The purchasing sector in the industry 4.0
For some time now, companies have been investing in creating a purchasing industry that uses resources such as automation technology and cloud computing for greater efficiency.
But has this area reached the level of maturity necessary to benefit from the transformation that is within the reach of purchasing in Industry 4.0? That’s what we’ll see next.
Digital maturity of the purchasing sector
In a recent study, Forrester Consult interviewed 417 purchasing leaders from North America and Europe to identify the degree of digital maturity in the area, noting that 65% of organizations said they were at an advanced stage in this regard.
However, the same survey showed that they are further away from a 4.0 Purchasing sector than they had imagined, with only 16% of companies at an advanced level of maturity – meaning they make intelligent use of the technological innovation available and are programmed to keep up with all the evolution that technological resources will bring in the coming years.
Another highlight of this study concerns the poor technological choices that companies have made. The result is that 82% of them have changed (or are thinking of changing) their digital provider, mainly due to the lack of integration between the implemented solutions (30%) and the difficulty of use of the tools by users (27%).
The conclusion of the researchers is that the vast majority of the companies interviewed still adopt a digital approach that simplifies processes and improves the efficiency of the purchasing sector, but this is not close to the transformation provided by Purchasing 4.0.
And the first step in this direction is up to the purchasing manager: to realistically assess the digital maturity in which the sector currently finds itself and, together with the Information Technology department, to outline the best strategy towards a planned and continuous transformation journey that will provide real competitive advantage for the company.
Organizations that do not adopt a smart approach to purchasing will risk losing space to the competition with digital knowledge, since the current business environment is one of extremely rapid change.
The Purchasing Team in Industry 4.0
Purchasing managers are still reticent about implementing new technologies, such as Artificial Intelligence, Robotic Automation or Blockchain in the industry routine.
This is the conclusion of a survey conducted by Deloitte – an American business consulting firm based in several countries around the world, including Brazil – pointing out that 51% of the managers interviewed are hesitant because they understand that their teams do not yet have enough resources to execute a digital purchasing strategy.
It is clear, therefore, that Purchasing 4.0 managers need to find new talent and also prepare the employees already hired, forming a multifunctional team with training to face the digital transformation.
Another essential factor to obtain the best possible performance from the purchasing team is to establish metrics that make it possible to evaluate all the collective and individual work. This analysis will allow us to know the team’s weak and strong points, investing in improvement actions.
And, of course, we must not forget that the purchasing manager himself must adapt to the new times, acquiring fundamental skills for the digital era.
Using modern tools correctly, the area will be able to capture, analyze and act from updated data in real time, creating agile connections with the entire organization, optimizing processes and increasing purchasing efficiency.
Purchasing 4.0 raises the sector’s value proposition
According to the German Henrik von Scheel, creator of the expression and fundamentals of Industry 4.0, we entered the second wave of Industry 4.0, characterized by the connection between advanced technologies and the use that humans can make of them, aiming at the improvement of organizational processes.
The purchasing sector has the opportunity to take advantage of this phase to increase its value proposition within the company, uniting its strategic knowledge about the market and its wide experience in purchasing with the opportunities brought by technological transformation.
This is the case, for example, with the use of bots. Considered a kind of assistant with Artificial Intelligence, it can provide updated information on purchasing processes and also generate automated demand. Through sensors placed in the stocked materials (making use of systems based on intelligence of things, IoT), the bot can identify the decrease in the stock of products and issue, autonomously, the purchase order before the item finishes and interferes in the organizational routine.
One of the great advantages of bots is that they can be implemented quickly, with little change in the process already used. That doesn’t eliminate the need for constant monitoring, by a properly trained professional, to ensure control over the resource – IT specialists recommend that the monitoring takes place on a daily basis, to ensure that the bots are running, and that there is a deeper performance assessment, on a monthly basis and whenever system changes occur.
Bots are already a reality in organizations, providing vendor management, purchase order creation, order and payment processing. But there is much to explore in this resource, and it is important that organizations reflect on operational details and impacts before the bots are deployed in the area.
In our blog, we’ve already covered other technologies that are influencing purchasing in Industry 4.0. Therefore, to complement your knowledge on the subject, we recommend reading from:
4 technologies that will change global trade
Soluparts can also collaborate for greater efficiency in the purchasing area, offering benefits such as better prices and agility to its customers. Get to know Soluparts differentials and values and take the opportunity to quote with our experts.
How to apply Agile methodology in the purchasing department
The current economic scenario requires faster responses from both companies and their employees. Aspects such as late deliveries of indirect material, for example, can generate a series of problems within the operations chain, impacting productivity and, consequently, financial return.
In order to try to respond to these demands, the Agile methodology becomes fundamental. In this text, we talk about the main concepts of agile mindset and give some tips on how to implement it in the purchasing sector.
What is the Agile mindset?
There are many cases that can exemplify the moment we live in: considering the field of technology, for example, extensive communication networks have been developed that allow instantaneous interaction between individuals in different parts of the world. Regarding the economy, we have seen supply chains become global, influencing and changing processes that involve a number of actors (suppliers, buyers, logistics companies, among others).
There are many experts and academics who seek to conceptualize what we live in the modern world. An example is the term VUCA, created by the US military to define scenarios and contexts of war, which has come to be used as a business strategy as well – long story short, VUCA is an acronym composed by the first letter of the words: Volatility, Uncertainty, Complexity and Ambiguity.
More recently, in order to expand this concept, the term MUVUCA was also introduced, with the addition of two new elements: Meaningful (all actions are guided by a purpose as a result of the search for a meaning for life and the world) and Universal (concern about the global impact of what we do).
In order to find a way to follow up a reality in constant change, the agile methodology emerges: coming from the Information Technology sector, it seeks to reduce the rigidity of traditional organizations’ processes and procedures, encouraging smaller and faster deliveries, constant reviews and collaborative work. Read our Agile Supply Chain article to understand more about it.
What are the agile principles?
Even though it emerged in the IT area, the set of principles and processes that make up the agile methodology started to be used by different types of departments and organizations. In the purchasing area it is also incorporated as an alternative to the traditional model of acquisitions.
It is important to emphasize that the adoption of agile thinking is not an easy task, it requires organizational changes and the willingness of employees to change. The use of this methodology also depends a lot on the context, but there are some topics that can be applied in all situations:
1- Consumer / customer satisfaction is the main element: highest priority, with a focus on deliveries happening correctly and in a short time. This customer or consumer can be thought of in many contexts: in the case of purchasing indirect materials, for example, it refers to the company that needs a spare part to continue its production.
2- Change as an opportunity: this new way of dealing with challenges is extremely important, regardless of the context in which the change occurs, helping to increase the competitive advantages and the satisfaction of the clients served. The focus now is on solving a problem and not on the problem itself.
3- Speed and value go together: in short periods of time, high value-added deliveries must be made, whether the value is tangible or intangible. These deliverables can be products or services resulting from a process or project, which must be regularly revisited with updates. Here, “value” can be understood as the customer’s view (or expectation) of benefits and sacrifices in relation to what is offered.
4- Collaboration overcoming conflict: members of a project must develop the team mentality, in order to guarantee the transparency of communication and the shared commitment to guarantee success.
5- Power to people: projects are built and led by people and teams engaged. That is, they must be given the tools and working conditions necessary to succeed and complete the assigned tasks. Soluparts already understands and applies this concept since its creation, reflecting it in our purpose: Empowering Buyers, a maxim that reinforces the company’s focus on customer satisfaction.
6- Interpersonal focus: face-to-face communication is the most efficient way to share information between teams. Working with emotional and cultural intelligence can be very relevant in this case.
7- Demonstrable values and results must guide each project: deliveries that meet or exceed expectations in terms of precision and value (tangible and intangible) become useful references for future initiatives and projects.
8- Keeping activities stable and sustainable: while delivering value is a priority, processes must be developed and optimized from a sustainable perspective to ensure that everyone is involved in a stable manner, without surprises that hinder decision-making.
9- Continuous improvement ensures agility: processes must be increasingly efficient through regular changes.
10- Simplicity is an essential element: maximizing returns using the least possible resources.
11- Self-managed teams are more successful: better results come from agile teams that are able to organize themselves.
12- There is always room for improvement: reassessing processes and making necessary changes to bring more efficiency and effectiveness are always welcome.
The twelve principles shown above, are based on the Agile Manifesto, which is the basis of mentality and all agile methodologies around the world. These principles were designed and coined by the Agile Alliance, a global non-profit organization committed to supporting people who explore and apply agile values, principles and practices to make the development of solutions and projects more effective, humane and sustainable.
This alliance was created by a group of 17 developers who, at a meeting in Utah, USA, from February 11 to 13, 2001, developed the Manifesto for Agile Software Development. Read more about the Manifesto and its principles on the alliance’s official website.
Agile thinking in the purchasing department
Unlike traditional models, most commonly focused on cost reduction, Agile thinking in purchasing seeks to generate value by supporting the organization’s objectives and business needs. Considering some crucial aspects of the procurement sector, it is possible to raise the main differences between the traditional and Agile forms of purchasing:
Instead of fixed and extensive planning and documentation, with the Agile methodology, a more responsive, objective and iterative position is valued, attentive to the real needs of the moment. Thus, identifying priorities becomes very important for purchasing employees.
The focus should be on elaborate more collaborative terms and built stronger relationships with suppliers, having as a result the gaining of shared success (questioning the competitiveness and rigidity present in traditional format contracts). Learn more about the topic.
They have to be iterative and responsive, in other words, suppliers can be changed after a round of work, as required by changing circumstances. On this topic, see the article we have specifically prepared on the application of agile methodology in the context of supply chains.
4 steps to make your purchasing department more agile, today
Below are some ways to make your purchasing process more agile:
1- Daily meetings at the beginning of the work day: lasting between 15 and 30 minutes, these meetings help to establish the day’s tasks, encouraging collaboration between team members to solve possible problems. In many companies, to encourage agility, it is proposed that participants remain standing;
2- Apply the notion of sprints, which would be small projects or project fragments, sequences of iterative work (with repetition of actions) in order to have a more compartmentalized notion of the whole, speeding up possible reevaluations and changes in the acquisition path;
3- Definition of priorities: in the face of frequent changes within the company, establishing priorities and regularly reviewing them helps to streamline the purchasing process;
4- of software that helps in Agile management: technology can help centralize data related to a purchase, in addition to facilitating communication and alignment between dispersed teams. There are a series of programs aimed at the application of Agile methodology in companies.
In this article, we show how Agile methodology can help a lot to optimize the projects and processes of purchasing departments. Even though the method was originated to meet the demands of software development, many business areas have adopted these guidelines, resulting in more effectiveness and efficiency. Responding quickly to market changes has become a competitive advantage.
The purchasing department has a lot to learn from Agile, but for that it is necessary to be sure that its organizational culture and professionals in the area are flexible and resilient. To help you optimize your purchasing department, we suggest the following readings:
Solving the 5 main problems of the purchasing department
4 ways to improve the management of indirect materials purchases
Strategic Sourcing: improving the purchasing process
The role of Strategic Force’s in Procurement 4.0
Another way to streamline the activities of your purchasing department is to count on a company specialized in the search for spare parts (MRO) from more than 15000 brands anywhere in the world, such as Soluparts.
Contact us today to find out how we can help your company!
The Value of Cultural Intelligence to the Purchasing Sector
The changes seen in recent decades in the world economy have brought a number of challenges for organizations. With a more connected world and a globalized economy, intercultural management has become an important dimension to be worked on by companies that deal with audiences in other locations (consumers, suppliers, employees, among others).
But what is culture, anyway?
Culture can be understood, in short, as the set of values, beliefs and habits of a given group in a specific context. It reflects what we consider normal, present in our daily interactions and, many times, we only realize its relevance when we leave familiar environments – which makes Cultural Intelligence in Purchasing a very important factor.
And we don’t need to go far to confirm this. When traveling to another city, is it not possible to notice differences in the customs of its inhabitants (food, forms of leisure, schedules of expedients, greetings, expressions)? These elements can bring challenges to those who are inserting themselves in a new context, depending on the distance between the cultures involved.
In the case mentioned above, language would not be a great difficulty (only some expressions would not be understood). But in an international context, dealing with this important cultural element becomes crucial to ensure success in communication and negotiations. For example, the growth and expansion in the last decades of the Asian market in the global economy has brought challenges for those dealing with companies from these countries.
Culture in the corporate world
In the corporate context, the examples on this issue are diverse: probably, when working with colleagues of other nationalities, you have already encountered some difficulties. By sending an e-mail, for example, you may have been concerned to ensure that there was no communication noise (a more informal greeting could be understood as a coarse attitude, or a less direct writing would cause difficulties of interpretation).
In a face-to-face meeting with a client, did you need to pay attention to behave in line with the space where you were? For example, was it customary at the venue for people to stand up to greet someone? Was the atmosphere of the meeting more relaxed or did the participants go straight to the issues on the agenda, without giving space for other types of interaction?
These situations help to highlight the importance of understanding the differences between groups. Thus, managing cultural diversity becomes a recurring activity in organizations. And this diversity can be understood in multiple dimensions: whether to deal with employees in different locations, but also for departments within a company that have particular cultural characteristics.
There is also a concern in the market and in academic studies of the area to understand issues related to cultural diversity. According to Harvard Business School research, companies with diverse teams had a 77% growth in employee engagement. In addition, where diversity is recognized and valued, there is a 50% decrease in conflicts.
To deal with these challenges, the concept of Cultural Intelligence (CI) has been used by professionals in the area. In this article, we will present what IC is and discuss its value to all areas of the companies (including the purchasing sector), giving tips on how to acquire this relevant skill.
What is Cultural Intelligence?
Different experts discuss the importance of Cultural Intelligence in the organizational environment. Tom Verghese, a consultant in the area, defines Cultural Intelligence as the ability to work efficiently between cultures, making interactions easier and providing insights and understanding about behaviors, values and attitudes of people from other cultural perspectives.
For Verghese, Cultural Intelligence is composed of four dimensions:
1. Objective: the interest and motivation to adapt to a multicultural context, whether for intrinsic issues (being involved in significant work, for example) or extrinsic (financial return), with the goal of understanding other cultures, norms and behaviors.
2. Knowledge: to understand similarities and differences between different cultures and the particularities of each context.
3. Strategy: ability to plan multicultural interactions, applying the knowledge that was previously acquired.
4. Skills: apply in (verbal and non-verbal) communication situations the repertoire obtained and adapt it according to the moment.
In an article published for the Exame magazine portal, Sofia Esteves, chairman of the board of the Cia. de Talentos group, talks about factors related to Cultural Intelligence: motivational, cognitive, metacognitive and behavioral. These elements are presented in different categories for conceptual purposes, but interact with each other in practical situations.
The motivational factor has to do with the willingness to know and deal with differences, to your interest in learning new things, being open to understand them and accept them, even if they represent values that differ from yours.
The cognitive factor refers to the respect for the norms of another culture, namely to behave in these spaces according to the social norms of the group.
The metacognitive is related to the “ability of transcultural awareness” and the capacity of “interpretation of texts”, that is, to understand the culture of the other from his/her own, to learn to read attentively, to absorb the message passed and to question when something is not clear.
Finally, the behavioral factor is our ability to respect and adapt to the other culture. As we have already commented, displays of affection in different cultural contexts can have multiple meanings: a strong handshake can be understood as a symbol of trust or disrespect, depending on where you are.
According to an article published in the Harvard Business Review, there is a dialogue between emotional intelligence and cultural intelligence: the former is related to what makes us human and, at the same time, different from each other. The second refers to detecting elements in a person’s or group’s behavior and checking whether they are true to all persons/groups or peculiar to these individuals.
That is, whether they would be universal or not when compared to other realities. In other words: when we are surprised by an attitude of a coworker living in another location, it is possible to observe whether it is related to the person’s personality or the common behavior of the group. This construction of values and habits among people, which are crucial to understanding them, would be what we call culture.
Cultural Intelligence in the purchasing area
In recent years, Cultural Intelligence has become a skill to be developed by all company employees. As already commented, it is important in the management of intercultural teams in different countries, but also valid to reduce cultural tensions between areas of an organization located in the same place.
For example, in projects involving participants from different areas, there is the challenge of understanding the culture of each one, allowing the alignment of employees. Information Technology teams have some different characteristics of business professionals, while the purchasing department has a different rhythm from the legal area. Understanding these differences is fundamental to the success of the company.
TMA World, a consulting firm specialized in Development and Learning, focused on training for intercultural teams, lists reasons why it is important to be concerned with Cultural Intelligence in the context of organizations and their different areas (among them, the purchasing sector):
- IC helps to develop a deep understanding of working styles in other cultures, which builds tolerance, trust and understanding among employees. Cultural differences become strong points in problem solving, while enhanced collaboration creates the ability to respond more quickly to market changes;
- Managers who work with teams on the production line, with different degrees of education, should deal with the cultural dimension carefully, as it may be relevant to ensure the engagement of these employees. The company’s top management must also pay attention to the challenges faced by those who manage these areas;
- Local partners, customers and outsourced sectors will become closer with Cultural Intelligence, as it no longer will be an obstacle to success due to their differences;
- IC is also important in the context of emerging markets, because of the differences in management styles and expectations created. In some situations, these markets can achieve success in their operations without necessarily following all the protocols defined by the companies of the country of origin.
- A culturally intelligent individual gains confidence. By assimilating into a local culture, immersing oneself in its ways and mirroring the gestures of the people around it, one becomes more empathetic – as long as one’s immersion in the other culture is genuine;
- Culturally sensitive leaders are better managers, as they are able to resolve conflicts, including in negotiations, more efficiently, and they understand clearly the dynamics of multicultural groups;
- Training is crucial for employees and their families, who move to work in a branch of the company, as it helps to reduce culture shock and makes the individual more effective and prepared to integrate the new workplace.
- Multicultural marketing is important for all areas of the company, since understanding your consumer and their needs is an essential element of IC, respecting their gender, age, race, ethnicity, sexual orientation, among others.
- Cultural awareness helps individuals to recognize areas of their own communication that can be improved, to make their daily interaction with international – and national – colleagues more effective and enjoyable. In addition, by developing communication skills, the individual’s interactions (with family, friends, neighbors) also improve.
When we make acquisitions in our country, not many differences in terms of culture are usually felt. However, when the purchasing sector deals with suppliers from other nations, we become aware of these issues, requiring us to think globally.
One of the biggest misconceptions in the procurement process is that people will act in a similar way to us, which can generate noise during the understanding between the two parties. Therefore, bringing the concepts of Cultural Intelligence into the purchasing context is very valid.
For Fabio Hoinaski, CEO at IBID – E-procurement, there are a number of issues that impact a good relationship between people of different cultures in the purchasing process:
In the globalized world, English is fundamental for communication; however, not all countries have the custom of using it frequently, and prefer the local language. We can mention here the French, who generally use their mother tongue more. There are also nations that have begun to encourage learning English only in recent decades, and it is still a challenge to interact with the majority of the population.
However, by learning basic local language terms and showing that you are making an effort to speak in the language of your interlocutor, a barrier is broken and the person is more open to communication and negotiation.
2. Form of treatment between people
There are cultures where relationships are marked by more formality and hierarchy, without affective demonstrations in public, for example. Work relations also change: Brazilians develop more close and friendly relationships than colleagues of other nationalities (such as the United States and Germany).
It is also important to point out that there are countries that present a more collectivist culture, while in others people are more individualistic. This ultimately defines how teams interact in a working environment, with different degrees of cooperation among their members.
3. Time Zone
It generates differences in business hours between countries and can make some communication formats difficult, such as video conferences and phone calls (when an email and text message are not enough to align a subject). Citing a case, when doing business with Asian countries, be prepared to deal with an eleven hour time zone difference, approximately, depending on the position on the continent.
4. A country’s history
Understanding how the main values of a country have been constituted and how they impact the organization of the State is another point to be observed. Nationalist governments, for example, present more protectionist measures, such as taxes and customs duties.
Moreover, the history of a country makes some issues (such as episodes of difficulties faced by the population) become taboo, and understanding whether this exists before a conversation is extremely important in order to avoid possible inconveniences.
Cultures deal with it in different ways, and it is necessary to make clear the time for the accomplishment of a certain activity in order to guarantee the alignment of expectations. There are studies that demonstrate the productivity rates of workers in each country. Sometimes forcing employees to adapt to the pace and culture of the organization’s home country can lead to reduced engagement.
6. Trade laws and standards
Understanding how the laws and tariff rules of a country have been structured helps to improve the understanding of its culture, avoiding difficulties in the processes of exporting and importing products – in this sense, we suggest that you know the main changes at Incoterms 2020!
Tips for developing Cultural Intelligence
Cultural Intelligence is very important for day-to-day business. Therefore, we listed some tips given by experts that will help develop this important skill, that will positively contribute to the purchasing departement’s activity performance. Take a look!
- Acquire knowledge about a culture in which you are interested. Read books, magazines and news, watch movies and TV shows about the country, listen to radio shows, podcasts. From these materials, you can observe people’s reactions and customs, and acquire vocabulary and expressions of the spoken language.
- Visit historical spaces, museums, art galleries and places where you can learn more about other cultures. There are several cultural spaces around the world that already offer their collection digitally, which are also an interesting option. In this way, you will acquire a relevant repertoire, which can be used in future work situations;
- When dealing with people from other countries, observe their body language, gestures and facial expressions. It is important to better understand people’s reactions, reducing possible noise;
- Always do a self-analysis, reflect on your emotions and behaviors in these situations of cultural differences, discover how you can change them in order to have a better interaction (for example, change your tone of voice and speed in speech to become clearer);
- If possible, immerse yourself in the country of your interest in order to better understand their culture. Take advantage of a vacation or leave to take a course abroad in another place, and you can have a very enriching experience when interacting with the locals;
- If you are unable to travel, learn the language of the country of interest at a distance. There are several options of websites and apps to acquire this type of knowledge, aimed at users of different levels (basic, intermediate and advanced), which allow you to interact, in some cases, with international teachers;
- In interaction, avoid reproducing common sense and existing stereotypes. That is, do not make comments that in some way generalize the group in which you are inserted (often this attitude can be understood as a sign of disrespect to the culture of your interlocutor);
- Do market research in order to detect perceptions and behaviours of the inhabitants of a region where you will do business;
- Search for information about the desired country in publications of companies and government agencies. This data is often available and published on the Internet;
- If you are a manager, implement intercultural training with the teams. This reduces cultural shocks and makes the individual a more effective, prepared, creative and open minded professional in their workplace, by allowing them to deliver their work without worrying about solving possible noises;
- If it is necessary to hold virtual meetings, try to respect as much as possible the working hours of your interlocutor, showing that you are attentive to this issue. Many people are bothered by having to extend their working hours, as they may have other social commitments;
- Study new technologies that make your work easier in the context of intercultural management (Speaking of which, check out the essential skills for the purchasing professional in the digital age). These new forms of communication can be important allies to ensure the engagement of teams in different locations;
- Ask! Don’t be afraid to question – respectfully – people about their cultures, this is an important way to create bonds and relationships, by showing interest and respect for others.
The documentary “American Factory” (United States, 2019, Netflix), winner of the 2020 Oscar’s Award, reports the entrance of a Chinese multinational manufacturer of automotive glass in the city of Dayton, Ohio. It is an interesting portrait of the challenges discussed in this text and an exercise to reflect on the importance of Cultural Intelligence within organizations.
The film shows that the city was in deep financial difficulties after the closure of the production yard of a U.S. automotive company located there, which guaranteed jobs to the population. The arrival of the Chinese organization brings optimism to everyone, however, its installation brings several tensions. Among them, the cultural clashes between American workers and the management of the emerging country, since the relationship with labor is deeply distinct in both countries.
In this article, we have seen how important Cultural Intelligence in purchasing is to ensure alignment between individuals in different cultures and situations. Whether dealing with different areas of the organization, or with employees and suppliers in other states and countries, being aware of the issue is paramount in our times. And this is a challenge for all people in an organization (not just managers).
Another important point is to have a specialized and culturally diverse team to facilitate acquisitions in different cultural contexts. For that, count on Soluparts.
Our employees, of various nationalities, speak several languages and many have lived abroad. Therefore, we have a team experienced in dealing with different cultural contexts, being able to conduct better negotiations and optimize the purchasing process. Request a quote!