Procurement 4.0 & engaging a Managed Services Provider

Firstly, what is Procurement 4.0?

The fourth Industrial Revolution, also known as Industry 4.0, refers to the growth of cyber-physical systems that are bringing the physical world online. The Internet of Things (IoT), artificial intelligence (AI), and other technologies have transformed our way of working, using data management platforms, end-to-end visibility in supply chains is no longer just a pipe dream. 

Current State

A recent survey by Forrester found that products and services procured within an organisation can account for up to 80% of organisational expenses, with over 30% of that being workforce related, highlighting how crucial it is that businesses drive their procurement departments towards digitisation, innovation, and added value. 

Benefits of 4.0

By implementing a MSP as part of your Procurement 4.0 strategy, a huge percentage of the time spent on mundane administrative tasks could instead be spent on strategic decision-making activities. Moreover, Deloitte calculates that companies with optimally structured procurement can immediately save 21% on personnel costs and up to 30% on process costs. 

Other advantages of a MSP as part of your 4.0 plan include:

• Consistently standardised processes ensure an automatic flow of information across your recruitment lifecycle.
• Stimulating innovation amongst suppliers - research on innovation management by procurement, carried out by Ernst & Young, shows that up to 40% of innovation is already being generated by suppliers on behalf of another company, regardless of the innovative strength within the client company. 
• Increasing corporate social responsibility (CSR) by incorporating CSR into processes such as supplier assessments and purchasing decisions.
• Reducing organisational risks by improving compliance procedures and carrying out supplier audits.
• Enhancing your bid-winning activities by including social value calculations across your supply chain and beyond. 

Where to start with procuring a Managed Services Provider

To digitally transform your procurement function, and not only as part of your indirect procurement evolution, continually applying the following four steps is recommended:

1. Identify potential and set goals:

As a first step, companies need to assess their current position in the procurement process within their own organisation, including in relation to external stakeholders. How far along is your company in the digital transformation? Understanding this will allow you to identify potential, as well as set short through medium and long-term goals when it comes to building a business case for a MSP. 

2. Select people and tools

Once you have set your goals,  you can start working to achieve them. Which people and stakeholders are necessary to realise your goals and which technology platforms are needed? Digital tools can support and augment your staffing strategy by, for example, using automation to cut down on tedious, repetitive tasks, using digital assistants to accelerate decision-making processes, or driving innovation by using technologies that provide insights to customers and suppliers. 

3. Digitisation of procurement on the basis of customer, product, and supply chain

It's essential that communication takes place between all areas of the digitised supply chain. So that the procurement department can add value and be effective, their strategy must be aligned with the strategies of supply chain, and the company. As Henry Ford once stated "Coming together is a beginning, staying together is progress, and working together is success."

4. Tracking and modification

The previous three steps are meaningless unless impact and value creation are measured and evaluated. In doing this, new knowledge and insights are gained which, in turn, contribute to new goals. If your goals were not achieved first time round, you can adjust the procedure or goals or both, creating a culture of continuous improvement across the entire organisation and supply chain.