McKinsey: Is “Should Costing” The Future of Procurement?
“Should costing” will help a company figure out the difference between the set price of goods and what they’re truly worth. It’s faster, savvier, and more effective than traditional methods, courtesy of digitisation and the new technologies available to businesses today, and agile principles. The concept works around supplier pricing by using clean-sheet techniques to make a fairly accurate estimation of a supplier’s production costs and margins. It’s becoming an increasingly popular method for the top organisations around the globe, and with more and more vehicles on the road every day, automotive companies are cashing in on this new kid on the block.
Software Sets Standards
In the automotive industry, should-costing is now an absolute imperative on the hardware purchasing list, but it seldom gets recognised by software procurement teams. It is becoming the gold standard, in fact. The lack of recognition comes from a slight ignorance across an industry that definitely knows its stuff when it comes to hardware suppliers and the way that they work, but knows a lot less about software development and its processes. It’s an understandable flaw.
Interestingly, though, the organisations that have adapted to the new technological norms and find themselves investing in, and subsequently, adopting should-costing software for their projects find that they’re reducing costs by up to 30% whilst speeding up their delivery times. With that in mind, it’s probably worth stating that this software is an absolute necessity for companies who intend to reach or remain at the top of the pile in the automotive industry.
Automotive Software is Increasingly Important
Digital technology has been disrupting, in a major way, every industry it has touched for several decades now, and now that it is changing the game in the automotive industry, it is becoming progressively more important. For original equipment manufacturers (OEMs) and external stakeholders, the introduction and evolution of computing power within vehicles is at the forefront of advancement ─ it’s a vital value driver. To emphasise its importance, McKinsey has found that, between 2020 and 2030, the global market for automotive software will double, leaping ahead of expansion across the collective automotive market which is set at just over 3% annually across the decade. That’s exponential growth.
It should go without saying that, organisations across the automotive industry are climbing out from under their vehicles and taking a look at the software that modern technology is bringing to the fore, wide-eyed. The developments are coming thick and fast, and they’re becoming more bespoke, sophisticated, and highly complex. The advancements are forcing procurement departments to throw out some of the old hardware and replace it with new, more efficient software, to ensure that companies obtain the best value for their money in their future purchasing endeavours.
SAP Ariba to digitise procurement for Expo 2020 suppliers
The global trade event, this year hosted in Dubai, was rescheduled from last year and will now take place between 1 October 2021 and 31 March 2022.
As the event’s Innovative Enterprise Software Partner, SAP Ariba solutions will fully digitise and automate the procure-to-pay lifecycle, providing a streamlined experience for thousands of market leading, global suppliers and strengthening the global supply chain with enhanced transparency and efficiency. The cloud-based platforms operate through on SAP Ariba’s UAE public cloud data centre and connects to the Ariba Network.
Expo 2020 "a long-term investment"
Mohammed AlHashmi, Chief Technology Officer, Expo 2020 Dubai, said the world trade event is “a long-term investment in the future that aims to enhance opportunities for sustainable business connectivity and growth”, which stretches beyond Expo 2020’s six-month window.
“Our partnership with SAP is an example of what can be achieved with the invaluable support of our technology partners to host one of the most digitally advanced World Expos ever,” he added. “The implementation of SAP Ariba solutions has transformed our end-to-end procure-to-pay cycle and helped set new standards of procurement automation for projects of this scale.”
To date, more than AED 1bn has already been transacted by Expo 2020 suppliers through SAP Ariba. The platform promotes collaborative partnerships and allows registered users to participate in sourcing events, negotiate and initiate contracts, and centralise their invoicing and payments in real time.
Claudio Muruzabal, President of EMEA South, SAP, said: “Expo 2020 Dubai is demonstrating global best practices in digitising its procurement process with SAP Ariba solutions to help gain visibility into its spend, tighten collaboration with its suppliers, and achieve process automation, including completely paperless invoicing.”
About Expo 2020 Dubai
Expo 2020 will take place in Dubai and is the first of the long-running World Expos to be hosted in the Middle East, Africa and South Asia territory. The original World Expo, called the Great Exhibiton, was hosted in 1851 at the Crystal Palace in London, designed as a showcase for the innovations of the Industrial Revolution.
Expo 2020 was originally due to run 20 October 2020 to 10 April 2021, but was last year postponed in light of COVID-19 restrictions - though some business has already taken place virtually. The event will place greater emphasis on innovation in sustainable solutions through the Sustainability District, blending technology and culture. It is expected that around 70 per cent of the 25 million attendees will be international visitors.