What Does Industry 4.0 Mean for Procurement?

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In need of a seamless experience across every aspect of our lives, the fourth industrial revolution saw the rapid adoption of digitisation in manufacturing and procurement. It revolutionises the operational and administrative processes, creating unique contemporary products and services.

Complying with the industrial advancements, procurement has also developed to new standards. However, the question remains, what does it entail for the industry? And should it be the strategic compass for procurement experts going forward?

Here is a brief discussion on what the latest industry standards mean for manufacturing and procurement.

The design components of procurement 4.0

Essentially, the fourth industrial revolution introduced new technologies, including AI, robotics, sensors, IoT, and cloud computing, helping transform the lives of billions. The four approaches to Industrialisation 4.0 are as follows:

  • Interconnectivity: Integrating IoT and wireless internet to connect to sensors and processing units that closely monitor the efficiency and effectiveness of a manufacturing line.
  • Transparency: Operators with data collected from interconnected devices can access and process valuable data from different points in the production line and identify key result areas for improvement.
  • Decentralisation: Procurement subcontractors and operators can process and combine local and global information at the same time to improve decision-making inside and outside the production line, therefore increasing productivity.
  • Technical assistance: Adopting innovative technologies means shifting operators’ roles from machinists to administrators, which frees up the resources required to handle situations requiring urgent decision-making.

The impact of procurement 4.0 on the modern supply chain

While the current state of procurement has evolved since the last industrial revolution, it is still plagued by inefficiencies in several points. One of its biggest drawbacks is the idea that the best model is one that keeps production costs low.

Therefore, the idea of procurement adding value for the manufacturer is something completely new.

There are several points in the modern supply chain that can benefit from adopting new technologies brought on by industry 4.0. For instance, procurement that primarily involves placing calls to the suppliers is evolving to digital means – via email. In addition, some procurement departments that have adopted digitisation also offer direct sourcing of raw materials via an IT infrastructure shared with their suppliers.

Small steps like these go a long way toward improving the agility with which businesses can move into the modern era.

Maintaining transaction records improves the transparency within the procurement process, not only for the operators but also for the stakeholders with a vested interest in the proceedings. Similarly, an email chain used to place orders can also be easily analysed, making it easier to access pricing information and estimating the supply TAT.

That said, as long as the information is disorganised and unstructured, simply maintaining a record will not improve the situation drastically.

Adoption of the design components into procurement channels

Yes, digitisation is one of the most crucial steps businesses need to adopt in this new era. However, adopting the four design components discussed above will truly define the future of procurement workflows going forward.

Essentially, an integrated IT environment that consolidates data from across the production line using the industry 4.0 technologies will be essential for improving transparency and flexibility of the procurement workflow. Cloud computing can be leveraged to analyse ordering patterns and supplier data to predict future price trends, market demand, and delivery deadlines.

Procurement experts can also use such integrated IT environments to diversify the sources from where they acquire a particular raw material. They can easily identify situations where the supply chain can be disrupted, points where they can cut costs, and other such relevant decisions to help improve your workflow.

The scenarios where industry 4.0 technologies improve the system is countless.

For instance, if your business involves 3D printing workflows tracked via IoT devices, you can source raw materials proactively, manage costs, reduce shipping expenses by partnering with a supplier, preamp productions based on market trends, receive notifications about delayed shipments, automate certain processes, and modify the procurement plans on-the-fly any time in your production cycle.

Proper implementation of new technologies

With all the bells and whistles surrounding industry 4.0 products, one misconception that businesses need to clear is that adopting technologies for technology’s sake is not a guarantee of success.

Several companies worldwide have failed to implement technologies properly or adopted software that does not fit into their system, disrupting the overall workflow.

Instead, procurement subcontractors need to make informed decisions about adopting technologies that improve interconnectivity and transparency. This is because, in the case of procurement, there is always a lingering risk of poor IT choices setting the system back instead of taking it forward.

A smart move will be to discuss the value proposition with stakeholders about the changes required in the current workflow. Investing in proven industry 4.0 solutions will help build a strong foundation for the business ushering into the 21st century.

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