Procurement 4.0 and the Fourth Industrial Revolution

The Opportunities and Challenges of a Digital World

Bernardo Nicoletti

• Publisher: Palgrave Macmillan
• Year: 2020
• Print ISBN: 9783030359782
• eBook ISBN: 9783030359799
• Topic: Business
• Subtopic: Management
• Index: Business

We are living in the middle of a Fourth Industrial Revolution, with new technology leading to dramatic shifts in everything from manufacturing to supply chain logistics. In a lively, developing field of academic, procurement is often neglected. Despite this, procurement plays a vital role, connecting the organization with its ecosystem. At a time of change and economic crisis, a new business model is called for, which this book aims to define.

Based on the applications of Industry 4.0 concepts to procurement, this book describes Procurement 4.0 as a method and a set of tools, helping businesses to improve the value of their products, reduce waste, become more flexible, and address the business needs of the future. It will appeal to academics in the area, as well as practitioners.

© The Author(s) 2020

B. NicolettiProcurement 4.0 and the Fourth Industrial Revolutionhttps://doi.org/10.1007/978-3-030-35979-9_1

Begin Abstract

1. Introduction

Bernardo Nicoletti^{1, 2}  

(1)

Temple University Rome Campus, Rome, Italy

(2)

Università di Tor Vergata, Rome, Italy

 

 

Bernardo Nicoletti

Email: [email protected]

End Abstract

The global recession has hit hard in many areas and all major functions of organizations have been impacted. Figure 1.1 summarizes some of the challenges organizations face in light of this situation. The importance of developing and managing innovative strategies in the field of procurement is clear. From a historical perspective, procurement has undergone huge transitions, especially in the last decades, in the sense that organizations have had to deal with pressures relating to cutting costs and increasing profits.¹

Fig. 1.1

Impact of the transformation on procurement

It is essential to innovate through process improvement and automation management. To analyze how this can be done, a possible entry point is to scrutinize the implementation of innovations. This book presents such a new approach, calling it ‘procurement 4.0.’ This approach represents a set of solutions that can support managers and buyers at all stages of the procurement process, from strategic procurement to pre-negotiation (the search for new partners), up to the monitoring of expenditure and giving better estimates of future needs. These solutions are consistent with the approach of industry 4.0 initiative.

Procurement 4.0 can be seen as a component of the initiative industry 4.0.² But it is much more than this, too. It also offers a new and original vision of procurement—one that is more agile, integrated, and responsive to the customers’ and the organization’s value-adding.

In terms of processes, this book explores problems and solutions in the definition of how procurement can add value for customers, inside and outside of an organization; and how it can help manage relationships, improve processes, and better management of resources, both internal and with partners.³

One of the major objectives of the procurement 4.0 initiative is to implement agile procurement. Agility is nowadays a much-used term in the management of organizations.⁴ The topic is especially relevant because it is an interesting development: the concept of agile management derived from ‘lean management,’ which became a business mantra in recent years. The need to be lean is not—in and of itself—the goal that organizations must pursue; rather, it is a means to becoming more agile and flexible. In other words, agility is the objective for which leanness is the means.

This vital need for agility is a consequence of the turbulence of the current environment. An agile enterprise can respond quickly to changes in the economy, markets, and technology.

In order to be agile, organizations must be able to respond quickly to changes by adapting their configuration. Better organizational agility can be achieved by maintaining and adapting products and services to meet the needs of customers. This can be done by adjusting the organization and making the best use of available resources within the ecosystem in which the organization operates. Thanks to its agility, an organization can quickly adapt to market changes and the evolving environment in effective, efficient, and economical ways.

In a scenario of this type, it is important that the procurement function fits the organizational philosophy. To achieve this, there are essentially two approaches that should be followed simultaneously. One is to improve processes by adopting a lean approach, while at the same time management should be automated, to implement effective, efficient, and economical solutions. Procurement 4.0 is an extension of these concepts. It is based on the key principles of complex adaptive systems and complexity science. This approach creates the basis for success. One can say that the agility of procurement in an organization result of its intelligence.

Procurement 4.0 is geared to supporting the digital transformation of an organization. It aims to turn such responsiveness and change into a habit of an organization’s life. It intends to reduce or eliminate the organizational trauma that paralyzes many organizations when they try to adapt to new markets, environments, and solutions. Change is perpetual: procurement 4.0 must be able to easily adapt and take advantage of emerging opportunities. Moreover, procurement 4.0 is an integral and essential component of a larger system within a given organization. Its activities produce and support digital processing chain effects both within procurement and in the wider organization.

This book delves deep into these methodologies and techniques, treating the field of procurement 4.0 as an agile business model and involving all its components.⁵

The transformation of organizations must cover key success factors, which are summarized in this book as the four Ps (Fig. 1.2):

• Processes
• Platforms
• Persons
• Partnerships.

Fig. 1.2

Four Ps

The central chapters in this book follow the sequence of these four Ps. The final part is a discussion of the future of procurement 4.0.

The core thesis that this book promulgates is that the function, discipline, and activity of procurement 4.0 can be a critical and strategic interface within operations management, supporting organizational efficiency, effectiveness, and economics as part of a long-term perspective. This is demonstrated through a number of references to real organizations in different sectors.

Footnotes

1

Uusitalo, J. (2019). Strategic Procurement in the Face of Uncertainty. Master’s Thesis. University of Jyväskylä, Finland.

 

2

Lasi, H., Fettke, P., Kemper, H. G., Feld, T., & Hoffmann, M. (2014). Industry 4.0. Business & information systems engineering, 6(4), 239–242.

 

3

In this book, the terms ‘supplier’ and ‘vendor’ are not used. These are replaced with ‘partners,’ because if the supply fails both the client and the supplier are damaged.

 

4

Nicoletti, B. (2017), Agile Procurement. Volume II: Designing and Implementing a Digital Transformation, Springer International Publishing, London, UK, ISBN 978-3-319-61085-6.

 

5

Nicoletti, B. (2017), Agile Procurement. Volume II: Designing and Implementing a Digital Transformation, Springer International Publishing, London, UK, ISBN 978-3-319-61085-6.

Nicoletti, B. (2017), Agile Procurement. Volume I: Adding Value with Lean Processes, Springer International Publishing, London, UK. ISBN 978-3-319-61082-5.

 

© The Author(s) 2020

B. NicolettiProcurement 4.0 and the Fourth Industrial Revolutionhttps://doi.org/10.1007/978-3-030-35979-9_2

Begin Abstract

2. Industry 4.0 and Procurement 4.0

Bernardo Nicoletti^{1, 2}

(1)

Temple University Rome Campus, Rome, Italy

(2)

Università di Tor Vergata, Rome, Italy

Bernardo Nicoletti

Email: [email protected]

Keywords

Industry 4.0Procurement 4.0Technology Acceptance ModelDigital transformation

End Abstract

2.1 Introduction

A saying attributed to Darwin argues that “[it] is not the strongest of the species that survives nor the most intelligent, but one best responsive to change.”¹ This also applies to organizations. They need to renew themselves, otherwise they will be marginalized or bypassed.

This chapter discusses the increasing application of innovation in procurement. Such renewal can be labeled ‘procurement 4.0.’

Industry 4.0 is the convergence of information and communication technology (ICT) and automation of machinery and infrastructure. The term refers to a Fourth Industrial Revolution. This is distinguished by advanced digitization within organizations, based on the integration of ICT solutions with operational technologies in the field of intelligent objects (machines and products).² This enables and transforms industrial production systems and services independently to control their production processes. In addition to the focus on digitization and automation, industry 4.0 provides support for...

Table of contents

• Cover
• Front Matter
• 1. Introduction
• 2. Industry 4.0 and Procurement 4.0
• 3. Processes in Procurement 4.0
• 4. Platforms for Procurement 4.0
• 5. Persons in Procurement 4.0
• 6. Partnerships in Procurement 4.0
• 7. Future of Procurement 4.0
• 8. Conclusions
• Back Matter