Procurement in the Internet of Things

Studies show that by 2020, there will be 50 billion connected devices on the market. From clothing with embedded payment functions to connected cars to ‘smart’ factories, the potential for connected devices hasn’t even been realized yet, as innovations come each day to change the way that organizations are looking at connected devices.

Of the innovations that will change the way that organizations operate, the elephant in the room is the connected manufacturing organization, an organization whose machines will share information across the global value chain that integrate communications and data into business workflows, plant systems, Manufacturing Execution Systems (MES), enterprise resource planning (ERP), and much more.

While this has already created a broader need for infrastructure—companies are making a move to 5G networks earlier than previously expected—Internet of Things and Machine-to-Machine communication are still in their infancy, posing risks for organizations nearly as high as the potential rewards.

Simply put, connected devices will become embedded in your organization, but without security measures and contingency plans, the risks could become insurmountable.

Procurement in Connected Manufacturing

Knowing that a hack could impact your supply chain, your procurement processes, and your payments, it is important to be able to monitor any discrepancies and changes that occur within your system.

A CPO Rising article took a look at three points in which IoT will impact a procurement organization—technology, processes, and people—that will need to be monitored in order to optimize procurement in the IoT era.

Technology

Everyday devices that contain processors, sensors, and an internet connection will monitor and report on a growing number of direct and indirect spend categories for procurement teams and ultimately reduce manual monitoring and reporting.

• Direct: Direct spend categories, such as inventory, can be monitored and managed via sensors in warehouses that measure the volume, quantity, or quality of a commodity, automatically placing orders when inventory hits a certain level.
• Indirect: Indirect spend categories, such as building or machine maintenance (in CPG or manufacturing) can be aided by sensors that monitor system “health” and “life expectancy”, so that as systems, machines, or components malfunction or near the end of their “lives,” service can be scheduled or replacements can be ordered.

Processes

Thanks to the Internet of Things, laborious, tactical tasks can be automated, enabling procurement leaders and line-of-business users to be more strategic. This will allow procurement to “connect the dots” faster and more efficiently throughout the procure-to-pay (P2P) process, only slowing down for certain tasks like on/off-boarding, or to fix minor errors.

People

As procurement adopts greater process automation and collects greater volumes of business intelligence data, it will become even more important – and challenging – to find the right mix of talent to locate, harness, interpret, and communicate the meaning of all this information. As a result, Chief Procurement Officers will place an even higher premium on technological skills, particularly in data warehousing and analysis.

Bringing It All Together: Payments in IoT

Technological change in the modern era is making an undeniable impact on the way consumers and businesses make payments. Having the right technologies, people, and processes in place, combined with a data management strategy can provide an organization to create more strategic procurement leadership that works with every facet of the organization to drive change.

With all of the data being generated, organizations will need visibility measures in place to ensure that everything runs smoothly throughout the entire value chain. Learn more about bringing the Internet of Things and Payments closer together by reading the following resources:

• Welcome to the 4^th Industrial Revolution
• Payments in the Internet of Everything
• Making the Connection: The Internet of Things and Payments