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Technology trends that procurement teams cannot overlook in 2016
Author: Ankit Kohli
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The past few years have seen several technologies gain momentum, that have the potential to change the way enterprises work, and therefore procure. From 3D-printing to Cloud computing, and from Big Data to BYOD, enterprise technology trends are fast evolving and buying organisations which overlook these trends can become ‘left-behinds’. Therefore, it is imperative that procurement teams take cognizance of these trends during the category planning and strategic sourcing stages, and identify suppliers that can help their organisations realize the benefits that come with the adoption of these technologies.
- 3D-printing will revolutionize manufacturing supply chains: Gartner expects enterprise 3D-printing shipments to grow at 64.1% CAGR through 2019, with increased adoption in manufacturing sectors including aerospace, automotive, energy, medical devices, and military-based industries. As 3D-printing technology gets cheaper and more accommodative in terms of materials that can be used, it can help buying organizations reduce cost and time to market. It also presents an opportunity for procurement teams to consolidate their supplier base by reducing the number of suppliers required for specialised and complex parts, thereby lowering the risk of supply chain disruption. Given its inherent advantages, it doesn’t come as a surprise to us that 3D-printing has recently been adopted by global OEMs ranging from Ford to Whirlpool to Airbus. We expect adoption to gather further strength in 2016, and therefore advise procurement teams at manufacturing organisations to evaluate this option.
- Forecast for enterprise IT will remain ‘Cloudy’: Cloud computing has established itself as a lighter, more agile, and arguably more secure alternative to the conventional on-premise enterprise IT infrastructure. IDC expects that by 2019, 46.5% of all IT infrastructure spending will be captured by the cloud, growing at 15.6% a year. The introduction of Amazon Web Services (AWS) marketplace has boosted cloud adoption, especially by smaller organisations. Moving IT infrastructure to cloud seems to be a logical next step for most organisations but the technology, speed, and scale of cloud migration will differentiate the winners from the laggards. IT procurement teams should, therefore, approach cloud adoption in an extremely planned and systematic fashion, and choose the right vendors that can help them migrate to the newer platforms.
- IoT will improve traceability of supply chains: Internet of Things (IoT) – this buzzword has been around for a while now, but most organisations still perceive it as a concept-level futuristic technology. However, IoT has already started making a significant difference to the way supply chains, especially logistics, are evolving. Usage of RFID tags has increased the visibility and traceability of supply chains immensely, leading to efficiency gains in terms of time, cost and safety of products. IoT adoption is not in the infancy, and logistics leaders such as DHL are offering next generation track and trace solutions with the help of IOT. Using these solutions helps them gain visibility into the real-time movement of goods, as well as monitor item-level condition information to ensure that goods arrive in time, at the right place, and intact. With the number of devices connected to the Internet expected to exceed 40 billion by 2020, procurement teams should ensure that they are collaborating with suppliers who can use IoT technology to drive supply chain efficiency
- Data security management will get more challenging: Instances of cyber-attacks, frauds and data breaches are on the rise. Therefore, organisations are implementing strong information security practices and systems, to minimize the reputational, regulatory and financial damage caused by such instances. However, in industries such as BFSI, Telecom, and Retail, it is critical for buying organisations to ensure that similar practices are also adopted by their suppliers. This becomes even more important when suppliers are given access to the personal, critical and confidential information. However, a recent survey from Marsh Insurance reveals that even as more than 40% of the U.K.’s large and medium sized businesses have experienced a cyber-attack in the past 12-months, 70% of them do not assess their suppliers and/or customers for cyber-risk. Procurement teams should map the flow of information in the supply chain and identify the suppliers who access the critical information. They should then try to ensure that these suppliers have adequate information security and business continuity and recovery measures in place to prevent incidences of data breach or cyber-attacks.
- Big Data will be used for making procurement decisions and for managing buyer-supplier relationships: Big data has transformed many businesses by helping drive consumer insight, production efficiency, marketing strategies and even employee benefit policies. The scale, scope and depth of data supply chains are generating today is accelerating, and organisations who can use this data to drive strategic decisions will emerge ahead of competition. A recent study by Accenture found that adoption of Big data has allowed the organisations to improve the time and effectiveness of their reaction to supply chain issues; increase supply chain efficiency by more than 10%; increase integration across the supply chain; and improve supplier relationships. Procurement teams can collect data from internal clients and suppliers to devise sourcing strategies that optimise the purchase and delivery of products or services. They can also use the data to perform spend analysis in order to map spend areas, and devise budget allocation plans aimed at reducing costs and increasing value. Buying organizations can also use big data to analyse the performance of smaller but critical suppliers, that may not have the budget or skills to undertake such an exercise in-house.
- BYOD will graduate from being a good-to-have to being a competitive advantage: Till a few years ago, ‘Bring Your Own Device’ (BYOD) was being considered as an option or an experiment by some organisations. However, BYOD is no more an experiment, as it has now gained acceptance in most organisations in some form or the other (like CYOD – choose your own device). The reasons are many – higher mobility and responsiveness, cost saving, more productivity, employee management, better collaboration, etc. There have been studies indicating that organisations might lose out on younger talent if they stick to rigid work structures. Therefore, BYOD is now migrating from being a good-to-have to being a source of competitive advantage for organizations. In such a scenario, buying organizations should evaluate BYOD solutions on the basis of their features, usability, affordability and architecture. Vendors, on the other hand, should be chosen basis their knowledge, technology road map and strategy, global and local reach, and channel strategy.
The above are some of the most critical technology trends that buying organisations should consider while making their sourcing strategies in 2016. We believe that procurement teams have a big role to play in this regard, and adoption of a structured approach can yield the desired result. Ideally, such an approach would entail the following, in the order indicated below:
- Identify which of these technologies are relevant and viable for your company / industry.
- Discuss the use cases with stakeholders such as heads of strategy, technology, and operations departments.
- Conduct a cost-benefit analyses of how adoption of new technology will impact important levers of your supply chain.
- Create a well-researched category management plan, that includes best practices from buying organizations that might have already adopted some of these technologies.
- Identify and on-board suppliers that can help meet the objectives of the category plan.
- Monitor and evaluate the technology and the supplier(s) on an on-going basis to minimize risk and improve performance.
Bottom-line, technology trends will keep evolving, and will require procurement teams to adopt a proactive approach to maintain and grow the competitive advantage of their organizations in their respective sectors.
Ankit Kohli is the Founder of Pure Research Private Limited, a procurement intelligence firm. Ankit and his team work with procurement teams worldwide to create secure and sustainable supply chains, based on actionable research on suppliers and categories.