Traditional procurement and collaboration methods have become outdated and inherently inefficient in today’s world. To survive, industries have no option but to embrace change, writes Schneider Electric’s Stacy Van Dolah-Evans.
As we shift into an environment where infrastructure, technology and entire supply chains need to work together, share data and drive change to achieve carbon reductions to meet net zero, we can no longer simply believe that today’s model is sufficient.
FIDIC’s latest State of the World report on digital technology and net zero is important as whilst the topic is broad it does highlight the increasing need for action. Below are some of the key factors that demonstrate why traditional procurement is no longer fit for purpose and that the way we all work has to change.
Lack of flexibility: Traditional procurement methods are characterised by rigid and sequential processes, which can be slow and inflexible. They follow a linear path from project initiation to contract award, often resulting in lengthy procurement cycles. In today’s fast-paced business environment, organisations require more agile and responsive procurement approaches.
Limited supplier engagement: Traditional procurement tends to be a one-way process where the buyer sets requirements and seeks bids from suppliers. This approach restricts supplier involvement and collaboration during the early stages of project planning, limiting opportunities for innovation and value creation. Modern procurement recognises the value of early supplier involvement and emphasises strategic partnerships, but these models still do not fully engage manufacturers, software developers, engineers etc early enough in the process to ensure that every effort to reduce carbon and optimise is undertaken.
Focus on lowest cost: Traditional procurement methods often prioritise selecting suppliers either solely or primarily based on the lowest price. While cost is an important consideration, it should not be the sole determining factor. This focus is going to become increasingly stark as carbon reductions are required and low-carbon solutions may not always be the cheapest option. Emphasising the lowest cost can also lead to quality issues, delivery delays, as well as increased risk. Modern procurement recognises the importance of considering total cost of ownership, quality, sustainability and other factors.
Limited transparency and accountability: Traditional procurement processes may lack transparency, making it difficult to track and evaluate processes and outcomes. This can lead to a lack of accountability and potential corruption. Modern procurement practices prioritise transparency, fairness and accountability to ensure ethical and efficient procurement processes.
Inefficient use of technology: Traditional procurement methods often rely on user-based, manual, or even paper-based processes, which can be time-consuming, error-prone and resource-intensive. Artificial intelligence can and will play a role in changing this going forward. With advancements in technology, organisations can leverage digital tools and platforms for streamlined procurement processes, automated data analysis and improved decision-making.
Changing business landscape: The business landscape has evolved significantly in recent years, with globalisation still important, but also with a rise in protectionism, technological advancements and changing customer expectations will not always align to such shifts. Traditional procurement methods may struggle to adapt to these changes and may not effectively address emerging risks and challenges, such as supply chain disruptions, cybersecurity threats and sustainability requirements.
There is a major upshift in the requirement for intelligent electrical devices and BMS for the optimisation of buildings. This further exacerbates the need for clients to engage early with technology vendors to manage supply and demand risk. For example, demand for intelligent electrical distribution and the rise in electric heating and electric vehicle infrastructure is growing as the urgent need to decarbonise accelerates electrification and digitisation of buildings and infrastructure. Due to this growing demand, technology providers are increasingly prioritising certain customer types that are focused on intelligent solutions.
Emphasis on value creation: Modern procurement practices recognise the importance of value creation beyond cost savings. Organisations now aim to achieve strategic objectives, such as innovation, sustainability, social responsibility and risk mitigation, through their procurement activities. Traditional procurement methods are still widely used across the globe and going forward will not be sufficient to adequately address these broader objectives.
What can be done to address this?
In response to these limitations, many organisations are adopting modern procurement approaches, such as strategic sourcing, collaborative procurement, e-procurement and supplier relationship management.
These approaches aim to overcome the shortcomings of traditional procurement methods and align with the evolving needs and challenges of the business environment. Schneider Electric stands at the forefront of digitalisation within the procurement domain, leading the transition from traditional to modern procurement practices worldwide.
This journey might be a bumpy one for the construction sector being considered the least efficient sector in world industries and if we were to embark on the journey to achieving net zero, drastic change is inevitable.
Schneider Electric enforced the lessons learned from Technopole for the IntenCity project (see full report for details), taking a different route toward the procurement market. Schneider selected appropriate parties who could deliver outcomes to BIM Level 4.
This project showcases the transformative power of software industrialisation and modern procurement, where BIM 4 models and collaborative software played a pivotal role. By employing a streamlined machine process, the project was completed within the allocated budget and on time.
This success story highlights that the need for change extends beyond software alone; it underscores the significance of transforming the entire process, fostering a collaborative environment where all parties work together harmoniously.
Throughout the projects (starting in 2014), Schneider Electric conducted a study of all available software packages the industry uses, from design to completion; architect to cost consultants and project managers to technical engineers. What we discovered is that the software packages were not designed to work together; they were all legacy systems.
Through this study, Schneider and its partners have determined that with traditional procurement and delivery methods, it will be extremely difficult to achieve net zero carbon goals. The way forward must be modern procurement, data sharing and collaborative agnostic software. As highlighted by this report the journey to net zero is not just a carbon journey it is going to be a data and intelligence-driven one.
Stacy Van Dolah-Evans is the global segment director – design firms, for the digital energy division at Schneider Electric. He was a contributor to FIDIC’s new State of the World Report entitled Digital Technology on a path to Net Zero. Click here to read the full report.