Four ways CFOs can strengthen relationships with CPOs
The most effective companies rely on a close working relationship between the chief financial officer (CFO) and the chief procurement officer (CPO).
There are a number of ways CFOs can develop and improve their working relationships with the procurement function of the business, particularly the CPO, in a bid to collaboratively drive their organisation.
Supply Chain Digital spoke with Omer Abdullah, Co-Founder and Managing Director at The Smart Cube, to find out the steps CFOs can take to improve relations with CPOs and the wider procurement teams in their business.
1. CFOs need to include their CPO counterparts in the early stages of the strategic planning process, so it’s about making sure they understand what the goals of the business are, and ensuring the CPOs know what the value levers are. CPOs have to understand what is defined as value and align procurement plans with that. Get the CPOs involved earlier.
2. Regularly communicate the financials of the business with the CPO and ensure that process goes beyond just numbers. It’s important to ask how the CPO and procurement function is helping to drive innovation and how – beyond cost savings – they are helping take the business to the next level. How is procurement helping the business transform the product or service that is being delivered to the market?
3. It’s important that CFOs are supportive of investment in technologies that CPOs need to further their capabilities, such as analytics tools or performance metrics, supplier analysis or contract compliance. Sometimes you have to spend money in order to be able to make money and make the right investments to be able to get that to take it to the next level.
4. Collaborate with the CPO to really develop a balanced approach, a balanced scorecard to evaluating procurement performance. Don't just look at unit cost savings. Look at things like impact on cash. Look at things like impact on contract compliance or broader metrics around how many suppliers do we have per million to spend? How much complexity is there in the business? How are we handling our strategic suppliers, and making sure that there's business continuity on the back of the work that we're doing there?
But, says Abdullah, it is important that CPOs also make a real effort to bring their function closer to the CFO.
"Both parties share that responsibility, I don't see it as something that only one person has to drive. I think both of them have to drive it and then they have to filter that across the entire organisation," he adds.
You can read Abdullah's six tips for CPOs to improve relationships with CFOs here.
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.”