Digital Economy - How Hyperconnectivity Will Reshape the World of Procurement and Help Manage Your Indirect Spend
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The document discusses how digital transformation and hyperconnectivity will impact procurement and indirect spending in manufacturing, highlighting that by 2018, a significant portion of manufacturers will adopt advanced technologies and strategies like commerce networks and micrologistics. It emphasizes the importance of efficiency, risk management, and leveraging eprocurement tools to adapt to changing market demands and supplier dynamics. Ultimately, sustainable supply practices and efficient processes are increasingly critical in maintaining competitive advantage in a rapidly evolving digital economy.
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Digital Economy - How Hyperconnectivity Will Reshape the World of Procurement and Help Manage Your Indirect Spend
- 1. Digital Economy - How Hyperconnectivity Will Reshape the World of Procurement and Help Manage Your Indirect Spend Simon Ellis, IDC Manufacturing Insights / March 2016 Public
- 2. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 10Public Agenda Digital Transformation Implications for Procurement Closing Thoughts
- 3. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 11Public The Productivity Imperative Source: US Government Data Platform 1 – Mainframe to Client/Server Platform 2 – Client/Server to Internet
- 5. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 13Public Digital Transformation is the approach by which enterprises drive changes in their business models and ecosystems by leveraging digital competencies. By 2018, 1/3rd of leaders in each industry will be disrupted by 3rd platform competitors Digital transformation through the 3rd Platform 13
- 6. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 14Public Digital transformation examples in manufacturing 14 Smart Manufacturing • Production or asset optimization • Energy management • Safe workforce Extended Supply Chain • Supply Chain integrated with design, manufacturing and service • Cloud-based business and procurement networks • C2 Centricity • Sustainability/Resource Scarcity Connected Products • Vehicles and industrial machinery • Remote operations and content/service delivery • Product as a Service
- 7. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 15Public Most manufacturers aspire to better supply chain performance 15 Top 3 Business Priorities of Manufacturers Top 3 Challenges of Manufacturers Product innovation Improved supply chain performance Better organizational excellence Accelerate new-product time to market/success rate Gain greater control of new-product development Manage increasing complexity of new products Source: IDC’s 2015 Product Innovation Survey
- 8. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 16Public IDC sees data generation from any source, both internal to the manufacturer and external, comprehensive and fast analysis, and then ubiquitous consumption — initially with on-premise access as significant, but declining over time in favor of cloud Data Internet of Things Social ERP + 202020102005 Volume – Quantity, Moore’s Law + Velocity – Speed (both in and out) Variety – Structured, Unstructured, Uncertain Value – Relative, Specific, Case-by-Case Analytics ‘gap’ Today Technological underpinning ERP IoT (sensors) Social (both internal and external) Data Collection and Analytics Cloud Mobile On-Premise 16
- 9. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 17Public Managed Digital Transformer Opportunistic Digital Explorer Ad Hoc Digital Resister Repeatable Digital Player Optimized Digital Disrupter 65% of Organizations are “Digital Explorers” or “Digital Players” 14% 32% 33% 14% 8% Digital Resister Digital Explorer Digital Player Digital Transformer Digital Disrupter Manufacturer maturity – US 17 Source: IDC, Digital Transformation Maturity Model Benchmark, 2015; n= 317 IT and LOB Executives, March, 2015 Though most organizations are in the early stages of their Digital Transformation Journey….. They’re moving quickly!
- 11. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 19Public Procurement priorities Unsurprisingly, cost reductions sit atop the CPO priority list (74%; Deloitte 2016 CPO Study) 70% of procurement organizations are using self-service portals (43% in 2014); 45% are using cloud (26% in 2014); 2016 Deloitte CPO Study Procurement professionals are increasingly worried about supplier risk (supplier insolvency, WWW and resource scarcity) and business resiliency; IDC discussions with manufacturers Skills gaps suggest a broader role for technology into the future In a recent KPMG study, only 8% of manufacturing procurement organizations considered themselves to be ‘excellent’ in terms of technology adoption/capability
- 12. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 20Public20 1 2 3 4 5 6 7 8 9 10 By the end of 2016, the majority of all manufacturers will be actively employing commerce networks in their supply chains to facilitate either demand, supply, or the development of new products By the end of 2018, 25% of manufacturers will have implemented a micrologistics strategy within part or all of their business to support a more distributed inventory management strategy By 2018, 75% of manufacturers are coordinating enterprise wide planning activities under the umbrella of rapid integrated business planning. By 2019, 50% of manufacturers will have modernized their logistics network to leverage 3D printing, robotics, and cognitive computing to support innovative postponement strategies By the end of 2019, enterprise wide improvements in resiliency and visibility will have rendered short-term forecasting moot for 50% of all consumer products manufacturers and 25% of all others By the end of 2016, one third of all manufacturers are actively integrating their 'traditional' supply chain processes with product design, manufacturing and service By the end of 2017, the need for visibility, scalability, and flexibility across the value chain will drive 60% of manufactures to invest in cloud based WMS and TMS solutions aligned to their trade partner networks By 2018, 40% of manufacturers will be investing in robotics and autonomous guided vehicles, and associated systems, within their warehousing operations to drive automation into their fulfillment processes By 2018, proliferation of advanced, purpose built, analytic applications aligned to the IoT will result in 15% productivity improvements for manufacturing supply chains By 2020, 50% of the operational jobs in the supply chain have evolved into ‘knowledge’ roles required to support new technologies like cognitive computing and modern robotics ORGANIZATIONALIMPACT TIME (MONTHS) TO MAINSTREAM Asingledepartment orabusinessunit Multiple departments orbusinessunitsCompanywide 0-12 12-24 24+ Supply Chain IoT Micro-Logistics Networks 1 2 3 6 87 9 10 5 Commerce Networks Resiliency &Visibility Modern Postponement Talent Cloud WMS/TMS Rapid Integrated Business Planning Robotics 4 Broadening Supply Chain IDC Manufacturing Insights supply chain predictions for 2016 and beyond
- 13. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 21Public21 1 2 3 4 5 6 7 8 9 10 By the end of 2016, the majority of all manufacturers will be actively employing commerce networks in their supply chains to facilitate either demand, supply, or the development of new products By the end of 2018, 25% of manufacturers will have implemented a micrologistics strategy within part or all of their business to support a more distributed inventory management strategy By 2018, 75% of manufacturers are coordinating enterprise wide planning activities under the umbrella of rapid integrated business planning. By 2019, 50% of manufacturers will have modernized their logistics network to leverage 3D printing, robotics, and cognitive computing to support innovative postponement strategies By the end of 2019, enterprise wide improvements in resiliency and visibility will have rendered short-term forecasting moot for 50% of all consumer products manufacturers and 25% of all others By the end of 2016, one third of all manufacturers are actively integrating their 'traditional' supply chain processes with product design, manufacturing and service By the end of 2017, the need for visibility, scalability, and flexibility across the value chain will drive 60% of manufactures to invest in cloud based WMS and TMS solutions aligned to their trade partner networks By 2018, 40% of manufacturers will be investing in robotics and autonomous guided vehicles, and associated systems, within their warehousing operations to drive automation into their fulfillment processes By 2018, proliferation of advanced, purpose built, analytic applications aligned to the IoT will result in 15% productivity improvements for manufacturing supply chains By 2020, 50% of the operational jobs in the supply chain have evolved into ‘knowledge’ roles required to support new technologies like cognitive computing and modern robotics ORGANIZATIONALIMPACT TIME (MONTHS) TO MAINSTREAM Asingledepartment orabusinessunit Multiple departments orbusinessunitsCompanywide 0-12 12-24 24+ Supply Chain IoT Micro-Logistics Networks 1 2 3 6 87 9 10 5 Commerce Networks Resiliency &Visibility Modern Postponement Talent Cloud WMS/TMS Rapid Integrated Business Planning Robotics 4 Broadening Supply Chain IDC Manufacturing Insights supply chain predictions for 2016 and beyond By the end of 2016, the majority of all manufacturers will be actively employing commerce networks in their supply chains to facilitate either demand, supply, or the development of new products 1
- 14. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 22Public Business/Commerce Networks MANAGE Partners BUY SELL Consumers Customers Legacy applications Packaged applications Databases File systems “Point-to-point relationships are too slow; if I need to connect to a new supplier, I want a network where they are already a participant” Global Heavy Machinery Executive “Commerce networks have allowed us to recover from supplier failures far more quickly than in a traditional supply model” Global High Tech Executive “Searching for and qualifying a new indirect supplier takes minutes on the network when it used to take weeks” Global CPG Company Cloud-based extended supply chain business networks Traditional SCM technology investments are projected to grow at 5% per year through 2020; Cloud-based deployments at almost 20% IDC expects that by the end of 2016, 80% of manufacturers will be actively employing commerce networks in their supply chains to facilitate demand, supply, and the development of new products Global reach, global supply Speed is the currency of the modern supply chain 22
- 15. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 23Public Collaborative trading adoption correlates to ROI measurement 0% 20% 40% 60% 80% 100% No process automation (Fax, Phone, e-mail etc.) Unilateral communication (your company is automated and your trading partners are not) Bilateral communication (transactional relationship based on EDI) Bilateral communication (transactional relationship based on web-EDI) Collaborative, shared and synchronous execution of processes (cloud-based collaborative tools, social technologies etc. - not asynchronous or… Total Driven by Higher ROI 23 Source: IDC Manufacturing Insights and EDIFACE
- 16. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 24Public Using technology to drive efficiency and mitigate risk eProcurement and catalog management help manage non-critical items eSourcing and Category Management are key tools for leverage items Strategic Sourcing Tools are appropriate for effectively managing strategic items Supplier Management is a focal point for bottleneck items 24 Source: Kraljic’s Portfolio Matrix Strategic Sourcing Tools eProcurement Catalog Management Supplier Management eSourcing Category Management
- 17. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 25Public B2B commerce 25 35.9% 34.0% 37.8% 15.7% 14.9% 16.5% 10.9% 10.9% 10.9% 13.9% 13.2% 14… 9.0% 9.3% 8.6% 14.7% 17.7% 11.7% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Total Manufacturing Discrete Manufacturing Process Manufacturing We do not have this solution, nor are we evaluating it. We have a home grown system We plan to upgrade or enhance this solution We plan to purchase this solution We will be researching or evaluating this solution We do not plan any additional investment this year beyond maintenance Source: IDC’s Vertical IT and Communications Survey, 2015 (Total Manufacturing n-602, Discrete n-275, Process n-327) QC4X1_19. B2B Commerce - In 2015 which statement best describes your organization's investment strategy for each of the following solution areas?
- 18. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 26Public • Political/Social instability • Conflict Minerals • Natural Disasters/ Weather • Workforce (work stoppages, fair wage) • Energy costs • Counterfeit/Gray Market • Product Quality, Safety • Global Trade (regulation, trading rules) • Resource scarcity External Forces • Just-in-Time • Forecast-centric • Globally Distributed Supply Networks • Long lead-times • Outsourcing (blend of owned and outsourced supply points) • From LEAN to BRITTLE • Supply consolidation/ rationalization • Cost obsessed Internal Practices Procurement Risk Procurement risk and business resiliency – why now?
- 19. Closing Thoughts
- 20. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 28Public Closing thoughts While it’s tempting to extract every last drop of cost from the procurement process, indirect (and direct) materials risk mitigation (supply scarcity) and sustainable supply have become an equally critical focus area Use tools like eProcurement and catalog management where possible to drive efficiencies through automation – especially in areas of low strategic value like many areas of indirect spend B2B networks offer the ability to match the speed of your business, whilst driving efficiency, visibility and agility
- 21. Thank you Contact information: Simon Ellis Program VP IDC Manufacturing Insights [email protected]
- 22. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 30Public Please complete session survey Locate Session Click Surveys Button Select Breakout Survey Rate Session