Procurement functions must reframe their role to avoid jeopardising their company's ability to compete, says Roland Berger.
Virtually all industries have new issues to contend with. From e-mobility to the Industrial Internet of Things (IIoT), 5G and digitalization, the list is almost endless. These disruptions lead to the emergence of new products, services and business models in the blink of an eye. In this volatile environment, procurement plays a crucial role across all industry verticals. But the function needs to free itself of legacy structures and reframe its activities. Roland Berger’s new study, ‘Procurement endgame: The future of procurement in times of digitalization and disruption’, highlights the steps necessary for this procurement transformation.
Procurement in the automotive industry today has to deal with buying batteries, managing strategic partnerships for the connected car and sourcing new types of software. Indeed, procurement departments across all verticals are confronted with new parameters, whether they're in engineering, banking and insurance or chemicals and pharmaceuticals. The changes, often driven by digital technologies, have very different impacts on different industries.
"If companies don't have ready responses to the disruptive forces in their industry that will work for new products, services and business models, or if they are unable react fast, they are putting their market position at risk,” said Oliver Knapp, Senior Partner at Roland Berger. Procurement has a key role to play as companies strive to successfully master the disruption that stretches far beyond the simple digitalization of procurement. “This is a unique opportunity. Procurement can and must reposition itself and redefine its role as a partner creating value in the company,” explains Knapp.
With the advancement of digital innovation in procurement, it's not only operational processes but also complex tasks that are being automated. "Specialised computer bots and artificial intelligence can handle issues today that go way beyond simple automation," explains Sven Marlinghaus, Senior Partner at Roland Berger. The automation of processes like supplier management or system management levels out the differences between companies. "New aspects in procurement are gaining importance, like cooperating with new strategic partners, innovation scouting and dealing with growing risks and margin pressure," notes Marlinghaus.
Overall, the disruption is already at an advanced stage, which is shrinking the window of opportunity for successful transformation. Yet many companies are still reticent about reframing procurement. "There's a certain insecurity about how companies should approach the necessary realignment," says Marlinghaus.
Building on this, a number of scenarios can be developed covering aspects such as what the organisation and role of procurement and the supplier network should look like, and how much capacity will be freed up as a result of digital standardization. The different factors need to be weighted individually to suit the company and assessed in terms of the possibilities available.
The remaining steps are all about realising the scenarios and strategic measures. "With a roadmap like this in place, the transformation can be managed step by step and implemented successfully. If procurement functions don't quickly adapt their performance to the disruptive trends in the marketplace, companies will lose their ability to compete,” concludes Marlinghaus.
If companies don't have ready responses to the disruptive forces in their industry that will work for new products, services and business models, or if they are unable react fast, they are putting their market position at risk.