and many seem to regard Brexit in this light.
“Issues that arise once a deal has been agreed to leave the EU will need to be risk assessed and procurement teams, and other key stakeholders in every organisation, will put a plan in place to deal with them. Right now, work should already be under way to look at best- and worst-case scenarios for individual businesses, as that work will help lessen the impact of changes once a Brexit deal is in place.”
Making use of knowledge services
According to the RS/CIPS survey, more than half of the respondents said they would like access to knowledge services to help them plan for the future. England believes that this type of insight, in relation to indirect procurement, can be split into two areas: product knowledge – providing information about the specifications and application of new products; and knowledge services aimed at the right strategy to take advantage of new technology and innovations.
“This is about how a business goes on a journey towards supplier and product consolidation, and towards preventative maintenance in an increasingly digitised world,” England explains. “People want to read articles, watch videos and find out information from experts that they can then apply in their own business.”
" There are lots of companies putting out knowledge at the moment: the key thing is to find sources that can be trusted"Helen Alder, Head of Knowledge, CIPS
Alder warns that choosing the source for this insight is crucial. “There are lots of companies putting out knowledge at the moment: the key thing is to find sources that can be trusted,” she says. “CIPS has a massive role to play in giving its members quality-assured, checked guidance via our knowledge partners on a range of issues, but the key thing is that it’s quality assured and relevant.”
RS, as the CIPS knowledge partner for indirect procurement, is in a good position to help steer procurement teams through the uncertainty of change. “I think the key for RS is about trying to paint a picture of what manufacturing industry is going to look like over the next five to ten years,” says England. “When you look at the research a lot of procurement professionals recognise that their world is changing and it will continue to change, so what they need is a trusted source of information to spell out what the changes mean. I am proud that RS can play a key role in this.”
The message is clear – ignore change in MRO procurement at your peril, but for those organisations that are willing to embrace it, the support will be there to help you use new technology to your advantage.