Procurement 4.0 and the Smart Factory

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The manufacturing industry is currently being transformed by the fourth industrial revolution. Commonly referred to as Industry 4.0, this shift is characterized by the merging of physical and digital technologies.

Many of today’s technological breakthroughs — including precision sensors, automation and robotics, the Internet of Things (IoT), cloud computing, and big data — are being utilized at increased rates. When brought together to form a cohesive manufacturing facility, these elements create what is known as a “smart factory.”

Using cyber-physical systems, smart factories are able to obtain real-time communications from both internal and external partners. Unsurprisingly, this has a major — and very positive — impact on how supply chain operations are managed.

By making use of accelerated connections and communications, smart companies are empowered with the tools necessary to quickly and easily bring about innovative procurement practices. When these smart technologies are integrated with contemporary procurement methods, it creates what is known as e-procurement, or, Procurement 4.0.

E-procurement differs from conventional procurement models in several fundamental ways. The most obvious divergence is how formerly analog processes such as invoicing, price negotiation, and inventory control are now handled almost exclusively on digital platforms.

When used in conjunction with other technological innovations in a smart facility, e-procurement offers many advantages. For example, by using big data analytics, procurement professionals can not only learn from past mistakes, but also predict possible future outcomes based on both established and emerging patterns. E-procurement can also use these predictions to expedite processes ahead of schedule and, consequently, establish better practices across many areas throughout a facility.

With so much of the grunt work being handled by computers, procurement focus will naturally shift from cost reduction and maintenance obstacles to more value-based factors, such as risk assessment, supply management, productivity tracking, increased spend visibility, compliance improvement, and sustainable transparency. These digital enhancements will eventually reconstruct the role procurement plays in supply chain operations.

Despite these unique benefits, however, the manufacturing industry has been slow to fully embrace and incorporate Procurement 4.0 practices. While some see e-procurement as groundbreaking, with the power to completely revitalize the procurement field, others see it as a semi-useful but ultimately secondary tool that provides only a small amount of support to the current paradigm.

However, as the manufacturing realm becomes more saturated with advanced technologies, and facilities become increasingly reliant on smart innovations, it’s inevitable that new methods and systems will need to be implemented in order to stay relevant in today’s ever-evolving digital landscape.


Image Credit: William Potter/

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