Above Market Planning - why it's not a universal panacea!
Written by: Dave Alberts, Director, Crimson & Co
Above Market Planning, a strategy which centralises aspects of planning across markets has been implemented in some form or another by most global businesses and has become in vogue in sectors like FMCG and Life Sciences.
The drive for tax benefits, supply chain efficiency, and the need to deploy skilled resources has driven varying degrees of centralisation, as businesses view the resultant disruption and high one off costs as a price worth paying. Despite this, the level of standardisation required to make the strategy work is seemingly at odds with the growing complexity of what’s going on in the end markets.
Above Market Planning is simple in concept and involves a single point of decision making either centrally, regionally or a combination of both. It has been adopted by many global organisations to meet a variety of different requirements such as:
- Optimisation of multi-national planning decisions
- Concentration of scarce skills
- Tax efficiencies
- Leveraging benefits from low cost locations
- Using supply chain management to extend channels and the services to customers
Amongst these, there is an overly dominant influence to achieve tax efficiencies by creating degrees of over-centralisation, which may actually have inhibited cost effectiveness.
Another dominant influence has been the scarcity of good planning people, which has resulted in the consolidation and centralisation of skills. Unfortunately for many organisations, this has only provided short-term benefits - as all the existing talent eventually clusters into a small number of very expensive locations, which then become talent hotspots.
As we increasingly need to provide more demanding servicing to new geographies and new customers, in new ways, is this approach still appropriate? Or, should we be adopting a more subtle approach to centralisation that does not sacrifice customer intimacy in pursuit of supply chain efficiencies?
The overall advantages of Above Market Planning are considerable, especially when the approach is viewed as a way of effectively deploying the supply chain strategy. But, given the need for more differentiated service and more market intimacy, should we roll back this strategy?
For many, Above Market Planning organisations have become centralised and bureaucratic operations, overly focused on meeting or, frequently, failing to meet formal service measures, having lost much of their desire to serve the customer.
In retrospect many of the expected advantages of Above Market Planning have not materialised, but the last thing that is needed is another general re-organisation. What is needed is a change in attitude and alignment. Above Market Planning organisations need to become more customers orientated - starting with the people in them.
So, is Above Market Planning a Universal panacea? Well obviously not. But it is still a very valid operating model. The central challenge is how these organisations can turn themselves into entities that balance mechanical efficiency, either regional or globally, with the need to delight customers and sell more products locally.
For more details on how to correct the Above Market Planning model, contact Dave Alberts, Director, http://www.crimsonandco.com/
EU and US agree end to Airbus-Boeing supply chain tariffs
The EU and US have agreed to resolve a 17-year dispute over aircraft subsidies, suspending tariffs on billions of dollars' worth of goods that have plagued procurement leaders on both sides of the Atlantic.
Under an agreement reached by European Commission Executive Vice-President Valdis Dombrovskis and US Trade Representative Katherine Tai on Tuesday, the tariffs will be halted for a period of at least five years.
It will bring an end to punitive and disruptive levies on supply chains that have little to do with the argument, which became embroiled in the trade battle. Businesses on both sides of the dispute have been hit with more than $3.3bn in duties since they were first imposed by the US in October 2019, according the EC.
The US imposed charges on goods upto $7.5bn in response to a World Trade Organisation ruling that judged the EU’s support of Airbus, its biggest aircraft manufacturer, unlawful. A year later in November 2020, the EU hit back. The WTO found the US had violated trade rules in its favourable treatment of Boeing, and was hit with EU duties worth $4bn.
In all the tariffs affected $11.5bn worth of goods, including French cheese, Scotch whisky, aircraft and machinery in Europe, and sugarcane products, handbags and tobacco in America. Procurement leaders on both sides of the fence were forced to wrestle with tariffs of 15% on aircraft and components, and 25% on non-aircraft related products.
Boeing-Airbus dispute by the numbers
- The dispute began in 2004
- Tariffs suspended for 5 years
- $11.5bn worth of goods affected by tariffs
- $3.3bn in duties paid by businesses to date
- 15% levy on aircraft and 25% on non-aircraft goods suspended
Both sides welcome end to tariffs
European Commission President Ursula von der Leyen branded the truce a “major step” in ending what is the longest running dispute in WTO history. It began in 2004.
“I am happy to see that after intensive work between the European Commission and the US administration, our transatlantic partnership is on its way to reaching cruising speed. This shows the new spirit of cooperation between the EU and the US and that we can solve the other issues to our mutual benefit,” she added.
Both aircraft manufacturers have welcomed the news. Airbus said in a statement that it will hopefully bring to an end the “lose-lose tariffs” that are affecting industries already facing “many challenges”. Boeing added that it will “fully support the U.S. Government’s efforts to ensure that the principles in this understanding are respected”.
The US aerospace firm added: "The understanding reached today commits the EU to addressing launch aid, and leaves in place the necessary rules to ensure that the EU and United States live up to that commitment, without requiring further WTO action."
This week’s decision expands upon a short-term tariff truce announced in March this year. The EC says it will work closely with the US to try and further resolve the dispute, establishing a Working Group on Large Civil Aircraft led by each side’s trade minister.
Airbus last month signalled to suppliers that post-pandemic recovery was on the horizon, telling them to scale up to meet a return to pre-COVID manufacturing levels. “The aviation sector is beginning to recover from the COVID-19 crisis,” said Airbus chief executive Guillaume Faury, adding that suppliers should prepare for a period of intensive production “when market conditions call for it.”