Transparency is the Key to Overcoming Hurdles to Industry 4.0

Procurement’s journey to Industry 4.0 will be far from smooth, with numerous hurdles to leap. But transparency could hold the key to making this jump.

Download your copy of ‘Procurement 4.0 – The Digitalisation of Procurement’ on the Fraunhofer IML website.

In our previous article, we touched upon the challenges procurement will face in its Industry 4.0 journey. Perhaps one of the biggest challenges will come from the people side, and assurances of roles in the digital era.

However, as with many challenges and roadblocks, communication is crucial to overcoming resistance. And, according to BME, for Industry 4.0 and procurement, transparency and knowledge sharing could be the key the profession is looking for.

“The key to success is to provide companies with the knowledge about opportunities and benefits by Industry 4.0 and to underline these with appropriate use case.” says Prof. Dr Michael Henke,  Head of Enterprise Logistics at TU Dortmund University.

Lack of Transparency Major Hurdle

Within the ‘Management and People’ area, four major hurdles to procurement’s Industry 4.0 journey were highlighted. They were:

• A lack of transparency and knowledge;
• No active attempts to explore Industry 4.0;
• The shaping of cultural change and the involvement and qualification of staff are already a burden in the minds of those responsible;
• A lack of willingness to take risks or to invest.

These hurdles were seen as the key reason procurement was holding back on Industry 4.0. There were also concerns that if they weren’t tackled effectively and quickly, it could hinder procurement’s strategic journey too.

However, this is not necessarily a hurdle that organisations can easily overcome. The lack of clear definition of both Industry 4.0 and Procurement 4.0 present a major problem. This has a knock-on effect in terms of building a knowledge base for organisations, and then passing this information to employees.

And in turn, it also stops organisations being fully aware of the benefits and advantages available within Industry 4.0. Improving transparency in this respect, and gathering greater levels of information can aid procurement overcoming this hurdle.

Investment in Data

One other hurdle facing procurement can be linked to both management and technology. Big Data is frequently cited as one of the key aspects of procurement’s future, particularly in line with new technology. However, organisations as a whole are yet to fully establish how to collect data effectively, and then put it to good use.

Current systems used in procurement are capable of handling certain levels of data, but nowhere near those levels needed in Industry 4.0. Procurement need to invest in new systems, but overall investment has slowed in this area.

There are three possible reasons outlined by the respondents to the survey. Firstly, many companies lack the funds to actively invest in new systems. Secondly, organisations are already unsure about the return on investment on new systems, as cost-effectiveness has yet to be proved.

Finally, there is a lack of clarity and transparency in the procurement technology supply market. The array of systems available can be confusing, and leave organisations in the dark about which supplier will best meet their needs and requirements.

Prof.  Dr Henke believes that “If procurement wants to lift its role to another level in the future, it can be characterized by agility and speed. But procurement can only do this if he is able to interpret data from different systems correctly,”

Leading Not Following

Procurement definitely needs to be a driving force, otherwise it will be forced back into its old performing role.

Overcoming these hurdles is, of course, vital to procurement playing its part in Industry 4.0. The profession cannot afford to be a follower, or risk remaining a transactional function, with little strategic influence, and probably a short shelf-life.

Within the survey, the majority of respondents stated that procurement needed to be an active influencer, and provide innovation to the organisation.

However, at the same time, it was felt that procurement wouldn’t take the lead on these strategies. Responsibility, it would seem, would lie with a management team, but with procurement acting as an enabler.

The journey to Industry 4.0 will require procurement to make changes, but also step forward and grab its opportunity. How Procurement 4.0 will come into being will be the topic of the final article in this series.

The Association Supply Chain Management, Procurement and Logistics (BME), founded in 1954, is the leading professional association for supply chain managers, buyers and logisticians in Germany and Central Europe.

Fraunhofer IML, founded in 1981, is a global expert on all fields of internal and external logistics. The Institute also currently heads up the largest logistics research centre in Europe.

To download your copy of the report, visit the Fraunhofer IML website.

The procurement function must adapt and evolve to accommodate technology changes and be ready to embrace what we’re calling Procurement 4.0. The question is: Are We There Yet?

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