Procurement: Internet of Things Technology to Have Impact

By Susan Avery

October 09, 2015 at 9:54 AM

technology impact.jpgProcurement executives see predictive analytics and the Internet of Things as revolutionary for the supply chain, with many expecting the technologies to have a major impact. 

That’s according to results of Xchanging’s 2015 Global Procurement Study which focuses on how technology is transforming procurement. 

“Predictive analytics will drive a far more strategic approach to sourcing – for example, enabling hedging on the price of raw materials to become a daily part of the procurement process – as well as creating further opportunities for automation to increase accuracy and efficiency,” says Luke Spikes, Xchanging’s Procurement Technology spokesperson. And "the IoT can enable businesses to track the exact whereabouts and the condition of goods in transit, automatically monitor inventory levels to manage cash flow more efficiently, and remove human error from the process.”

The study is a major international project that surveyed 830 procurement decision makers across the UK, Europe and North America.

Please click on images to enlarge for viewing. 

xchanging study technology.jpgTechnology Adoption 

The study finds savings tracking (77%) and spend analytics (76%) technologies the most widely implemented.

This mirrors respondents’ answers about the KPIs (Key Performance Indicator) on which their procurement functions are measured – the top four all being cost related (47% cite cost savings realized as their most important KPI, 19% revenue impact, 16% cost savings identified and 14% cost avoidance).  

Over half of companies questioned also have automation (68%), reporting dashboards (68%), contract management (67%), supplier performance management (64%), market intelligence (60%), e-sourcing (59%), predictive analytics (54%) and Internet of Things (54%) technologies in place. 

In general, the organizations most likely to have the above solutions in place are:

  • In the U.S.
  • Larger, with more than 3,000 employees
  • In retail, consumer goods or manufacturing industries
  • Those outsource parts of their procurement operations

U.S. companies are 8% more likely to have all of the listed technologies in place than those in Europe.

Overall, supplier performance management software and predictive analytics are the technology solutions most likely to be implemented in the next two years (cite 12% of respondents), whereas 46% say they are unlikely to ever implement online auctions. 

Investment Priorities 

The top priority technology investments for procurement decision makers are process enhancement (cited by 28%), followed by automation (24%) and talent development (22%). 

These will presumably be to address capacity issues faced by the function: Eighty percent of respondents identify ‘procurement team time pressures’ as a challenge, and 20% as a major challenge. Technology that automates and enhances processes can ease pressures and demands currently placed on procurement manpower.  

Companies with decentralized procurement operations are more likely to consider process enhancement a top investment priority (32%) than those with centralized operations (25%). 

Technology and Procurement Skills

Despite the growing importance of technology within the supply chain, ‘aptitude for technology’ is surprisingly only ranked as the sixth most important skill, and just 17% claim there is a technology skills gap in their procurement department. 

These statements also contradict the fact that respondents say ‘talent development’ is the third most important technology investment priority. This suggests that when procurement professionals look at technology as a whole, they recognize the importance of developing talent and skills in this area for successful implementation, yet when they look at the desired skills of the procurement function in isolation, an aptitude for technology is overlooked.  

Also see the My Purchasing Center articles on Xchanging’s 2015 Global Procurement Study:

Managing Risk Extreme Challenge for Procurement

Not Understanding Procurement May be Real Issue

 



Tags: purchasing Supply chain management Procurement Technology sourcing predictive analytics Internet of Things
Category: News Article

Susan Avery

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Susan Avery is Editor-in-Chief at My Purchasing Center. She writes articles, blogs and white papers and manages and creates other content for the online procurement and supply management publication. She produces and moderates roundtable discussions, podcasts, webcasts and video interviews. Susan has 30 years experience covering procurement and supply management for Purchasing magazine and Purchasing.com. 


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