Smart procurement in the supply chain. New technologies and application opportunities.

In recent decades, competitive conditions for businesses have evolved with economic transformations occurring both locally and globally. However, the need to adapt has remained a constant factor flowing from both competitors and customers. Factors influencing the company's environment have been transformed because of new purchasing preferences, accelerating globalization, ever-shorter product life cycles and technological change. In recent years, there has even been talk of revolving in a VUCA environment - an environment under Volatility, Uncertainty, Complexity and Ambiguity (VUCA). Due to volatility, businesses feel a progressive difficulty in correctly predicting upcoming events, as well as their timing and pace, leading to a sense of uncertainty and anxiety. We are talking about so-called Black Swans of the coronavirus type, as well as phenomena that are already in place, yet still make it difficult to observe effectively: population migrations, global conflicts, or, finally, the increasing digitization of businesses. The changes being observed are faster than ever before. What's more, their scope is global, affecting business, the economy, but also public sentiment. Complexity, on the other hand, is the fusion of a multitude of phenomena and information. Big data, or large, diverse, and variable databases, is access to knowledge, but which people and businesses can neither process nor assimilate effectively. Ambiguity, on the other hand, indicates that trying to explain the environment with reason and logic alone is not enough, while relying on prior experience is not always reflected in effective planning.

Market conditions of ever-increasing competition have forced changes in the strategic thinking of modern organizations. Today, strategies are increasingly focused on core activities and business development. To this end, modern procurement departments have been creating separate purchasing divisions focusing exclusively on one of the two activities mentioned above. One of the effects of the strategic development of procurement processes is the decision to outsource activities that are not seen as core to the business. However, the same approach has increased the awareness of company managements of the growing influence of the procurement department on business development and security, as well as the inherent contribution of procurement to the development strategy of the entire enterprise.

Strategic capture is defined as a company's effort to create long-term goals, plans and decisions that consider the management of the supplier base and purchasing functions. It is also the making of decisions at the management level that affect activities at the tactical and operational levels, making the procurement department the focal point for the flow of information and of manufacturing and non-manufacturing goods in a supply chain defined as a set of activities and functions with the enterprise beginning with the ordering, receiving and accounting of base raw materials, through the manufacture of products and ending with delivery to the customer . The goal of Supply Chain Management (SCM) for a procurement company is to achieve a sustainable competitive advantage over other players in the market by reducing costs, lead times and increasing the quality, productivity, and efficiency of component production through Collaborative Continuous Improvement (CCI) of components and their manufacturing processes. The pandemic has also highlighted the absolute necessity of developed Supply Chain Risk Management (SCRM) and having an effective Business Contingency Plan (BCP) that is as complete as possible in the event of a disaster that threatens to keep production flowing.

Digitalization is a move away from paper and towards the cloud, its real-time information sharing, the ability to integrate all elements of a project instantly, it's simpler access to data, but also sharing, processing, copying. Procurement 4.0 is not only a business transformation. In my opinion, it is primarily a change in the role of the procurement department in the company from a transactional function (creating orders, negotiating, and controlling on-time delivery) to the role of a strategic partner in the organization. My experience as a manager of the procurement department and as an external consultant shows that direct procurement is almost entirely managed by purchasing departments, while indirect procurement even in leading companies is only partially centralized, while most often it is dispersed throughout the organization.

The structure of spending is unstructured, divided between branches, countries, business units and categories, making it difficult to identify, standardize and control, but also the potential for scalable improvement. For the past ten years, indirect spending has been growing globally at about 7% per year. New technologies make it possible not only to understand the value that indirect procurement brings with it, but also the value it generates. Digitization of procurement makes it possible to increase the centralization of procurement, the management of corporate purchases by a single department common to the organization. With the right level of control, other departments could also procure after adequate negotiation of commercial terms and conditions and subsequent acceptance of the offer and supplier by the procurement department, while remaining in line with company policies.

Agility is now often spoken of as an indispensable attribute of any modern procurement department. To meet the expectations of the modern enterprise, buyers need to be involved with suppliers as early as possible, as early as the conceptual stage, at the time of planning, and take an active role in the development of product prototypes - both production and non-production. It is believed that in the future there will be a significant increase in the importance of the procurement department (estimated at 55%), at the expense of the R&D departments. This may be partly due to the integration of these two positions, but I think it will be much more related to the transfer of these job responsibilities to suppliers, as the innovations proposed before suppliers from the current area of products and intermediates, will be supplemented by process and per-product innovations. An analysis of the structures of companies using innovations from suppliers shows that these are large companies with more than 250 employees. This means that small and medium-sized enterprises are not yet aware of the opportunities behind sourcing innovations from suppliers, but also testifies to the great potential that still lies in this area.

Against the background of the European Union countries, Poland comes out as a moderate innovator, with values in the middle of the chart (European Innovation Scoreboard 2023) shown in Figure No.1 on top of this article. Focusing on small and medium-sized enterprises, however, we see the unexploited potential, which has not changed since I’ve been working on this paper in 2021 and based on 2020 data. Poland, according to this criterion, is ranked fourth from the bottom (Innovation in small and medium-sized enterprises, SMEs). Expanded cooperation with suppliers, which also includes sourcing and implementing innovations from them, could certainly improve these results.

This article is a translated fragment of my post-graduate Paper: " Procurement digitalization in business. Concept, Problems and Opportunities for Improvement" submitted in 2021 at Warsaw School of Economics (SGH).

References:

M.E. Porter, Competitive advantage: creating and sustaining superior performance. First free press ed. 1985, New York

J. Galbreath Twenty-first century management rules: the management of relationships as intangible asset Management Decision?40(2)

A. Pressey, N. Tzokas, H. Winklhofer, Strategic purchasing and the evaluation of “problem” key supply relationships: what do key suppliers need to know? Journal of Business & Industrial Marketing, ISSN:?0885-8624, August 2007

J. Kucharczyk-Capiga, Cz?owiek w ?wiecie VUCA Magazyn Coaching 06/17

N.N. Taleb, The Black Swan: The Impact of the Highly Improbable – Polish edition: Wyd. Zysk i S-ka, Poznań 2020

L.D. Xu, Information architecture for supply chain quality management International Journal of Production Research 2010

H. Noori, Collaborative Continuous Improvement Programs in Supply Chain Problems and Perspectives in Management, 2/2004

E. Ma?yszek, Wybrane Aspekty Ryzyka w Zarz?dzaniu ?ańcuchem Dostaw W: R. Knosala (red.) Innowacje w zarz?dzaniu i in?ynierii produkcji PTZP, Opole 2015,? s. 914-925; E. Kulińska Zarz?dzanie ryzykiem w ?ańcuchu dostaw Logistyka 1/2007

R. van der Meulen, Gartner Business Continuity Survey Shows Just 12 Percent of Organizations Are Highly Prepared for Coronavirus Gartner Newsroom, March 2020

T. Twardzik, Zwinne Zakupy 4.0. Automatyzacja I digitalizacja w procesie zakupowym, ?Finanse i Controling”, 65/2019 [accessed: 4 August 2021]

M. Antonowicz, T. Gonsior, Rola innowacji w procesie zakupowym przedsi?biorstw, ?Handel Wewn?trzny” 2018; 4(375)

European Innovation Scoreboard (2023) https://ec.europa.eu/commission/presscorner/detail/en/QAN DA_20_1150 [accessed: 7 March 2024]