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."
Upgrading RFID and Automated Track and Trace Solutions
During the COVID-19 pandemic, global supply chains faced the challenge of rapidly adjusting their business priorities to new customer preferences. Local supplier backlogs, winter storms, and the Suez Canal backup in March underscored the need for efficiency and visibility across the supply chain.
According to Christof Backhaus, Digital Lead Product Supply and Smart Label Project Lead at Bayer, companies must now place critical importance on tracking and tracing their products. “All large enterprises in the world dealing with finished goods,” he said, “seek functional and technical solutions to real-time channel inventory.”
Indeed, RFID’s real-time tracking data allows executives to make quick, well-informed decisions in moments of supply chain crisis - and rather than unfolding across days or weeks, it only takes a matter of minutes.
Why does RFID remain relevant despite digital disruption?
Essentially, RFID uses radio frequency waves to transfer data wirelessly between a scanner and a tag. In contrast to barcode technology, which requires a stationary scanner, RFID tags can be pinged from anywhere in the world, allowing companies to track real-time movement through the supply chain. RFID tags can also scan unique SKU numbers and distinguish between varying product sizes, colours, and styles: a critical feature for increasingly personalised end-user products.
Though the first patent for RFID tags appeared in 1973, higher accuracy rates, lower costs, and advances in sensor and data technology have made it newly accessible to a wide range of companies. Today, the technology is used in logistics networks, manufacturing and delivery networks in the pharmaceutical industry, and any business where efficiently tracking and monitoring product location is critical: raw materials, consumer products, cars, electronics, retail, and agriculture.
What are the key benefits?
Overall, automated track and trace solutions keep labour costs low, optimise operating costs, mitigate security risks, use capital effectively, and assist companies in adhering to regulatory requirements.
Below are three in-depth dives into how RFID benefits major industries:
- Pharmaceuticals: RFID tags help manufacturers safeguard sensitive products such as vaccines, tracking where they are and when they will arrive in real-time. Sensors closely monitor temperatures to ensure regulatory compliance. If anyone tampers with a shipment, the sensors alert the company.
- Logistics: RFID identifies process gaps and frequent anomalies by monitoring a product’s lifecycle from shipment to delivery. This data helps decision-makers predict the most efficient routes and therefore optimise their distribution schedules.
- Retail: Sensors help guard shipments against theft and provide critical intelligence when shipments go missing. Before adopting RFID technology in 2203, UK retailer Marks and Spencer relied on barcodes to scan inventory. When they made the switch, their productivity increased from a maximum of 400-600 items scanned per hour to up to 15,000 items scanned per hour. Building on their initial success, the retailer expanded the use of the technology and is still using it today.
Regardless of the industry, RFID promotes accuracy, immediacy, and efficiency. Companies reduce human error by automatically scanning products, keep track of inventory even in geographic locations with poor connectivity, and help streamline warehouse operations by identifying exact product locations.
Which recent innovations have changed the game?
With recent developments in cloud technology and IoT, a multitude of cloud-based alternatives have emerged to challenge traditional RFID technology. One of these cutting-edge solutions is Sony’s Smart Label - an intelligent shipping label that runs on AT&T’s global cellular network.
As with any good innovation, Sony’s proprietary technology started with a customer need ready to be solved: the Bayer Crop Science Division lacked an international IoT solution that could track seed products from start to finish throughout its distribution channel. Millions of dollars of revenue stood at stake, so Bayer turned to Sony to develop a smart label that would set the organisation up to manage its supply chain with end-to-end visibility.
Sony’s printable and disposable adhesive label allows companies to track the condition and location of their products worldwide and act upon the vast amounts of data it collects. The process is simple: the label activates when attached to the package, connects to AT&T’s secure LTE-M network, and sends data to the Smart Label Cloud in real time.
In sharp contrast to other smart label solutions that place trust in a patchwork combination of Wi-Fi, radio-frequency identification, and other limited coverage connections, the Sony Smart Label connects solely through a secure and universally-available cellular network. “Working with Sony,” says Robert Boyanovsky, the vice president of Mobility, IoT and 5G at AT&T, “we provide full visibility of every item shipped.”
Most importantly for companies on the edge, the Smart Label integrates with existing enterprise systems to achieve full visibility, thus adding value without disrupting supply chain process flow.
Why is this important now?
Companies that previously delayed introducing RFID and other automated track-and-trace technologies can capitalise on recent developments that lower costs, improve accuracy, and supercharge traceability.
Clearly the technology has value in today’s uncertain global marketplace, and can help decrease the costs of tracking goods. To quote Christof Backhaus, the Project Lead at Bayer, “the Smart Label indicates how much product is in the market, from the packaging line to the end customer.” Companies no longer have to spend a small fortune to take advantage of recent IoT developments. “Due to the technical composition [of the label],” Backhaus explains, “we don’t require additional infrastructure, manual scanning, or other expensive tools.”
Over the decades since RFID was first introduced, support for introducing it to company supply chains has also improved. AT&T’s IoT Professional Services Organisation, for example, supports companies through the end-to-end design and integration process--from installation to deployment and project management.
Companies that invest in traceable and visible supply chain solutions stand the best chance of survival, adjusting in real-time to natural disasters, shipping backups, and slowed-down supplier turnarounds as a result of the global pandemic. “Smart Label promises to help businesses like Bayer realise the full potential of the IoT,” says AT&T’s Boyanovsky. “[We can] deliver improvements in revenue and cost savings and make supply chains more efficient.”
Certainly, company executives will be hard-pressed to ignore recent innovations. In an age of uncertainty, RFID and its challengers herald a welcome sense of supply chain security. The next step? “Our sales team,” Boyanovsky adds, “is prepared to engage with prospective customers now.”