Digital Transformation in Purchasing

Head buy­ers are under pres­su­re. They’re sup­po­sed to imple­ment digi­ta­li­za­ti­on as quick­ly as pos­si­ble in order to achie­ve the effi­ci­en­cy gains hoped for. But what does a suc­cess­ful digi­tal trans­for­ma­ti­on look like? h&z hel­ped a Ger­man mecha­ni­cal engi­nee­ring com­pa­ny through the pro­cess.

The Super­vi­so­ry Board was con­vin­ced that auto­ma­ting pro­ces­ses could signi­fi­cant­ly redu­ce ope­ra­tio­nal activi­ties. The CFO had also thought for some time that the Purcha­sing depart­ment had too many peop­le to hand­le the ope­ra­tio­nal pro­ces­ses. Other depart­ments regu­lar­ly com­p­lai­ned about labo­rious and incon­ve­ni­ent pro­ce­du­res. And the CPO (Chief Purcha­sing Offi­cer) heard restrai­ned remarks from employees again and again: the IT tools they had to work with were archaic.

Purchasing: Making business processes more efficient

It had long been clear to the CPO that digi­ta­li­za­ti­on would chan­ge his life and that of his team. But what was still in the dark was how to mana­ge this in con­cre­te terms, how quick­ly the right tech­no­lo­gy would be avail­ab­le, and which tech­no­lo­gy would fit at all. All custo­mer and busi­ness pro­ces­ses were sup­po­sed to beco­me fas­ter, more effi­ci­ent, and more con­ve­ni­ent. Sup­plier rela­ti­ons­hips would have to be for­med dif­fer­ent­ly, and ulti­mate­ly the who­le orga­ni­za­ti­on would need to chan­ge. But how exact­ly?

Digitalization: From skeptic to committed comrade-in-arms

When we at h&z came in, the CPO had “his back against the wall,” to put it dra­ma­ti­cal­ly – a sta­te in which one rare­ly has good ide­as and solu­ti­ons readi­ly avail­ab­le. In such situa­ti­ons we rely on the crea­ti­ve methods we’ve deve­lo­ped our­sel­ves: We use “inspi­ra­ti­on work­shops” some­ti­mes befo­re the pre­cise ana­ly­sis of the respec­tive orga­ni­za­ti­on and its weak points. They clear the mind and allow one to get a first per­spec­tive on:

• What might work?
• What works now, what later?
• What pri­va­te expe­ri­en­ces have tho­se invol­ved alre­ady had with the effects of digi­ta­li­za­ti­on?
• What chan­ges are we expec­ting in the near or distant future?

It was the same with this cli­ent. Some of the work­shop par­ti­ci­pants took the oppor­tu­ni­ty to make their deep skep­ti­cism regar­ding pos­si­ble chan­ges clear. Cle­ver­ly mode­ra­ted, this was even hel­pful for the fur­t­her pro­cess becau­se we were able to see the sore points. And from expe­ri­ence, we know that the most honest skep­tics often end up being the most com­mit­ted com­ra­des-in-arms.

Digital processes: Success brings employees on board

The­re fol­lo­wed a pre­cise scan of the ent­i­re orga­ni­za­ti­on and collec­tion of weak points and ide­as. It took two mon­ths of exten­si­ve inter­views and data assess­ment until the result was ready: a matrix of pro­fes­sio­nal, orga­ni­za­tio­nal, and tech­ni­cal “pain-and-gain points,” which imme­dia­te­ly inclu­ded the expec­ted resis­tan­ce to the chan­ge pro­cess.

Chan­ge pro­ces­ses, of cour­se, give rise to fear:

• Fear of being let go
• Fear of losing power
• Fear of being over­whel­med.

That’s why it’s often bet­ter first to esta­blish a preli­mi­na­ry visi­on of the direc­tion to be taken and then very quick­ly intro­du­ce the first small sup­porting func­tio­na­li­ties of a purcha­sing solu­ti­on with imme­dia­te­ly visi­ble posi­ti­ve effects. This allows the initi­al basic resis­tan­ce among tho­se con­cer­ned to be bro­ken down.

That’s how it was here: As soon as the first func­tio­na­li­ties were avail­ab­le, inte­rest was arou­sed. Indi­vi­du­als saw the oppor­tu­ni­ty to deve­lop fur­t­her and felt sup­por­ted on this jour­ney into the future, which is still very uncer­tain in parts.

Straight to the goal with the right digital solutions

Much of what is being “hyped” today is not yet tech­ni­cal­ly pos­si­ble. Other things that one might dis­miss as sci­ence fic­tion may arri­ve fas­ter than you think. The soft­ware offe­ring is high­ly com­plex and unclear, too. At h&z, we can right­ful­ly claim that we have a good over­view of the­se topics. As con­sul­tants in the most varied indus­tries, we’re con­stant­ly occu­pied with the topic and con­ti­nu­al­ly obser­ving the latest IT solu­ti­ons. To sum up, we can con­fi­dent­ly say:

• We know whe­re things are hea­ded.
• We know which soft­ware solu­ti­ons fit.
• We know how to approach employees so they accept the­se solu­ti­ons well.
• We know how to launch the ship.

Robotic process automation shortens the ordering process

The dif­fi­cul­ty at the com­pa­ny in ques­ti­on was that the respec­tive sys­tems weren’t com­pa­ti­ble with one ano­t­her. With h&z’s mar­ket know­ledge, it was pos­si­ble to quick­ly iden­ti­fy sui­ta­ble solu­ti­on pro­vi­ders from among the 300 or so sup­pliers of purcha­sing soft­ware for a tem­pora­ry solu­ti­on – at least until a long-term solu­ti­on had been deve­lo­ped. After the sup­plier selec­tion, the pro­cess was able to be repla­ced quick­ly by “robotic pro­cess auto­ma­ti­on” and the orde­ring pro­cess was cut from two weeks to two days.

At the same time, pro­ject manage­ment had to be acce­le­ra­ted, e.g.

• awar­ding ten­ders,
• for­mu­la­ting requi­re­ments,
• eva­lua­ting sup­pliers in the RFQ pro­cess, and
• con­duc­ting the final nego­tia­ti­on and selec­tion.

Sta­te-of-the-art soft­ware can great­ly sim­pli­fy and acce­le­ra­te the coope­ra­ti­on bet­ween Purcha­sing, Deve­lop­ment, Finan­ce, Pro­duc­tion and other func­tions. This worked in the pre­sent case as well.

Digital transformation: New roles and functions for buyers

After the digi­tiza­ti­on of the first pro­cess steps, the CPO was alre­ady able to free his team from rou­ti­ne non-value-adding tasks and make them avail­ab­le for more important and much more inte­res­ting duties:

• Deve­lo­ping sup­pliers
• Mana­ging risks
• Nego­tia­ting bet­ter
• Making inno­va­tions usable and brin­ging them into the com­pa­ny
• Secu­ring and expan­ding Purchasing’s seat at the deci­si­on-makers’ table

A tar­get ope­ra­ting model deve­lo­ped by h&z, an indi­vi­du­al struc­tu­re and pro­cess orga­ni­za­ti­on, assigns new roles and func­tions to the buy­ers. It links pro­ces­ses with the right tech­no­lo­gies, initia­ting the chan­ge toward the Purcha­sing of the future.

Our mecha­ni­cal engi­nee­ring firm has made a good start and the CPO has regai­ned con­trol of the shape of the future. He’s achie­ved his first suc­ces­ses and alre­ady redu­ced manu­al activi­ties by 20% in the first year, with the pro­s­pect of 50% in the medi­um term. He now also has good chan­ces of see­ing a posi­ti­ve return on invest­ment in the second year of imple­men­ta­ti­on of his “road­map” deve­lo­ped with h&z.