Procurement 4.0: How the digital disruption supports cost-reduction in Procurement

Abstract

Paper aims: "Without purchasing, Industry 4.0 will not take place". Procurement ensures supplies at the lowest level of costs. Those costs account for more than 50% of the gross production value. This paper analyses, explains and proves that digitization reduces cost even further. Originality: This empirical examination as well as the explanatory approach are key supplements to previous survey-based studies on the effect of digitization on procurement costs. Research method: The digitized procurement process and the application of technologies were analysed in detail by establishing a Procurement 4.0-Framework in order to prove evidence of digitally induced cost-cutting effects. The hypothesis that the use of Industry 4.0-Technologies leads to cost reductions is empirically tested with data by the federal statistical office. The Pearson correlation coefficient measures the strength of correlation between the degree of technology usage and costs of material and commodities. The correlations are empirically tested using a t-test. Main findings: The correlations' strength between digitization and the development of procurement costs enables to confirm the hypothesis and allows an in-depth analysis of technology-specific effects based on a Procurement 4.0-Framework. Implications for theory and practice: This paper effectively supports the implementation of technologies for the reduction of costs.