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Über dieses Buch

This book shows how digital transformation has the power to revolutionize the way procurement operates, and discusses how especially buyer decisions are empowered through artificial intelligence. Depending on a company’s strategy all desired outcomes are possible, including doubling savings, innovation, sustainability, quality, speed, and halve the risk. Jumpstart to Digital Procurement is a hands-on guide on how companies can grasp the opportunities offered by digital transformation.

Inhaltsverzeichnis

Frontmatter

A New Concept of Procurement

Abstract
The revolution is coming and it will be big.
Wolfgang Schnellbächer, Daniel Weise

Value: Whatever Matters to the Business

Frontmatter

Savings: The Right Applications for the Right Spend

Abstract
Let us start at the top of the house. Without a doubt, savings is the most important value dimension for the majority of CPOs. Consequently, it is methods of generating savings that are the most developed among the six value dimensions. Best-in-class companies combine a rigid strategic sourcing approach based on comprehensive category strategies with the right tactical selection of enablers tailored to the specific sourcing situation. For example, successful savings generation may require strong collaboration with business partners to prevent costly over-specifications and unnecessary demand while ensuring that specifications do not limit the supplier landscape.
Wolfgang Schnellbächer, Daniel Weise

Innovation: Finding the Right Partners

Abstract
The importance of innovation has gone up on the CPO agenda, mostly driven by shorter development cycles, lower value generation, and growing dependency. Not surprisingly, when asked about their top objectives, CPOs rank innovation second, right after cost reductions. According to the Institute for Supply Management, companies that leverage their suppliers’ innovative power outperform their peers in top- and bottom-line performance, achieving twice the EBIT, a 5–10% COGS reduction, and a 7–10% revenue boost driven by lower product cost, faster time to market, and higher prices realized.
Wolfgang Schnellbächer, Daniel Weise

Quality: Highlighting What Is Actually Delivered

Abstract
The need to obtain high-quality products and services from suppliers has never been greater. Failures increase costs (for example, in the form of warranty claims, product recalls, and lawsuits) and damage revenue and branding irrevocably. Best-in-class companies have used a variety of practices to mitigate and smartly prevent quality failures across the supply chain. They have focused on identifying which components require the highest quality, where quality issues have occurred and are likely to occur, and how to best reduce the risk of failures in the future.
Wolfgang Schnellbächer, Daniel Weise

Sustainability: Adding Sustainability as Procurement’s New Value Proposition

Abstract
Sustainability is increasingly gaining in importance for companies in general and procurement functions in particular. With extreme weather and natural disasters occurring more frequently across the globe and youth movements calling for us all to act now to save the planet, environmental protection is becoming a core task. Of equally increasing importance are a company’s social impact and ethical standards. Together these factors are broadly known as environmental, social, and governance (ESG) factors. Governments are increasing the pressure by issuing more sustainability-related regulations (e.g., the UK’s Modern Slavery Act and the CSR Directive Implementation Act in Germany). Furthermore, the market stakeholders, such as investors and customers, are demanding that companies focus more of their attention on ensuring sustainability. According to a recent “BCG Pulse of the Fashion Industry” update, 75% of consumers surveyed consider sustainability as extremely important or very important. And, more than 50% of consumers plan to switch brands in the future if another brand acts more environmentally and socially friendly than their preferred one.
Wolfgang Schnellbächer, Daniel Weise

Speed: Leveraging Bots as Our New Best Friends

Abstract
As business cycles quicken, procurement functions are under pressure to purchase goods and services faster than ever. Digital technologies make it possible to accelerate the procurement process that begins with the need to buy an item or service and ends with payment and delivery. According to our estimate, the time required can drop by as much as 80% for simple items like office supplies and 40% for complex technical items like capital projects.
Wolfgang Schnellbächer, Daniel Weise

Risk: Predicting the Future and Acting on It

Abstract
The world is becoming increasingly interconnected, which creates complex interdependencies in global supply chains. At the same time, uncertainty is growing, with companies being exposed to a wide range of risks threatening their business. Chinese factory closures due to natural disasters or labor strikes in South Africa plant cause standstills in Germany and trade barriers increase sourcing costs. The consequences are significant: The insurance company AON estimates noninsured costs of $134 billion from natural disasters in one year alone.
Wolfgang Schnellbächer, Daniel Weise

Enablers: What Makes It Work

Organization: Building the Procurement Function of the Future

Abstract
The first part of this book provided an extensive overview of the value that procurement brings to companies—having advanced from a function purely focusing on savings to a strategic partner also securing access to critical innovations, supplier quality, assurance of sustainability, delivery speed, and a limited risk exposure.
Wolfgang Schnellbächer, Daniel Weise

Processes: Clear, Lean, and Automated

Abstract
Processes define the work within a function and at its interfaces. They are the guiding grid along which work procedures take place, making them pivotal to any value generation. Consequently, process efficiency and effectiveness strongly benefit from the digital revolution. And even more so, getting processes right significantly determines the overall success of digital applications within the function.
Wolfgang Schnellbächer, Daniel Weise

People: A New Skill Set for New Roles

Abstract
People is without a doubt the most crucial enabler dimension in BCG’s Procurement House. When managers fail to manage their people well, they can excel in everything else but they will not succeed. However, at the same time, the people dimension is by far the most complex one to tackle and, therefore, also requires the highest degree of attention from CPOs and managers alike. Typically, when successfully implementing new tools, only 10% depends on the right selection and 20% on the available data, whereas 70% depends on the extent to which people adapt to the inherent changes.
Wolfgang Schnellbächer, Daniel Weise

Performance Management: Bridging the Value Delivered

Abstract
Undoubtedly, performance management is one of the most crucial enablers for procurement success. However, few CPOs have it clearly under control. In a recent survey of approximately 50 procurement heads, only 65% stated that their performance management covered the core value dimensions driven by the function. In response to the question as to whether the performance was accurately measured, only 22% said “yes” and 9% answered in the affirmative that at least the majority of employees in the function were covered by a transparent and fair performance management system. But what keeps this core enabler scoring so low in actual implementation?
Wolfgang Schnellbächer, Daniel Weise

Collaboration: Leveraging Business Partners in the Inside and Outside

Abstract
Collaboration is defined as working with partners with the common purpose of securing benefits for the business. Faced with increasing product complexity, an expanding global supplier landscape, and the ever-rising need for alignment, managing collaboration with internal and external business partners has always been at the heart of procurement. It helps to identify internally which value dimensions (i.e., savings, innovation, quality, sustainability, speed, and risk) are most important to other functions such as R&D or production, and it helps to appropriately reflect those requirements externally when interacting with suppliers. Yet, these collaborations are often not handled optimally—without the right focus on business partners or the optimal ways of approaching them.
Wolfgang Schnellbächer, Daniel Weise

Digital Foundation: The Basis of All Our Decisions

Digital Analytics: The Data Foundation for the Next Procurement Revolution

Abstract
The previous chapters have shown how drastically digital will change both the work and impact of procurement. This change will particularly affect the way in which decisions are made—much less dependent on intuition and more on big data leveraged for AI-based algorithms. As digital analytics detects patterns in existing data and predict future developments, it helps buyers to make smarter, better-informed business decisions than ever before. Big data also builds the foundation for AI and blockchain, facilitates collaboration between business partners, and ensures that robotics makes the right decisions. Understanding data and performing the right analyses thus serves as the backbone of digitization.
Wolfgang Schnellbächer, Daniel Weise

Finally, a Look at the Technology

Abstract
Despite the diverse jungle of digital solutions available in procurement there are only five distinct types that characterize the entire market: RPAs/Bots; Big data and advanced analytics; AI; Collaboration; and Blockchain.
This chapter explains the nature of all these five solution types, towards which value and enabler dimensions, they are most likely to be used and what are potential pitfalls when applying the technologies in a procurement function. Take RPAs/Bots for example. Here, the technical implementation is rather straight forward; however, the acceptance of buyers needs to be thoroughly managed due to a potential fear of job losses. Last but not least a concrete example is given on each solution type from leading procurement functions across industries.
Wolfgang Schnellbächer, Daniel Weise

Utopia Versus Dystopia: A Brief Look at the Decades Ahead

Abstract
The value potential of digital solution is enormous. However, if you look at the procurement function itself and the people employed in it, there are different pathways imaginable which future role they will play. It could be that they will be marginalized by smart application which simply are making better choices than a human mind is able to do. In that dystopia procurement professionals are facing a doom future in which they stand at side with little value creation by themselves. In another scenario—utopia—however digital will even further boost procurement as a function on the strong pathway to success it has already started on many years ago. Robots for instance take away the mundane, redundant tasks that give buyers the freedom to focus on more value adding and strategic activities. Even the smart AI applications need to be fed at first with the likely parameters and data sets that truly matter for their choices. Not to mention: The tasks they are solving need to be defined first by humans based on the highest business needs. If Procurement professionals keep staying close to the value that is expected from them, if they understand which enablers lead them there and based on that actively shape their digital agenda the future for sure will be bright.
“Jumpstart to Digital Procurement” is guiding CPOs into this bright future.
Wolfgang Schnellbächer, Daniel Weise
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