CPO of Siemens on Digital Procurement Transformation
Digital procurement transformation is no longer an option, it is a must. Ignoring it today will ultimately lead to a loss of procurement’s influence in the organization. On a more positive note, early adopters in digital procurement are already benefiting from incremental cost savings, increased productivity, and substantial improvements in innovation, quality, speed, and risk management.
As a CPO, it is absolutely necessary to understand how digitally mature your procurement organization really is, how you compare to others, and the key steps to digital maturity.
Given the relevance and urgency of this topic, I wanted to explore further. So, I reached out to Siemens’ head of procurement and supply chain to understand how he is transforming Siemens’ procurement organisation in the context of digital – here is what he had to say.
What are your current activities in procurement related to digitalization?
We started our digitization journey about 3 years ago. At that time, we were of the opinion that we needed a holistic digital master plan, which we then could roll out top down through the organization. However, it quickly became very clear to us that the decisive success factor is not a fully thought-out top-down concept, but the active participation of employees in this transformation process: To achieve better acceptance, focus more on user-centric solutions, and to constantly get new ideas from bottom-up.
Thus, our digital transformation journey is built on an aligned digital transformation framework. This ensures applicability to our different business needs and establishes clear guidance towards building blocks, dependencies, and development paths. At the same time, we actively involve our employees via digital communities and a self-organized digital network of passionate experts. Our employees, including management, must understand digitalization intrinsically as the new normal. Therefore we also put much attention toward changing management, self-expanding knowledge bases (internal Wiki), and various training, including digital mindset training.
The framework itself consists of 5 building blocks:
- Procurement platforms: before you can think about data, analytics, and AI you obviously have to assure that our employees are supported in the day to day processes and workflow by platforms that help to get their jobs done whilst producing data. We follow our principle: as many platforms as needed, a few as possible.
- Ecosystem integration: As procurement by nature is a cross functional endeavor, we need to integrate with our partners’ architectures, e.g. ERP backends and PLM applications.
- One global data mart: With the first 2 building blocks now generating data we are replicating the relevant data in our central data mart, managing the data, adding external data sources as needed, for one integration layer for all connecting analytical and AI driven apps.
- Analytics and knowledge management: Before advancing to the last building block, we laid a solid foundation of descriptive analytics apps as well as digitized our procurement know-how, like Wikipedia.
- AI driven decision guidance, simulation and autonomous sourcing. Here we are using AI engines for more effective decision making (SCM Companions) and efficient integration with our platforms. Especially in the field of cost and value engineering, we establish digital twins of cost. Our latest development is an autonomous sourcing bot that will write a whole new chapter in procurement.
Your most amazing accomplishment in digital.
Digitalization is all about value generation. We put a great deal of emphasis on consequent utilization of our digital architecture amongst our employees worldwide. You can buy the greatest digital tools, but if your staff is not using them, value generation will be not just zero but negative. So, scaling up our digital ecosystem is something I am proud of.
We are happy to see how our businesses have managed to really drive the implementation of our framework. For 12 months now, we have seen that even new opportunities like our companions, digital twins-of-cost, or autonomous sourcing are eagerly piloted and pulled from our business units.
At the end it is all about people. The broad involvement of our employees, the strong collaboration with our cross-functional partners – the different Siemens businesses as well as our regions – is probably our greatest accomplishment, and at the same time our greatest recipe for future success.
Matthias Gutzmann is the founder of Digital Procurement World.