Procurement in the digital age: An interview with SAP Ariba CDO Marcell Vollmer
Dr. Marcell Vollmer’s job is to be at the forefront of the transformation for businesses looking to embrace the latest digital technology and cloud-based solutions. He’s been doing some research into the some of biggest concerns for companies in the industry moving forward, and is passionate about ensuring that procurement remains just as relevant in the future as it does today.
Vollmer’s research was focused on seeing how prepared companies feel they are for the digital transformation which is taking shape in the market place. The survey found that there is indeed work to be done, with less than a quarter of companies in the United States feeling that they were ready, and the number in Europe (although the research focused mainly on Germany) sitting at not much more than 10 percent.
But one thing, more than any other, is at the forefront of concerns for companies involved in procurement and supply chain, and that is how to ensure that talent can be brought in and kept within the industry.
- SAP partners with Saudi Aramco to establish cloud-based digital marketplace
- SAP Ariba exclusive: No turning back as procurement goes digital
- Read the latest issue of Supply Chain Digital magazine
Vollmer says: “We wanted to ask ‘what are the key priorities and the challenges for procurement companies to focus on?’
“Across Europe and North America, asking for the number one challenge for the future, we mainly got the same response across most people we asked; that is the ability to attract, develop and retain talent across the procurement function. In terms of respondents, 55 percent replied back with that answer in the US, 49 percent in Germany, and 41 percent in the rest of Europe, so that was by far the number one topic that we have seen as being the key challenge for companies in preparing themselves for the future.
“When you look back at procurement, it’s not necessarily a very strategic function right from the beginning. You can probably say that modern procurement started in the 1950s or 1960s when it was more operation and process-driven, and it has evolved over time, in the 1990s particularly. We were then able to see by going deeper and focusing more, the impact that a company could create with a professional procurement function that was really huge, both with hard savings and soft savings, looking at the numbers and seeing how they impacted profit.”
Although there is a shared belief across continents that attraction and retention of talent is the main challenge for the industry, what motivated SAP Ariba and Vollmer to conduct such detailed research was the discrepancy in perception between what executives in the US thought about how to best move forward into the new digital age and then contrasting that with what European experts thought.
The key for him was to get “more empirical data to work with” about what the differences are to allow SAP Ariba to best facilitate the varying requirements across different geographical regions.
Vollmer explains: “Our feeling basically was that a lot of German CTOs and procurement executives, and supply chain executives on the finance side, were a little bit reluctant in terms of moving to the cloud, addressing systems and thinking about the future of their organisational setup and we wanted to bring this into the discussion.
“I’m asking people all the time ‘what are you doing today to respond to all the digital trends we’re seeing and what they might mean for your organisation?’
“Operational tasks, for example, are becoming more and more automated, so you don’t need employees to necessarily sit on two screens when, say, the left screen has a scanned invoice and maybe you have a menu of purchase orders on the right screen. On our platforms, you put in the information and the system does this in a better way than a human being can do it.
“And that is far from the most exciting task when it comes to procurement or an accounts table. Therefore, I was thinking about ‘how do you prepare yourself for the future?' The organisational readiness, the process readiness, as well as the systems you are investing in… And then, how we are going to transform procurement to ensure that you stay relevant in the future and that you will have a seat at the table of the business.
“Other CTOs were not really working intensively on these topics, they were waiting to see how things developed rather than arming and preparing themselves for the future.
“From my understanding, it’s absolutely key that procurement needs to become more strategic and more embedded within organisations, and this means focusing on supplier innovations, risk management, sustainable supply chain, etc. These are the kind of areas that supply chain needs to focus on more and more, especially with the smaller organisations. That’s exactly where I think procurement needs to be now to be ready for the future.”
With that in mind, Vollmer feels that procurement is now at a fork in the road in terms of how it prepares for the future.
It needs to develop in such a way that it can help different areas of a client’s business to ensure that the necessary opportunities are provided to stay relevant in the future. Vollmer is adamant that there now also needs to be a focus on strategic procurement as well as being involved in automating operational and tactical tasks.
Despite the widespread worry that automation of operational tasks will lead to widespread job losses, Vollmer is not worried about the future of the industry and says that it has to evolve to remain relevant.
He adds: “Procurement will play, in the future, a key role to the benefit of the company in all of these different sides of the business.
“It’s perfectly true that a lot of people will use things like artificial intelligence and machine learning, and also things like RPA, and we can see more robots and things like that coming into the agenda so therefore people will lose their jobs. But when you see it from the other side you can look at the many transformational changes in all the different industries over time, starting with steam power back in the 1760s which meant the transport system fundamentally changed and expanded with the use of trains.
“Following that you had the era of mass production, and now we can see what computing has done for us in everyday life. You look at the kind of processing power you have on a laptop now or on a smartphone with apps, every platform today has more CPU than the entire Apollo space missions.
“Now the tricky thing is that you can’t necessarily develop somebody who was focusing on processing purchasing orders, or working in an accounts payable department, into a data architect or something, to work in a totally different field. That’s not realistic. But with the change that is coming in that way, it is also providing new opportunities and also giving room for additional, totally new industries, especially in the services area today.
“Take Uber for example, how they are significantly transforming the network taxi industry. Of course, on one side, in a negative sense, you can see ‘they’re stealing jobs from taxi drivers’ but, when you look at the overall growth, Uber is not just taking out of the existing market, but it is actually generating a new market. That is also what we are seeing in different areas where we are only at the beginning of a transformational change.
“It is up to the politicians and the economy and all of the people involved in the industries to make this change happen. Not everybody will be a winner, but I’m pretty sure there will be lots of opportunities in the future and people will jump on that. We cannot imagine yet what all the additional technologies will provide in terms of opportunities and also what they will transform to help us to become better, to grow more and to hopefully contribute to the overall GDP."
RAIN RFID, IoT and AI are key to a proactive supply chain
Across supply chains around the world, we have seen leading companies rely heavily on technologies like AI and IoT during the pandemic. These digital solutions have enabled businesses to accurately capture and ultimately use their own first-party data to drive efficiencies and protect increasingly fragile bottom lines.
However, what is less commonly known is the increasing role of RAIN RFID technology in supporting IoT solutions. By using RAIN RFID to capture item data and then feed that data into AI systems, businesses can identify inefficiencies within the supply chain and make informed decisions.
What is RAIN RFID?
In short, RAIN RFID is a powerful IoT technology that enables itemised data collection. By applying small, battery-free tags to items, organisations can identify, locate, and authenticate each of those items, scanning up to thousands of items simultaneously with a variety of devices, including hand-held, fixed and wearable readers.
RAIN RFID solutions dramatically improve the operational capabilities of an organisation by ensuring they have exactly the right items, in the right quantities, at the right locations, at the right time. During the pandemic, RAIN RFID solutions have been key to limiting disruptions in retail and manufacturing supply chains, most notably by increasing inventory and asset visibility and improving the management and flow of goods.
Three ways RAIN RFID helps solve supply chain concerns
RAIN RFID is used to streamline processes, maintain real-time inventory, increase productivity, and help manage labour shortages. We see three key ways RAIN RFID helps solve supply chain concerns:
- Automate shipment verification: Today, significant labour is required for multiple, manual barcode scans during the shipment process. RAIN RFID tags can be read automatically without a direct line of sight, erasing the need for workers to pause, locate a barcode, and scan it. By using RAIN RFID, supply chain leaders can automate their shipment verification process and improve warehouse efficiencies by up to 25%.
- Deliver real-time visibility: Retail Systems Research says that 76% of supply chain survey respondents reported that real-time inventory visibility was their leading focus for improving performance. When supply chain managers lack information about the status of assets and shipments moving into and out of warehouses, confidence and productivity suffer. By using RAIN RFID, supply chain leaders gain real-time visibility into an item’s identity, usage, and location. With this information, they can quickly find inventory and assets, and reduce the cost of asset investments.
- Improve order accuracy: Today, companies rely on redundant manual checks to verify that the right cartons are loaded onto the correct pallets. By using RAIN RFID, supply chain leaders can automate pallet build verification to streamline the process and increase order accuracy. In fact, a recent study by Auburn University found that RAIN RFID can help an organisation achieve up to 100% order accuracy, eliminating claims costs and unhappy customers.
RAIN RFID can increase value of AI-powered analytics
In today’s AI-driven, rapid decision-making business environment, RAIN RFID is uniquely capable of making systems more effective. This is because it provides item identifiers for tracking and locating billions of items, from clothing to food, pharmaceuticals, tools, packages, pallets, and more.
It also works without line-of-sight, providing visibility into places and processes not previously available. The data provided by a RAIN RFID system can give AI-powered solutions the ability to see individual items throughout the supply chain, understand how the entire supply chain is functioning and identify which areas can be improved.
As companies accelerate digital transformation, we expect to see a rise in interconnected data as investments into new technologies and IoT surge. But as the volume of real-time and accurate data about the movement of goods rises, so too do the demands on operations teams to make sound business decisions quickly and with confidence, often using AI-powered systems that thrive on improved data to make better decisions.
As an example, over the past several years, Delta Airlines transformed its customer experience by investing in technology including real-time RAIN RFID bag tracking and automatic check-in via the Fly Delta mobile app. Delta is now leveraging this set of investments in their implementation of an AI-driven platform that analyses millions of operational data points, from luggage movement to aircraft positions to flight crew restrictions to airport conditions. This system simulates operating challenges and creates hypothetical scenarios that help Delta’s professionals make critical operational decisions that improve the overall customer experience.
The need to drive digital transformation rapidly during the pandemic has made supply chain and logistics professionals increasingly tech savvy. As we prepare for a post-pandemic era, companies’ increased know-how and awareness of solutions like RAIN RFID, IoT and AI will play a key role in evolving the industry’s approach to solving supply chain issues from reactive to proactive, setting them up for future success.