In the last decade, the necessity for a more integrated logistics, planning and procurement operations was fostered by a \u201cwar\u201d between companies around the globe to achieve lower costs and better services and products. Supply Chain has been evolving to catch up with the new industry trend and Procurement is a fundamental piece of the puzzle, as it is the interface with internal clients and external actors, e.g.: suppliers.<\/p>\n
As summarized in academic literature, \u201cThe introduction of Procurement 4.0 means developing new value propositions, meeting new business needs, and integrating data across functions and value chains. It will call for using this data proactively and intelligently, while introducing digital processes and tools\u201d [1].<\/p>\n
Although BMW has been at the forefront of new Supply Chain trends and risk-avoiding mechanisms, the company experienced a car-production stoppage on May 2017. This was due to a delay in its steering gear supply. Bosch, a direct supplier for BMW, couldn\u2019t deliver the parts required for the production of the 3-Series model, due to a delay in its own vendor. [2] The high reliability of the vendors and the risk assessments performed by BMW weren\u2019t enough to detect and mitigate all the risks when it has 13,000 suppliers in 70 countries. Is there anything more that BMW could have done?<\/p>\n
The firm focuses its actions on trying to manage and minimize risks plus lever on resource efficiency with suppliers as they are providing 75% of the value creation. [3] The supplier network and its logistics are carefully selected and risk assessments are run to avoid any delay or stoppage in the production. Delays can not only raise costs, but can also threaten supply in certain markets by triggering a \u201cdomino\u201d effect of losing market share. \u201cWe manage and minimize risk, by identifying and analyzing potential sustainability risks throughout the supply chain in a risk management process\u201d [4] is stated on BMW\u2019s official webpage.<\/p>\n
In the book Procurement 4.0, the former Head of Indirect Purchasing at BMW talked about how the company is doing Procurement. \u201cFor us at BMW a collaborative network approach together with our suppliers is already a key element of our procurement strategy. Our belief is that we can only be successful if we manage to set up a professional partnership with our suppliers\u201d. [5] He makes an emphasis in the win\/win relationship that the company has with its suppliers that it is not focused on cost.<\/p>\n
However, BMW has rapidly started implementing Procurement 4.0 in order to integrate better procurement and production, as more agile and lean processes are essential to deliver customized cars. \u201cIt is working on the reorganization of the production processes, connecting all workflows in the procurement sector. The idea is that, though digitalization, the global value network becomes transparent\u201d [6]. When the supply chain becomes fully transparent, the system is more flexible, predictable and responsive because the players can make decisions consciously.<\/p>\n
\u201cBMW recognized that this new approach will depend on secure data interfaces and standards that allow the original equipment manufacturer (OEM), its first-tier vendors and the materials and equipment in the procurement to communicate digitally via cloud networks\u201d. [7]<\/p>\n
In addition to working on the challenges stated by the company, I consider essential to start working with 2nd tier vendors, especially in an industry in which cost structure and lead time are so relevant. Regarding Bosch, having tracked this company would not have fully avoided the shortage. Standardized processes, similar working culture, service level agreements and the integration of systems with its vendors could have been helpful in mitigating risks of supply and quality.<\/p>\n
Implementing Supply Chain 4.0, according to which all stakeholders can have fully visibility of the needs, is becoming essential. Companies are investing on technology and connectivity to oversee not only their own processes and but also those of their vendors. However, this may not be enough.<\/p>\n
Despite these efforts, there is a long way to acquire the capabilities to take full advantage of Procurement 4.0. BMW is on track and will face some challenges as its supplier network adapts to this new way of connectivity. Besides, IT functions and cloud platform services will have to assure a secure space to share information and run the required software in different corners of the world. As all these investments are done by companies, I wonder if the mentioned connectivity with the 1st tier or even 2nd tier suppliers will be the final solution. Is this enough to mitigate all supply related risks? And at an organizational level, what are the capabilities that the new Procurement and Supply Chain teams need to perform this twirling integration between companies?<\/p>\n
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[1] Startegy& – Procurement 4.0: Are you ready for the digital revolution? by Reinhard Geissbauer, Robert Weissbarth, J\u00fcrgen Wetzstein Published: May 4, 2016. https:\/\/www.strategyand.pwc.com\/reports\/procurement-4-digital-revolution<\/a>, accessed on November 2017.<\/p>\n [2] Bloomberg – BMW to Seek Compensation From Bosch for Car-Production Stoppage. By\u00a0Christoph Rauwald .Published: May 29, 2017, 8:34 AM EDT. https:\/\/www.bloomberg.com\/news\/articles\/2017-05-29\/bmw-to-seek-compensation-from-bosch-for-car-production-stoppage<\/a>, accessed on November 2017.<\/p>\n [3] Agile Procurement – Volume II: Designing and Implementing a Digital Transformation. Authors:\u00a0Nicoletti, Bernardo. Page: 212<\/p>\n [4] Official BMW site: https:\/\/www.bmwgroup.com\/en\/responsibility\/supply-chain-management.html<\/a> , accesses on November 2017.<\/p>\n [5] Procurement 4.0: A survival guide in a digital, disruptive world. Authors: Alexander Batran<\/a>,\u00a0Franziska Sperl<\/a>,\u00a0Ralf Schulz<\/a>,\u00a0Agnes Erben<\/a> (2017) \u2013 page. 111<\/p>\n [6] Agile Procurement – Volume II: Designing and Implementing a Digital Transformation. Authors:\u00a0Nicoletti, Bernardo. Page: 212<\/p>\n [7] Agile Procurement – Volume II: Designing and Implementing a Digital Transformation. Authors:\u00a0Nicoletti, Bernardo. Page: 212<\/p>\n Image: Website: Auto NDTV,\u00a0https:\/\/auto.ndtv.com\/bmw-cars\/3-series, accessed on November 2017<\/p>\n","protected":false},"excerpt":{"rendered":" Is full connectivity able to mitigate all supply related risks? BMW is moving toward Procurement 4.0, which are the challenges and opportunities ahead?<\/p>\n","protected":false},"author":10166,"featured_media":22649,"comment_status":"open","ping_status":"closed","template":"","categories":[1302,3513,17],"class_list":["post-22642","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-bmw","category-procurement","category-supply-chain","hck-taxonomy-organization-bmw","hck-taxonomy-industry-auto","hck-taxonomy-country-argentina"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"\n