Using purchasing 3.0 instead of dreaming of 4.0

Everyone is talking about digital transformation in purchasing - what does that look like in reality, Mr. Allerstorfer?

As a service provider, we experience firsthand how corporations and midsize companies deal with the topic - and it's sometimes a bit, shall we say, sobering. For example, two out of three companies in the German SME sector say that digitization plays a major role for them, especially in the areas of accounting, sales and purchasing. Digitization is also overwhelmingly seen as an opportunity, with very few seeing factors that would prevent the digitization of their business. And then it is not uncommon for a project to fail as early as the tendering phase!

What is the reason for this failure?

I often get the impression that the tenders are unrealistic. We receive requirements documents for which we know that the egg-sucking lizard required in them is nothing more than a best-of all the features of all the providers! But first of all, this is not feasible and secondly, it is not even necessary. At DIG, consulting is therefore an essential part of our service: Together with the customer, we create a clear picture of what processes are to be digitized and automated - and how what is feasible.

How do you assess the practicability of the individual requirements?

As implementers, we know the real problems that arise in the individual steps. Purchasing 4.0 sounds good at first - the question is: What does it mean in the specific case and does the company really need it? We analyze the internal infrastructure in a workshop and derive the target processes from the actual processes. In doing so, we take into account cultural differences, decentralization vs. centralization, and much more, for example, in the case of internationally operating companies. Companies are too different to be brought forward by a wish list! Our approach: realistic step-by-step scenarios instead of nonsensical daydreams!

Which people will be involved in the workshop?

For us, there are three fixed stakeholders in purchase-to-pay projects, for example, who have to be involved right from the start: IT, Finance & Controlling, and of course Purchasing. This is where the tension usually arises: While IT is often opposed to any change in the spirit of "never touch a running system", rejects outsourced solutions or has locked itself into an ERP provider, Finance is keen to see and check every invoice - even if the associated purchase order has been approved by the highest level. What is overlooked in the process: This view of things, which is limited to one's own department, prevents sensible overall solutions! This is precisely where purchasing can take on an extremely important position.

How can purchasing get involved?

With its ability to take a unifying view of things. In this way, purchasing also defines its future role: Increasing automation provides it with the opportunity to develop out of the operational business into a strategic position and to create sustainable value ad! Because strategic purchasing will become immensely important in the future... the context of Purchasing 4.0?

Quite honestly: The vast majority of companies are still miles away from Purchasing 4.0 - and will probably remain so. Why? Purchasing 4.0 requires internal and external networking across the entire supply chain, enables autonomous processes, and uses big data - the question is, which companies will even consider it. The good thing is that most of them still have enough untapped potential in Purchasing 3.0!

Some also see purchasing 3.0 as a threat...

That is exactly the wrong way to look at it! The digital transformation supports the transformation of the operational buyer to the strategic buyer. In medium-sized companies and even in some corporate groups, 90 percent of the people whose business card reads "strategic buyer" are actually doing operational purchasing! This means that the exciting value creation potential of strategic purchasing processes, such as risk management, supplier consolidation, supplier development and evaluation, remains untapped. Green procurement, compliance and TCO approaches to reduce total costs are also tasks that bring much more than, for example, counting peas when purchasing office supplies!

So what is the key to successful digitization?

The individual departments must shed their exclusive internal view and develop a view of the whole. Efficiently structured processes are not about taking away importance from anyone, but about benefits for the company as a whole. To achieve this, it is essential to gain an open view of things and a realistic sense of the joint project - this is what we achieve in the first step with our consulting. We implement the resulting roadmap with our own forces and skills, always keeping an eye on the practical benefits.

What do you see as the practical benefits?

In concrete, real-world benefits. Let me give you an example from each of our two areas: FDI and eProcurement. In the former, we are setting up flexible channels for efficient data exchange with suppliers. The background: Anyone involved in EDI knows that out of 100 partners in a company, often only three to five are ready for this form of data exchange. That's why we at DIG have provided for additional channels: For example, partners can transmit follow-up documents such as order confirmations, invoices, etc. via a web interface. Likewise, an e-mail with a PDF file is possible, from which we automatically read out the relevant information using OCR recognition including intelligent data analysis. This flexibilization of the input channels practically facilitates the connection of a wide variety of partners - and thus creates real practical benefits!

In our second area, eProcurement, we offer a user-friendly procurement platform that reduces costs by up to 40% with standardized processes. Highly individualized, easy to use and directly integrated into the in-house ERP system, this solution achieves what ultimately matters: high user acceptance. And this reduces the costs of system implementation and increases overall success.

What is your recommendation regarding the implementation of such systems?

When it comes to automation, everyone thinks of savings. At the same time, however, it also means new opportunities, as already illustrated by the example of the purchasing agent. It is therefore important to communicate openly and honestly and to involve employees as early as possible. To this end, we can contribute extensive best practice and effectively support this process. Above all, however, as already mentioned at the beginning, one should say goodbye to unrealistic targets and instead concentrate on smaller steps that are implemented according to a binding schedule. In this way, savings potential can be realized in a consistent manner instead of getting bogged down with an unattainable "eierlegende Wollmilchsau".

What are the obstacles in practice?

Often it is a lack of knowledge about their own processes. Sometimes companies only realize in the course of consulting that they need appropriate employees with IT and process knowledge. In a recent survey on digitization in German SMEs, only 6% see a lack of employees as an obstacle - I would say that this actually applies to far more, it's just that people often don't recognize the challenge at the beginning.

Of course, budgets are always an obstacle. This is precisely why it is important to us at DIG to first work out the customer's requirements together with him and then calculate them exactly. This way, the company has an idea of the price, which we absolutely want to meet! Another factor is also the economy: We notice that these projects are often put on the back burner in times of economic boom due to time constraints - and when the economy slows down, we would then like to see the savings and then the budget is missing.

We are curious how you see these aspects - just write to me - we would be happy to send you the story as a PDF!

You can find other interesting success stories here!