BCG's Strategic Priorities - The Digital Procurement Journey
In a world of constant technological advancement and digital adoption across industries, it can be easy to forget that most companies’ procurement is stuck in analogue. Sometimes old is gold, but in this case, traditional methods leave a lot to be desired, and digitisation is knocking at the door, offering to remedy any issues.
You can’t just ‘go digital’, though. To successfully transition, your organisation must have a digital procurement strategy─an effective one, at that. The strategy will tailor solutions that unleash the full potential of digital. Procurement leaders and trailblazers can guarantee successful implementation through an effective strategy, but to begin, they must first identify the core values within an organisation that can be disrupted by emerging technologies.
BCG’s Strategic Priorities for the Procurement Organisation’s Digital Journey
As leaders in the field, chief procurement officers, or CPOs, should always prioritise the adoption of digital systems, in an effort to drive change where their organisation needs it most. By going digital, CPOs can change the game for their companies in a myriad of ways.
- They can open new doors and access enormous levels of innovation through the interconnected global supply chain, which is often a cheaper solution to our traditional, analogous methods.
- Through the use of robots, machine learning, and artificial intelligence (AI), every stage of the payment and procurement process can be streamlined, mitigating any potential human risk and speeding up each segment.
- With access to data analytics, CPOs can monitor and support activity by analysing and archiving the data collected throughout the procurement cycle, and pinpointing areas where improvements can be made.
Procurements Digital Innovation
Digital adoption is fairly daunting for some organisations, but with a good strategy, it can be an easy, fairly seamless transition. Software and systems are interconnected, designed to do the legwork for you by efficiently collaborating in the existing landscape, rather than overriding original programmes. So there are no drastic measures necessary.
Digital technology is already disrupting every part of the procurement process and is allowing industry-leaders to, according to BCG, better their organisations’ back pocket with 5-10% cost savings and a 30-50% increase in efficiencies across the department. And, in a world where competition is growing on a daily basis, getting the edge on your bottom line and efficiencies is fast-becoming one of the most important factors the keep ahead. So what’s not to like?
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.”