Procurement 4.0: How Industrial Customers Transform Procurement Processes to Capitalize on Digital Servitization

Abstract

The rapid development of digital technologies can revolutionize industrial companies’ operations through the procurement and application of digital solutions following a logic of digital servitization. However, industrial customers must refine their internal processes to exploit the potential servitization. In this transition, the procurement organization is pivotal in orchestrating relationships between its internal functions and supplier's ecosystems. Yet, traditional procurement processes are poorly suited to the evaluation and procurement of digital servitization offerings, hampering value cocreation between suppliers and customers. The purpose of this article is to investigate how procurement process models can be adapted to address the opportunities and challenges of digital servitization for industrial customers. The investigation is based on a case-study design, drawing on data collected through in-depth interviews with informants from 11 leading customers and 8 global suppliers. Based on the data analysis following the Gioia methodology, in this article, we describe key challenges with the traditional approach and identify novel procurement practices to capture value from digitalization. The article's key contribution is to propose a process model for Procurement 4.0, highlighting four phases: mapping digital opportunities, selecting digitalization partners, codeveloping digital solution contracts, and promoting continuous digital innovation. Furthermore, we define three overarching principles for procurement 4.0: nurture digital ecosystem generativity, orchestrate cross-functional integration, and leverage supplier capabilities through agile cocreation.