#pacesetter: Purchasing becomes active designer of digital change
Under the conditions of an economic downturn, volatile raw material markets and challenging digitalization, purchasing is undergoing radical change. At the BME press conference, Managing Director Dr. Silvius Grobosch presented the trends in purchasing.
“The number of international crises continues to grow. Trade conflicts, Brexit and worldwide streams of refugees will continue to dominate the headlines this year,” said Dr. Silvius Grobosch, Managing Director of the Association for Supply Chain Management, Procurement and Logistics (Bundesverband Materialwirtschaft, Einkauf und Logistik e.V., BME), at the 54th BME Symposium Purchasing and Logistics in Berlin on Wednesday in front of journalists.
These events are weighing on the already fragile value and supply chains. For this reason, purchasing is more than ever required to regularly scan the markets relevant to its procurement activities and subject its entire risk management to a continuous stress test. Only then would procurement do justice to its role as an innovation driver in the company and become a real pacesetter. The BME as Europe's leading non-profit professional association for supply chain, purchasing and logistics has therefore declared "#pacesetter" to be the central motto of this year's symposium.
“The pacesetter in our understanding is someone who ensures the success of the entire team, regardless of their own competitive success,” explained Grobosch. Purchasers, logistics experts and supply chain managers are pacemakers in the best sense of the word because they set trends in the introduction of new digital technologies and procurement processes that others can follow later. With the right attitude, they provide orientation and motivation for their teams to stay ahead in the race for talent, resources, innovation and know-how.
Against this background, Dr. Silvius Grobosch presented the current framework conditions and the latest trends in purchasing and supply chain management from the perspective of the BME:
German economy in the downward pull of the global economy
The export nation Germany is increasingly suffering from the global trade disputes and is feeling their effects with full force. Above all, the ongoing conflict between the US administration and the political leadership in Beijing is paralysing the global economy and dragging companies' nerves. There, some corporate leaders are already thinking about reducing their investment plans or even putting them on ice. The German economy cannot escape this downward trend and is beginning to play the autumn blues. This is clearly illustrated by the current IHS Markit/BME-Einkaufsmanager-Index (EMI). Although it rose marginally by 0.4 points to 42.1 in October compared to the previous month, it is still close to its ten-year low. At the same time, for the tenth month in a row, the important leading indicator for the development of the manufacturing sector in Germany is moving below the magical 50-point reference line from which economic growth is signalled. The October data confirms once again that the industry of Europe's largest economy is in recession.
Commodity markets still volatile
US protectionism is not only having a negative impact on the global economy, it is also having a negative impact on developments on the international commodity markets. It is currently uncertain whether prices, especially for industrial raw materials, will pick up again next year, continue to move sideways or fall. The fact is, however, that the development of the global economy will ultimately determine the direction in which prices turn. By contrast, it is already clear that industrial commodity buyers will have to adjust to volatile commodity markets - across all segments - in 2020 as well. China could be the tip of the balance: If the economy in Asia's largest economy picks up again, if the state-controlled restructuring process in industry is successful and if there are no further US punitive tariffs on Chinese goods, the country's associated hunger for raw materials should fuel prices again. This is because the People's Republic is already the world's number one in terms of both raw material requirements and raw material production.
Making greater use of the potential of digital supply chains
Although buzzwords such as Industry 4.0 or Big Data are on everyone's lips, not all supply chain managers yet use the multitude of instruments to digitize their supply chains. Too often, a patchwork of stand-alone solutions dominates. There is often a lack of integrated workflows and above all of a digital strategy that helps purchasing and supply management to become the enabler of the industrial Internet of Things. An online survey by the BME and the Fulda University of Applied Sciences has produced astonishing results. Although many of the current digitization technologies such as robots and automation or self-propelled vehicles are familiar to the supply chain managers surveyed, there are still electronic solutions such as "Uberization of freight" or "Low-cost Sensor Technology" that they hardly use or do not use at all. The BME therefore appeals to decision-makers in companies to quickly close existing gaps in knowledge. Otherwise, SMEs in particular run the risk of missing the digitalization train.
SCM is in big phase of upheaval
Supply Chain Management (SCM) is in the midst of structural change. For a long time, the distribution of roles was clear: product development, marketing and production set the tone in most companies. They defined products and strategies for market success. The main function of supply chain optimization was to further optimize cost structures and ensure delivery capability. But times are changing radically and so are the boardroom discussions of the Chief Supply Chain Officer. In a world in which the major hotel room providers (Booking.com, HRS, Airbnb) no longer have their own hotels and the largest mobility service providers (such as Uber) no longer have their own cars, supply services become the core of a product.
There is no doubt that every successful procurement and supply chain manager is up to date when it comes to mastering the current challenges in his or her field. But true success in the future will be largely determined by intelligent collaborations within different business functions. A common intelligence approach will make it possible to collect, analyse and disseminate information that supports intelligent decision-making on an individual level and in doing so assume the role of a pacemaker.
Those who dominate information flows dominate the market. This is a completely new responsibility for the supply chain sector. Those who sit in the driver's seat must also take responsibility for the direction. Pure efficiency logic, which has long been the compass for the industry, will no longer suffice in the future.
Matchplan for risk management
The storm wins matches, the defensive title, it says in football. In addition to a powerful offensive on sales markets, companies also need a functioning defence against risk. The matchplan is called risk-oriented supply chain management. Most executives in procurement and supply chain management know that supply chain risk is an important issue. What is often still missing is systematic and risk-oriented control and monitoring of the entire business operation, anchored in the strategy.
Sustainability: The greatest leverage lies in purchasing
“Less is more” - a motto which is increasingly being taken into account in many areas of the economy and which, in view of the threat of climate change, is the order of the day. The important topic of sustainability is also of great relevance for purchasing. After all, the procurement departments are at the controls of sustainability throughout the entire company. In the truest sense of the word, they have it in their hands to minimize the consumption of resources in the purchasing process, to focus more on renewable energies or to avoid hazardous substances in production. The BME appeals to companies to take the issue of sustainability even more into account in their work processes. At the beginning of June 2019, the kick-off meeting of the new specialist group “Sustainability in Purchasing” took place at the BME office in Eschborn. The committee of experts currently being set up will, among other things, develop concrete sustainability strategies in purchasing.
BME consistently promotes further development of the association
As part of its “BME 2030” long-term strategy, the buyers' association has once again successfully implemented many new innovative ideas this year. For example, new content formats were created for events. These include “Disrupting Procurement”, which was a complete success from a standing start. Established and successful formats such as the BME Symposium Purchasing and Logistics or the BME Solution Days were further developed. The European Procurement Excellence Summit in Dresden was supplemented by a sub-congress for Supply Chain Executives in order to set an example for the necessary cross-functional cooperation between the two areas.
In 2019, the BME further expanded its international B2B activities for buyers. In recent months, it has once again offered members and buyers from companies of all sizes and industries numerous opportunities to get to know new sourcing markets and suppliers in a targeted manner and to integrate them precisely into their existing sourcing structures. In 2019, almost 300 BME member companies took part in the BME's cross-border events in Europe and North Africa. These activities, which are geared specifically to the processes and needs of buyers, will be expanded in 2020. Eastern Europe will continue to be the focus of the BME next year. In addition, a Maghreb purchasing initiative is planned for the first time.
In China, BME 2019 hosted several network activities and formats such as the Procurement Executive Round Table in Shanghai and the 3rd Sino-German Procurement 4.0 Summit in Chengdu. In the west of the People's Republic, the buyers' association was awarded the contract for a promotional project. Cooperation partners are the IAIT-Institut für Automatisierung und Industrie Technologie GmbH as well as government organizations in Sichuan Province and the city of Chengdu/Pujiang. Also participating is the Sino-German (Pujiang) SME Cooperation Zone. Together with their Chinese partners, BME and IAIT will first determine the possibilities of the Western Chinese procurement market. Later, suppliers from the region will be brought together with interested German and European companies. An online-based “Sino Europe Procurement Platform” is currently being set up for this purpose.