Sep 14, 2020

Bain: Helping Build World-Class Procurement Organisations

Bain
Procurement
Oliver Freeman
3 min
Bain: Helping Build World-Class Procurement Organisations
Find out how Bain estimates that companies can reduce their purchasing cost base by an average of 8-12% plus an additional 2-3% savings annually...

Procurement is a department that many organisations tend to let slip. They slack a little on the optimisation of processes because the majority are unaware of just how lucrative an excellent procurement department can truly be. Lucrative through savings and increased productivity, that is ─ which is why organisations falter, because executives and business leaders often only take the ‘inbound’ cash flow into account, and tend to maintain supply chain relationships for a prolonged period of time through a form of loyalty, or comfort. Bain is looking to change that relative ignorance, with a unique three-stage approach reduce procurement costs for global organisations, bolstering bottom lines and igniting further growth across the board.

It’s usually the case that companies have huge external spends─oftentimes; it’s actually the largest expense. Regardless of that fact, external spend remains one of the least scrutinised aspects of the budget. Odd, right? It turns out, when consultants get involved with organisations on a supply chain level, they tend to focus on improving procurement effectiveness and tactical improvements like price negotiations and changing the volume pooling. 

Bain has come up with an alternative method of consulting organisations in an attempt to turn their procurement departments into world-class leaders.

Spend X-Ray

Using unique visual imaging software, the ‘spend x-ray’ assists organisations in understanding what they’re buying; who is buying it, and where it’s being bought from. It’s all imaged as an automated spend cube which gives companies an excellent overview of their spending through data analytics, supported by Bain’s dedicated procurement centre of excellence. 

Buy Better + Spend Better

With a comprehensive plan to reduce spending, Bain’s collaborative system combines the proprietary spend, savings benchmarks, category expertise, spend drivers, and complex analytics to analyse data. This system takes a broader and more integrated look at each organisation’s unique circumstances and identifies the best saving opportunities available. Not only that, but the system also aims to go a step further than just price optimisation and supplier acquisition, by focusing on improving demand management and understanding the total cost of ownership across multiple projects, in realtime. 

Capabilities

Bain is looking to help organisations build the right capabilities, through the adoption of the right organisational structure and by employing a diverse, but correct set of talent across the company. They do this so that your organisation is sustainable in the future, long after their own engagement has ended. 

The very best firms out there have the best of the best, not just on a technological solution level, but also on a people level. They’ve got the right models and the right talent, demonstrating that with the right level of augmentation, the sky is the limit. By providing the best tools and empowering the right talent through ample training and resources, organisations find that, in the right environment, they can optimise their productivity and the results stick. 

In fact, by following these simple steps, Bain claims that there’s “a typical one-time cost reduction of 8-12% for their clients, with ongoing 2-3% annual increased productivity benefits.”

These are tangible results that, if your organisation is savvy, can be reinvested in other parts of your business to fuel further growth and successes. 

Source: https://www.bain.com/consulting-services/operations/procurement/

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Jun 16, 2021

EU and US agree end to Airbus-Boeing supply chain tariffs

supplychain
Boeing
Airbus
tariffs
3 min
Supply chains embroiled in Airbus-Boeing dispute will no longer be impacted by $11.5bn tariffs imposed on food and beverage, aircraft and tobacco

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.”

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