An Expert Opinion: Which Companies Survived the Lockdown, or Why Automation is Important in Procurement

ТІТАRЕNКО HАNNА
Head of SAP CX, SAP Ariba
a.titarenko@ageless.com.ua

The volatility of the global economy and billions of dollars in losses from the coronavirus have proven that the sustainability and success of a company today directly depends on risk and supplier management, Supply Chain security and the harmonious interaction of all departments at all levels.

 

PROCESS AUTOMATION IS THE BASIS OF BUSINESS RESILIENCE DURING A PANDEMIC

It’s hard to imagine, but ten years ago, Ukrainian companies almost did not use automation in procurement. But abroad, the German software manufacturer SAP SE presented the Material Management system in 1973, after which the Purchasing module itself appeared.

Almost half a century later, the pandemic and the associated instability of the global economy have proven that in order to survive, business must become resilient, focus on risk management and supply chain transparency.

It is impossible to achieve such a goal without high-quality automation. Tamara Brown, Director of Customer Relations at SAP Procurement Solutions, Intelligent Spend Management (ISM), SAP SE, spoke about this at the conference «Effective Procurement and Delivery 2020. New Reality».

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The situation with the pandemic has clearly demonstrated: companies with automated processes and developed roadmaps turned out to be more prepared for the crisis and new challenges.

It was easier for them:

  • see the full picture,
  • timely change the strategy
  • organize work from home.

Remote work of purchasing departments without the necessary automation can turn into chaos, and procurement can be an uncontrolled process.

However, today there are complex solutions for automating the work of the procurement department, which are capable of:

  • ensure full control over the supply chain,
  • reduce the risks of violation of terms and conditions of delivery,
  • help monitor the execution of contracts.

Artificial intelligence is becoming the new normal, and for purchasing departments too.

 

AI OPPORTUNITIES FOR IT IN THE ERA OF THE «FOURTH INDUSTRIAL REVOLUTION»

There are corporate IT solutions (procurement ecosystems for business) that provide such opportunities:

  1. Analysis of procurement costs, identification of weak links and cost optimization methods.
  2. Planning. Development of categorical strategies, where segmentation of procurement categories occurs, an algorithm for working with a supplier is determined, responsibilities are distributed among participants and basic accounting documents are formed.
  3. Search for new suppliers. It takes place according to a given algorithm in compliance with the requirements for the counterparty and the identification of potential bidders.
  4. Qualifications. Helps to structure the requirements for the supplier and select the most optimal companies.
  5. Procurement procedure. Allows you to conduct a tender of any type and choose the most reliable supplier.

In addition, the speaker spoke about Industry 4.0 and highlighted the main trends in the era of the «Fourth Industrial Revolution», including:

  • hyperinterconnection, exchange of information («data») between everyone and everything, including people and machines equipped with sensors;
  • the most automated production;
  • existence and active expansion of digital ecosystems and, in fact, Big Data.

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The larger the company, the more data we are talking about. For a long time, Big Data was considered one of the key sticking points for corporate IT solutions. The question of how to manage big data worried everyone.

Now the problem can be considered solved. There are no more restrictions on networking and cloud computing.

Big Data today is what is capable of providing transparency to your supply chain. Thus, companies prevent the development of corruption schemes and strengthen the brand’s reputation.

 

SUPPLY CHAIN TRANSPARENCY IS THE BASIS FOR SUCCESSFUL IMPLEMENTATION OF IT SOLUTIONS

However, without confidence in the transparency of the supply chain, unpleasant situations can arise. For example, one well-known cosmetics company has stated that it does not test products on animals. Later it turned out that this was not the case.

The procurement department was unable to trace the unscrupulous supplier in the opaque supply chain. The company had to change the labeling, which caused millions in losses.

 

BUSINESS AUTOMATION – NEW RESOURCES FOR DEVELOPMENT

Although digital, technological trends in the economy and production are becoming critically important today, according to the expert, you should not focus solely on them.

Automation must be efficient. It is important to learn how to set long-term goals, focus on a clear vision of the entire roadmap for digital transformation.

Automation management is a huge process. And here everything will depend on the ambitiousness of the goals. The main thing to remember is that all changes are based not only on technology, but also on people – individual professionals with the necessary technical skills.

That is why it is necessary to work with each department, to play the model of future innovations. Employees may be intimidated by the fact that operational activities are being “taken away” by automation.

It is necessary to explain to the staff that it is not professions that become obsolete, but individual tasks, while others, more strategic, important and interesting, come to the fore. And automation only frees up the company’s resource.

«In digital transformation, you need to worry not only about your departments, but also about all stakeholders, including suppliers. They also need to be prepared for changes in the approach to procurement management.

The purchasing team should work out the innovations with suppliers as much as possible, convince them to use automation when working with each other. The positive effect is increased when internal and external stakeholders work as a whole»,  Tamara Brown is convinced.

 

EFFICIENT SUPPLY CHAIN – EASILY ADAPT TO MARKET CHANGES

According to the expert, procurement is at the heart of everything. If a crisis occurs, it is from the purchasing department that everyone expects decisive action. At the stage of forming the general strategy of the company, one cannot do without a purchasing department.

Therefore, all positive changes should begin with specialists in this area:

  • readiness and understanding of the need to use automation capabilities,
  • focus on mitigating risks in the supply chain,
  • making strategic decisions that are consistent with the goals of the company.

Therefore, purchasing departments in companies must be the first to adapt to new market conditions. This is the main condition for the survival of modern business.

Recorded and adapted by Hanna Titarenko.