Digitalization – for some digitalization is still only the paperless archiving of documents. But digitalization is much more than that. It is mentioned in the same context as globalization, urbanization and individualization. It is a common project of our economy, the sciences, the society as well as the politicians. In Germany keywords like industry 4.0, big data, connectivity (of household appliances, machines and cars), the internet of things, smart home solutions, cloud applications as well as the visualization of processes and data and the use of robots are only some examples, areas and applications of this cross-sectoral and interdisciplinary term of digitalization.
In news 4/2014 general information is given. This article describes some aspects of the current status of digitalization especially in Germany. Worldwide many big companies and groups as well as smaller start-ups are developing digital applications for various industries. Some digital solutions that are used in different functional areas and industries are discussed in the following.
In recent years for many companies the procurement department was the main driver for the realization of saving potentials. Meanwhile nearly each company has checked, changed and thus improved the organization as well as the processes of the procurement department. Based on analysis saving potentials have been identified. Main drivers are e.g. the supplier management, the pooling of purchases and global sourcing. Many years ago a lot of companies started to use auctions, electronic tenders and the procurement based on online catalogues. In this way the so called low hanging fruits or quick wins (saving potentials that can be realized in a fast and quite simple way) are in most cases exhausted. Further digitalization offers a range of new opportunities.
For example, the selection of quotations based on an automatic evaluation is easier and faster. If applicable more quotes can be compared and evaluated than before. The simulation of combinations offers further advantages to cope with a big amount of data. And in most cases this results also in a higher quality of data. Within the scope of digitalization under the keyword big data improved evaluation options are possible for all procurement data that is anyway already available. This leads to a better and more accurate planning, management and monitoring of procurement activities based on defined key performance indicators (KPI).
The biggest potentials within the scope of digitalization arise based on continuous and consistent processes, low discontinuity of media or at least standardized interfaces and trained employees. The procurement department works closely together with other areas such as logistics. In this way the expectations of transparency across the whole value chain, starting with the suppliers, the producer to the clients, can now be realized. This leads to a better planning, a reduction of the so called bullwhip effect. Further saving potentials can be realized by detecting bottlenecks earlier. In this way there is much more time left to take appropriate and thus in most cases more economical measures.
Thus the realization of the potentials offered by the digitalization requires the collaboration with external as well as with internal business partners.
And in addition in most cases the available employees are not able to cover the required knowledge in information and communication technologies. Thus it is necessary to develop appropriate competences. At least it is necessary to build up competences that enable employees and managers to evaluate the variety of offers that exist in the market and to select the supplier that is able to offer appropriate and company-specific products and services to acceptable prices and in an acceptable time frame. There are many different types of cooperation and partnering including mergers and acquisitions of companies with specific future-oriented knowledge. Within the logistics sector the participants are used since many years to build up logistics networks. And in recent years there was a development of the carriers to become logistics service providers offering a wide range of services e.g. assemble parts and deliver material and modules directly to the production lines. Further digitalization leads to a wider range of products and services.
In the production area further automation takes place. Depending on the type of production processes robots are used. Meanwhile the collaboration between an employee and a robot is possible (human-machine-interaction). In context with the digitalization machines are connected with each other, exchanging information for an optimized production process. In addition quality checks can be made faster and more accurate than a human being would be able to do it. A further advantage is that automated and digitalized production processes and technologies allow the production of a smaller number of units in an economical way. This leads to big changes not only in plant and mechanical engineering, in hightech industries and regarding medical technology but cross-sectoral.
Regardless of the sector since a long time there are comfortable solutions for the customer, e.g. the online tracking of a shipment. In the automotive area cars can be configured online. Worldwide several established and new companies are working on the development and improvement of electric cars, the connectivity of cars and the autonomous driving. In the energy sector there are many applications e.g. the virtual power plant. And the customer gets more and more possibilities to check and reduce the energy consumption. Furthermore the customer gets support to be not only a consumer but also a so called prosumer (the customer is not only energy consumer but also energy producer e.g. with a solar panel on the roof). In combination with the possibilities of digitalization new business models are developed.
In addition across all industries, companies try to get a better understanding of the customer’s needs by analyzing data. The target is to be able to offer customer-specific products and services quite often in combination with digital solutions.
Beside the optimization of existing products, processes and services, the digitalization gives the opportunity to develop a variety of applications and business models that are new to the market.
Thus digitalization includes opportunities as well as risks. For those companies that achieve to gain advantages with the digitalization there is the opportunity to improve their competitiveness. Whereas there are big risks for companies that do not carefully monitor the markets and that do not work on these digital topics on their own, giving a chance to new players with new products, services and business models. Especially smaller companies with good businesses in recent years, quite often do not spend time on the topic digitalization or at least not in a sufficient way. But also in industries with bigger companies and groups disruptive changes occur. Online shops weaken the retail shops, the print media has to fight against online services and in many countries currently the sector of taxi drivers is alarmed by new services based on digital applications.
In this way there is a risk that existing products and services are replaced by digital products or their digital production as well as by digital services. In this context quite often the use of 3D printers is mentioned, giving the opportunity to produce certain products in another way. In some cases it enables the customer to produce the product on her/his own.
In various industries already today new competitors arise taking over certain parts or even the whole value chain. In case only a part of the value chain is taken over, it is very important that the established company keeps the interface to the customer. In addition appropriate solutions regarding the cyber security are important for the future success of a company. The definition of technological standards and the expansion of the digital infrastructure are further indispensable preconditions for the success of the digital transformation and the use of innovative digital applications.
Summary: Worldwide the digital transformation is pushed by the economy, the sciences, the society and the politicians. Digitalization offers a wide range of opportunities for all functional areas within a company and across all industries. Comparable to the introduction of UMTS some years ago, cloud computing and other technological developments probably there will be no single “killer application” replacing other technologies and application. Rather, it can be expected that in each industry and within the different functional areas there will be fascinating technological developments. Risks are that new competitors endanger the business of established companies which might lead to disruptive changes in some sectors. Thus each company is well advised to observe the developments in the market very carefully, to become active, to develop digital (evaluation) competences and do partnering to keep its competitiveness and moreover to gain competitive advantages on a national and international level.
Do you need further information regarding digitalization and the described examples? Is there a systematic approach to improve processes, products, services based on digitalization and to develop new applications and business models? Are you currently working on the topic digitalization and do you need support regarding the topics customer management, operations, procurement or solutions within the supply chain management? Do you need any support or do you want to discuss any of the issues raised in greater detail? Please send an email toThis email address is being protected from spambots. You need JavaScript enabled to view it. This email address is being protected from spambots. You need JavaScript enabled to view it. .