Digital Road to 2020: Why Business Networks Are More Than Technology

Written by Dr. Marcell Vollmer and Dr. Fabian Simoneit 

If we reflect on the volume of changes over the last couple decades, it becomes apparent that the desire to increase business and process efficiency is a primary driver. The evolution of new technology is simply an enabler, starting with a singular approach through innovations (such as smartphones, tablets, and enterprise resource planning (ERP) systems) and later elevated into new business models realized by the likes of Uber and Airbnb. Every one of these advancements have culminated into new ways of collaborating in a networked economy.

In the middle of this transformational tsunami, a magnitude of digital trends are impacting every industry. Business networks are one of these shifts, enabling companies to step beyond virtual solutions by delivering end-to-end integration. Innovations, including machine-to-machine (M2M) communication and artificial intelligence (AI), will continue to unite every area of the business and simplify operations.

Touching on the union of end-to-end integration scenarios with customer solutions, technology innovation is heading down a path where four major areas can impact future growth:

1.      Internet of Things (IoT): The connectivity and management of electronic devices to and from the Internet are growing exponentially. Gartner predicts that there will be more than 26 billion devices connected to the Internet by 2020. All these devices will generate a massive wave of data, ranging from standard maintenance to smart city management such as optimization of ecological and economic processes. For example, light systems can be linked to real-time traffic flow to optimize traffic routing throughout the city, reducing gridlock, pollution, and CO2 rates.

What this change means for procurement and the supply chain: All this will lead to higher automation of purchasing – initiated, monitored, and processed directly by machines. With a sensor, buyers can instantly connect to the Internet to order goods and services in a highly automated manner. A warehouse can order supply based on a contract signed by e-signature to initiate production planning. A laptop can request replacement based on the monitored performance data inside the machine.

2.      Blockchain: This general ledger features distributed data storage that is decentralized all over the world. A transaction that is executed with blockchain technology operates on a peer-to-peer network consisting of participating computers (referred as nodes in the blockchain). After validation by each node, the transaction is added to the blockchain ledger, which is transparent and secure. Fintechs using blockchain have, by far, realized the highest compound annual growth rate over the past years.

What this change means for procurement and the supply chain: Blockchain has the potential to disrupt transactional processes as we know them today. Full transparency of the supply chain of goods and services ordered and secure monitoring of payments can transform purchase order and invoice processing, as well as accounts payable and payment processes, in the future. More important, blockchain’s impact may extend far beyond procurement and supply chain, anywhere all transactions are transparent, secure, and fully digital. Just imagine: What will be the role of banks in the future if payments are processed without them?

3.      Virtual and augmented reality: There are a variety of use cases of virtual reality (VR) and augmented reality (AR) happening today. An IoT device can indicate when maintenance is needed and automate the ordering of spare parts and services. AR information is displayed to a technician – similar to Google Glass – during a service call, making maintenance as easy and safe as possible. On a more general level, VR is used to view virtually everything before it even exists, such as a new building before construction, to assess usability and make sound investment decisions. Other use cases include training sessions and meeting attendance.

What this change means for procurement and the supply chain: Considering that a significant portion of service activities, on average, comprises over 20% of a company’s spend, AR will change the skills needed and, in combination with IoT, recalibrate processes for ordering, contracting, and scheduling. It won’t be long until new ways of cross-border collaboration and sourcing emerge.

4.      Artificial intelligence (AI): Intelligence exhibited by machines to simulate informed behavior is defining AI. Directly correlated to machine learning and Big Data analysis, the future of decision making will be based on prescriptive guidance delivered through processed information. AI will also use algorithms to continuously improve itself.

What this change means for procurement and the supply chain: Systems can learn typical behavior and needs for goods and services. For example, if a critical mass of employees from a particular department is ordering laptops with large screens and high CPU power, equipment processing can be automated so that it can anticipate the needs of a new hire who is starting in two weeks. Just envision the response time for direct materials: If the market is trending towards a higher price and a large order is typically done within the next 4–6 weeks, the system can use real-time data to process an order early on to benefit from the lower price point.

All of these technologies represent incredible growth in automation and productivity. People and independent systems can make more educated decisions based on patterns revealed through Big Data and further enhanced by AI. IoT technology can then initiate processes that may be performed with AR devices from any place in the world. And this is only the start: Combining these digital trends can leverage data in ways that are intelligent and automated – even exceeding our wildest dreams. 

About the authors

Dr. Marcell Vollmer, Chief Digital Officer, SAP Ariba

Today I help customers to digitalize their supply chain. Prior to my current role I was Chief Operating Officer for SAP Ariba to help SAP Ariba to setup a startup within the larger SAP Group. Before that I was Chief Procurement Officer at SAP SE, where I have transformed the global procurement organization towards a strategic, end-to-end driven organization, which runs SAP Ariba, SAP Fieldglass and Concur in the Cloud. I have more than 20 years’ experience in working in international companies, starting with DHL, where I delivered multiple supply chain optimization projects.

Dr. Fabian Simoneit, Senior Director, SAP SE

I manage with customer the transformation from complex integrations to a run simple approach in the supply chain area. My engagement focus is to drive the customers and organizations from innovations to customer solutions. I was working in different roles in large enterprises, always focused on customer centricity (e.g. driving large customer relationship scenarios). My experience and my fields of research / interest are beside Collaborative Supply Chain solutions in the area of Internet of Things, Blockchain and Fintech.