Last week we reported on our visit to Procurement Week, the Institute for Competition and Procurement Studies Bangor University event, which is sponsored largely by the ESRC. We talked about the morning session: the Internet of Things and the future of public procuring. The afternoon session followed a very nice lunch, pictured, which was fresh, healthy and very tasty. I remarked to Dermot Cahill, our esteemed host, that ICPS always manages to do good food, and he imparted a little bit of his procurement wisdom “you know Nancy,” he said, “the difference in cost between procuring ‘rubbish’ (polite form) and decent, healthy food, is pennies … you just have to be bothered to source it properly!”
Back to the afternoon session – it carried on along a similar theme to the morning, but focused more on procuring for our smart cities, transportation and supply chains. The presentations we are told will soon be available for you to listen to on-demand, so here is just the essence for now.
The keynote address from Charles Toosey, Grant Thornton, gave us some fundamental truths about the future of procurement: that companies must invest in technology to remain competitive, and that people (the experts) need a strategy. By this he meant that we must ‘plan for the impossible,’ so when change happens we can adapt.
Nowadays, supply chains are long – they need to speak to each other more. For example, OEMs need to understand their suppliers better, not just their customers. And this begs the question – can the supply chain create a strategic alliance to fulfil future demand, because while there is already 85% automation in manufacturing – the same does not apply to the supply chain, especially tier 2. He also mused on how 3D printing will affect the supply chain – will parts of it disappear? The digital revolution is running really fast.
It’s worth mentioning a question from the audience at this point, about the level of public sector awareness of what’s going to happen. And the discussion turned to how, in the public sector and especially at local level, there is little collaboration among services. But, like in a future where social care and health will talk to each other and share budgets, a similar scenario is anticipated for police, fire, ambulance services, and so on. Why should one service have different policies from the same service 40 miles away? There is too much disconnect and inefficient procurement in the public sector, was the main feeling. We must seek out more opportunities for communal policies.
A good point was made, that if we want to really take innovation seriously, then any capital that goes into innovation initiatives should not be taxable – but that’s a whole other discussion for another day.
We then heard from Mikele Brack of UPPlift Toronto. She talked about the growing urban population and the technology that will be needed to support it. Global change will bring opportunity for more government initiatives; cities will have to develop, deliver services and stay competitive if they want to attract people and industry – albeit with decreasing budgets. So this is where we have to use technology more wisely. The driving opportunities for public procurement lie in transport, energy, and buildings, especially in social housing. But how do you sell something to the public sector that you can’t yet see? We’re talking innovation.
Now, we’ve nearly all got personal digital devices, and the big tech companies are responding by developing solutions we can use them for. But small companies lack the opportunity to attract the investment to showcase what they can do. So UPPlift Toronto is supporting them. They find innovators a location to pilot their inventions and get third-party validation to help them be procured by the public sector. By way of example, you may have seen the solar-powered benches around London that have USBs, where you can charge your devices and get wifi.
Next we heard from Simon Ings of B/E Aerospace on how one industry is exploiting the IoT. Aerospace has always been an industry at the forefront of tech adoption. The automation of RFPs and RFQs, the cost benefits of being online for vendors, suppliers all working to the same standards, less investment in human capital, are all essential in this very standards-driven industry. But, he reminds us, you only get out what you put in. It’s the job of procurement to make sure the data entered is correct to start with. Embracing IoT will always come down to good data. For example, there are about 250 sensors on each engine, with 422 TB of data generated that will tell us about issues at varying heights. This is all useful for procurement and helps us talk to suppliers. Procurement can make sure MRO have the right equipment at the right time, to stop a plane being stuck on the tarmac any longer than is necessary, losing money.
Two major developments are massively impacting this industry’s supply chain – 3D printing, especially of parts which could be made available within hours, and supply chain mapping, helping reduce risks with multi-tier maps and scenario planning. And don’t forget the importance of communication – lack of intelligence can cost you lots of money. We have to understand the market as well as the commodity. But fear not the future, he says, the day-to-day tasks for procurement will remain important: managing contracts, face-to-face supplier audits, etc will always be needed.
And what about vehicles? How does IoT apply to them? Peter Frederick of IXION says, if you consider, when it comes to data, first you have to detect it, then transition it to where you want it to be, then process it, then display it. Take the example of worn-out tyres. 300 million tyres are sold a year in the EU. About 20% are illegal in terms of remaining tread – this is serious. So how do you make sure people are aware of their tread limit? Well, it’s easy to solve, but it requires people to do something, to bother to go and measure their tyres. So they’ve helped get funding for the development of a stud that fits into the tyre, basically with a battery and transmitter. As the tyre wears down it sends data to your device, in car or mobile. There are associated problems at this stage, like where do you display it all, but the point is – this is just one type of data we can get from vehicles. How about driver habits, terrain conditions to help determine whether it’s suitable for certain vehicles. There’s a huge amount of data that could be extracted from every car, the question we need to ask is, what do we do with the data once we’ve got it. It’s certain that it will impact the buying behaviour of organisations going forward.
An interesting afternoon, with one clear message that came from the audience: public procurement is not necessarily aware of all this development. Large companies need to improve their relationships with the public sector. And the public sector needs to make it easier for small companies that find it difficult to get fact time with government. We need to focus less on transactions and more on relationships.