Cost reduction key focus for procurement leaders
Within the Asia Pac...
79% of procurement leaders plan to focus on cost reduction, according to The Deloitte Global Chief Procurement Officer Survey 2017.
Within the Asia Pacific region year on year savings performance has improved, with 55% of CPOs indicating better performance than last year.
However, reducing cost is by far the biggest priority for CPOs in this region (73%).
Consolidating spend is the lever which is expected to deliver the most value in the next 12 months.
The same is true in the EMEA (Europe, Middle East and Africa) region, where the main priority for the CPOs is reducing costs, with 77% indicating it is a strong priority.
North America, however, has the greatest percentage – 84% – of CPOs ranking cost reduction as the biggest priority.
Across different industries, cost reduction was a key priority.
77% of CPOs within the consumer business sector will be primarily focused on reducing costs, with very little attention being given to disposing of assets or increasing CapEx.
In the technology, media and telecommunications sectors, reducing costs is the top priority for 91% of CPOs this year.
Education was not one of the sectors highlighted in the report, but budget cuts in many parts of the world mean that cost reduction is also a priority there too, with technology playing an important role in this.
“Applied technology, increased reliance on technology for us, automating the transactional activities has increased our efficiency, our ability to deliver more value and increase the cost savings of the university,” said Hanan Itani Ramadan, Director of Procurement and Contracts Administration at the American University of Beirut.
“Innovation is one of the key elements in improving our cost-saving margins, because when we learn about the user's needs early enough in the process this helps us better understand the requirement and research the market for the most economical alternative.
“Buyers need to be innovative and to search for alternatives, and the communication with suppliers and negotiating better terms and conditions.
“Communication is a part of the whole process of the procurement, and you can deliver better results when you're applying innovation.
“You have to be creative and innovative in the processes that you apply in addition to coming up with solutions to improve efficiency and effectiveness.”
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.”