Dominique Lebigot, Chief Procurement Officer of LVMH for Wines and Spirits, spoke at Lider’s 16th Procurement Conference about what will affect procurement in the next 10 years, reflecting on changes over the past decades. His forecast is that all companies will reach the so-called web 4.0 where it will be more important than ever to connect with suppliers who will ultimately become clients and customers of the company’s products, thereby impacting the company’s revenues. As he explained, during the era of web 1.0, companies connected with each other. Web 2.0 led to the connection of people through social networks.
– We are now moving to web 3.0 where more and more things and objects in the supply chain are connected. You can connect with the final products of your manufacturers and suppliers. Today our superiors are not directly connected with clients, however, this will change in the future. There will also be web 4.0 which will connect markets. The company will be organized around so-called upstream and downstream markets, two poles that we currently do not connect, but we will soon – said Lebigot, explaining by example that they at LVMH are already connecting these two markets.
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– We wanted to achieve revenue growth through the principle that our suppliers become our customers, for which we had to make a plan and advertising campaigns to market our products to suppliers. We wanted to see if there are any companies we can acquire, looking at the key performance indicators of those companies. We produce high-quality products and everyone who has the opportunity to try them knows what top quality it is – explained Lebigot, believing that by selling final products to their suppliers, they can develop the business.
From Mere Transactions to Collaboration
Lebigot concluded that the best way to be better than the competition is to develop a separate, individual relationship with each supplier. There should be no competition among each other but rather collaboration, learning, and exchanging knowledge.
– Our suppliers must collaborate with us. This means that we are moving away from competitive relationships and towards collaborative relationships, which creates collective intelligence – concluded Lebigot, adding that in this way all stakeholders contribute to the company’s revenues.
It is necessary to redefine the way of communication with suppliers and improve collaboration with them, but how? Lebigot believes that the secret lies in changing the mutual relationship. Collaboration with suppliers should extend beyond the framework of mere transactions (delivery of goods and services and payments) and thus require suppliers to contribute to the company’s revenues. LVMH has so far developed a ‘supplier activation’ program in the United Kingdom, Europe, South America, and beyond.
Digitalization of Procurement
The procurement as we know it today will change in the future as automation and other tools will affect its operational activities, was the thesis of the presentation by Marcello Vollmer, partner and director at Boston Consulting Group (BCG).
Vollmer also emphasized that the automation of procurement processes, i.e., digital transformation will help procurement managers focus on other, even more important aspects of the job such as creating value, driving innovation, developing supply chain resilience, and improving business operations. They will thus have more time for strategic decisions. This will make them, as well as their business, more efficient.
