Could CPO role be replaced by Chief Value Officer?
A decline in costs-cutting in favour of strategic procurement and value creation could see a shift from Chief Procurement Officers to Chief Value Officers.
That’s the verdict of the Advanced Procurement Trends Report 2018; previous surveys had found 80% prioritised cost-cutting however, this has dropped by half in the last three years, with under 40% now seeing this as their main objective.
Over 175 global business professionals were quizzed in the seventh annual procurement trends survey, which also revealed more than 60% have a procurement strategy that is well defined, aligned closely with organisational priorities, or stated there was complete symmetry between procurement activities and organisational needs.
Despite optimism around the growing strategic importance of procurement, just over a fifth of respondents (22%) believed moving from a tactical to strategic function was the biggest challenge they will face in 2018.
Another 27% felt their biggest challenge was procurement being seen as a barrier rather than an enabler.
Mark Dewell, Managing Director – Public, Private and Third Sector - Advanced, commented: “The report reveals how the role of procurement is transforming as it provides a more strategic approach – one that aligns seamlessly with the overall business strategy.
“As part of this process, we expect to see a major shift from the traditional Chief Procurement Officer role to one of value creation and thus, the introduction of the Chief Value Officer (CVO).
“It’s extremely positive to see the historically tactical perception of procurement starting to fade in favour of a much more strategic and business critical function. Our research shows how procurement is adapting to new challenges and playing a more valuable and vital role in today’s increasingly agile and competitive organisations.”
Supporting the move away from cost-cutting, the research also revealed 44% have a savings target of just five per cent or less for the coming year. However, bucking that trend is the public sector, with almost a fifth saying their savings target is greater than 15%.
As procurement becomes more strategic, unsurprisingly, significant shifts in the importance of data and technology were uncovered, with 96% of organisations planning to maintain or increase their investment in technology this year.
While last year, ‘big data and analytics’ were deemed the technologies most relevant for procurement in the next five years, in 2018, ‘supplier networks’ has topped the table, followed by ‘big data and analytics’ and ‘Cloud-based solutions’. Blockchain’ was also included in this list as a technology seen as relevant.
Dewell said: “Our research suggests procurement teams are continuing to invest in technology to support digital transformation. There is a lot of excitement in the industry around emerging technologies, with artificial intelligence (AI), robotics and blockchain appearing on the radar.
However, it’s clear the current focus remains on more established technologies, such as supplier network and the Cloud, which are essential components in streamlining processes and boosting productivity.”
Bringing the importance of procurement to the fore, the research also found that in 2017, 95% of businesses saved money through dedicated procurement activity. Just over a fifth of procurement departments will increase their headcount this year, most likely in order to support digital transformation, while over half are increasing their training budget.
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.”