Blog: 2020 - Tipping Point for Digitization?
The COVID-19 crisis has made it very clear that professional buyers and supply chain managers (SCM) are important for our economy. Leaders such as Merkel (Germany) and Rutte (The Netherlands) spoke openly about the importance of well-coordinated professional purchasing for obtaining the necessary personal protection equipment (PPE) such as face masks for health care workers. Various CEOs indicated that their companies have only made it through the COVID-19 crisis thanks to the decisive action of their Procurement and SCM departments. In short, the spotlight is on Procurement and SCM. COVID-19 has been a wake-up call for many companies. How do we actually deal with risks in our supply chains? Have we not become too dependent on suppliers in China? Is large-scale outsourcing and working with global supply chains still sustainable?
Various industry experts argue that COVID-19 puts us at a 'tipping point' with regard to digitization of Procurement and SCM. Recently I facilitated a NEVI Webinar on this topic. A large part of the 65 participants (most of them purchasing managers) agreed with the statement that COVID-19 will accelerate the digitization of Procurement. Now is the time to push forward, reinvent and digitize Procurement! The most promising digital technologies for Procurement and SCM, according to the participants, are currently: 1) Big data analytics, 2) Artificial intelligence (AI), 3) Robotic Process Automation (RPA), 4) Predictive analytics, 5) Digitally connected Supply Chains and 6) Blockchain. Next, if the decision was theirs, they would reserve more than 80% of their IT budget for the next 3-5 years to invest in Big Data analytics, AI and RPA.
What can we say about the current state of affairs with regard to Digitization of Procurement in The Netherlands? On a 5-point maturity scale for digital Procurement, as developed by the German WHU-Otto Beisheim School of Management, the participants of my webinar scored an average 2.4. That is exactly between phase 2 "Digital newcomer" and phase 3 "Developing learner". So, there is still a lot of work to do before we can call ourselves Digital champions (phase 5). However, we are not lagging behind the rest of Europe. Research from SAP and University of Mannheim concluded in 2019 that although the adoption of mature digital technologies (such as EDI, Cloud solutions, Collaboration tools, eProcurement, eAuctions, eCatalogues) within Procurement and SCM is reasonably well, the adoption of the latest digital technologies (such as Blockchain, Virtual / Augmented reality, Chatbots, AI and RPA) is still very poor.
It will take some serious resources and efforts to bring digitization beyond the tipping point. For this, it is important to see digitization as much more than just the automation of operational Procurement activities and take a more holistic supply chain view. We must stop thinking in terms of what is not possible or allowed at this moment, it’s much more important to look creatively at what is (or could be) possible. Why not engage your key supply chain stakeholders and brainstorm together about how digital technology can be applied in a way that benefits all?
Digitization is not a threat, but a great opportunity for both Procurement and Supply Chain Management. With the right digital support, it will not be long before it becomes possible for professional buyers to make the best strategic sourcing decisions in real time, no matter how volatile, uncertain and complex the supply markets and supply chains are. So, take action and explore what the latest digital technology such as AI, Chatbots and Augmented reality can potentially contribute to your organization or supply chain. Based upon sound research Brightlands Institute for Supply Chain Innovation (BISCI) is ready and fully equipped to support you in every way on your digitization journey. Whether it is to get you inspired about the possibilities (e.g. strategy workshops) or to get you ready to experiment with the latest digital technologies (e.g. Innovation Labs). If you start exploring and experimenting today, chances are high that we will look back in a few years and see 2020 as a Tipping point for the digitization of Procurement and Supply Chain Management.
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