Procurement must champion IoT or risk falling behind

IoT Procurement

The procurement function will fall behind and suffer a wider skills gap if organisations do not proactively pilot the Internet of Things (IoT) technology, writes Supply Management‘s Su-San Sit.

Robert Handfield, Executive Director at Supply Chain Resource Cooperative, notes that many procurement managers today are “frozen” when confronted with new technology and lacked the skills to implement such:

“The only way they are going to develop these skills is literally by throwing themselves into that environment and learning as they go – through experimentation, through pilots – and, in my mind, many organisations aren’t willing to move forward and invest in piloting this new technology, which is how you learn.”

During a Zycus webinar panel discussion on getting procurement ready for the emergence of IoT, Handfield noted that the technology would primarily be used as a way to collect and categorise data, and it would be the role of procurement professionals to use said data to make decisions:

“IoT is the next phase in the development of decision making where we will get better information, better raw data; but the key to unlocking its potential benefits rests on being able to analyse that data”, says Handfield.

“If you look at the smart grid today, for instance, in energy, there are these homes that have sensors broadcasting data but utility companies still don’t really know how to use that information.”

However, Jon Hansen, Editor and Lead Writer at Procurement Insights, questions whether the procurement function by nature struggles to keep up with emerging technology, which would affect its adoption of IoT.

Hansen points to the Deloitte Global Chief Procurement Officer Survey 2017 that involved 480 procurement leaders from 36 countries. The survey revealed that 87% of respondents agreed that talent drives procurement performance but 62% also noted that there was currently a large skills gap across analytical abilities.

More than 60% of CPOs surveyed believed that their teams currently lack the skills needed to deliver their procurement strategies.

“As we get into the IoT world and artificial intelligence, will the skills gap get even worse? Now not only do we have the lack of skills within our own capabilities prior to digital transformation, but also the introduction of new technology that might just exacerbate that gap further”, says Hansen.

Mark Hubbard, Managing Director at consultancy Smart Brown Dog, agrees that the procurement function was constantly playing catch up when it came to acquiring the skills to use technology to its advantage:

“When we had a surge of activity in e-auction areas of purchasing, there was clearly a degree of skill that is necessary to use that technology effectively but most organisations have a very limited pool of people who have fully grasped the skill levels that are required, and that’s been happening for around eight to ten years now and is only moving forward relatively slowly.”

“But that’s often a consequence of the pressure that is placed by the same CPOs on delivering short-term savings goals, because of internal business pressures, so we can see that short-termism view actually causing a problem in the development of the longer-term skills that we need to get hold of.”

Handfield suggests that the only way for the procurement function to be able to move forward is for individual procurement managers to champion the cause and push their organisations to invest in long-term projects to utilise the technology:

“The way forward is to see these technology disruptors as a benefit instead of a threat – if you think of it as a threat, then you are going to be reluctant to adopt it. The procurement function will not change when IoT is used because, at its heart, procurement is people-led.”

“You need procurement leaders to really champion the cause for using this new technology and push their organisations and their teams to learn about them and integrate them into their long-term strategies.”

Supply Management

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