A look at Applus+ digital transformation of the supply chain and the challenges to come for the procurement department
A decade ago, the role of a procurement department and its Chief Purchasing Officer (if the role existed at all) was often relegated to a monthly meeting of the accounting department in order to briefly discuss the cheapest possible way to acquire products and services. Today, the business community has “moved on from the idea that procurement is just a cost cutting department. Now, it's a department that adds value to the company and is capable of driving change inside the organisation,” says Montse Empez, Chief Purchasing Officer at Applus+. Founded in 1996 and headquartered in Madrid, Applus+ is one of the world’s leading testing, inspection and certification companies. It provides solutions for customers in multiple industries to ensure that their assets and products meet health and safety, quality and environmental standards and regulations. Applus+ operates in more than 70 countries and employs 22,800 people.
Joining the company in 2011, Empez was tasked with a unique and engaging challenge: building Applus+’ procurement department from the ground up. “Since I joined the company, I have seen tremendous change in the perception of procurement and the involvement that we now have in strategic decisions. It has not been an easy path; we have had to show we’re adding value to gain that confidence,” Empez recalls. Touching on the long-term digital transformation of Applus+ procurement department, Empez discusses her journey so far, how the growing importance of the procurement department has led to increased challenges, and the ways in which digital transformation is instrumental in overcoming them.
The pervasive digital transformation of the business landscape is, Empez asserts, the touchstone by which every procurement department will be judged by history. “It’s the hot topic right now. Everyone is talking about procurement digital transformation,” she notes. “We are trying to integrate all the companies to access data via either API or web services, so that we can gain access to information incredibly quickly. That sort of implementation will hopefully allow us to be proactive rather than reactive.” Gathering data from the 70 countries across which Applus+ operates has been no mean feat for Empez, who faced initial challenges at home and abroad. “When I joined Applus+, the first thing I found out was that there were no procurement specialists in Spain. The company had an external procurement department that was just processing local purchase orders and invoices, not doing any procurement as such. So, one of the first decisions I made was to internalise that function,” Empez recounts.
Outside of Spain, she quickly discovered that Applus+ operations in most countries lacked a procurement process, and those that did have one weren’t standardised. “We had no spend visibility and no global deal or agreement in place for our fleet. Applus+ has over 5,000 vehicles, which represent one of the most important requests for proposal (RFPs) in the company, so that was the first thing I tackled,” says Empez. After reworking Applus+ fleet management, Empez worked on developing procurement policies to demonstrate which software solutions system would best suit the company’s needs. “A year after I joined the company, I raised the department’s needs with the board of directors, and they agreed to launch an RFP. I'm proud to say that six years after the first implementation, we now have 13 countries using it. It's not complete, but it's a great start,” says Empez. “With the new system, I started getting information that meant we could make smarter decisions and ensure compliance.” Now, Applus+ is in the process of migrating its procurement department again, this time to SAP Ariba’s service. “Ariba is a much more robust system than our previous deployment,” Empez explains. “It gives us additional advantages with regards to our procure-to-pay process, and it allows us to implement rules with procurement to be more consistently compliant. We are very satisfied with the Ariba deployment and what we can get out of the system.”
Empez maintains that, regardless of the solutions in use, one of the greatest challenges of the digital transformation of procurement is an increased focus on compliance. “Procurement is coming under more and more scrutiny,” she says. “There are increased controls and compliance standards on the procurement process now, especially relating to things like Corporate Social Responsibility (CSR). Procurement is something that can, if done poorly, really hurt a company’s reputation.” Sustainable practice across the procurement department is another avenue through which responsibility increases alongside importance. “Sustainability in the supply chain is taken much more seriously than 10 years ago,” says Empez. “We're doing a lot of things: we want to make sure that we work with suppliers that are sustainable in the way they operate, so we have a pretty strict evaluation and qualification process. The same goes for our products.”
Looking to the future, Empez sees emerging technologies like Big Data, prescriptive analytics and the Internet of Things (IoT) as key to overcoming the challenges facing procurement departments. However, she observes, while the majority of companies are, in some way, adopting artificial intelligence (AI) and predictive analytics, this investment is not being seen enough in the supply chain and procurement departments. “These technologies will play a significant role in procurement. My question is ‘when?’ I don’t think the market is ready yet. Applus+ has implemented AI tools in its systems for checking things like the procure-to-pay process. But the reality is that only maybe 1% of our suppliers are ready for an AI integration.” This is something that Applus+ is putting a great deal of emphasis on going forward. “In all our new RFPs we're looking for digital players,” Empez explains. “Through this intelligence, we can definitely improve efficiency and cost.”
Empez relishes the ongoing challenge and dynamic nature of her role. “Right now is a fantastic time, because my role and department are changing the organisation. By 2020, I hope we will finish our department’s digital transformation. Of course, there will always be new things,” she laughs. “I’d like Applus+ to be ahead of the market, no matter what kind of changes arise. By next year, I hope we have a consolidated structure and are ready to take on new challenges and projects.”