Hackett Group: Digital transformation of procurement in 2019
According to The Hackett Group’s 2019 Procurement Key Issues research, procurement organisations are prioritising the transformation of digital technologies in specific areas including: (54%) modernising core source-to-pay platforms, (50%) improving analytical capabilities, (36%) accelerating the adoption of technology tools, while only a minority (14%) are prioritising data and systems security. Benchmark analysis shows that teams with higher levels of digital automation realise real performance benefits, for example: higher savings realisation, are more likely to be viewed as a valued business partner, operate with fewer headcount, and are more likely to consider data to be accurate and reliable.
While all procurement teams are transforming, most are choosing to invest selectively, with five critical development areas being cited as most popular: enhancing analytical capabilities, realigning procurement skills and talent with business needs, leveraging the value from supplier relationships, accelerating agility, and striving for true customer-centricity as priorities for 2019.
Planning for digital transformation
Over the next two years, procurement is planning to prioritise investment in the specific technologies of spend optimisation analytics, visualisation dashboards, supplier portals, and supplier relationship management systems. This represents a major shift towards adopting a data and insight driven mindset and supporting post contract supplier management efforts.
However, only a third of all procurement organisations have a major initiative in place to align skills and talent with business needs, and 27% said they intend to hire, train, or retain top talent. Even fewer plan to work on agility, improve customer-centricity, or supplier relationship management capabilities. This is disappointing, as agility is critical for procurement organisations to respond ahead of changing market conditions and business requirements. Without a focus on customer-centricity, procurement can miss significant opportunities for business value or cost efficiency, simply because they haven’t consistently understood what the business needs. Without managing supplier relationships, the additional supply chain contribution from collaboration and innovation opportunities will be missed.
Advanced analytics enable procurement to become more predictive - and less reactive - to quickly identify opportunities and accurately avoid risks. So, it’s encouraging that adoption of master data management is forecast to grow by 57% and advanced analytics by 60%. Spend optimisation analytics and dashboarding adoption rates are also expected to grow by 61%.
The business case for change
Core source-to-pay automation should reduce operating costs and eliminate transactional work, freeing up staff time for more value-added efforts. Significant value can be realised from spending more time to select the best suppliers or to align with internal stakeholders over upcoming plans and requirements. In addition, digital tools can help to identify and unlock new areas of savings and valuable opportunities as well as improving the overall experience of internal customers and suppliers.
As procurement continues to take the next steps towards holistic digital transformation, having the right people with the right skills in place will be critical to realise the full advantage of what digital can offer. In some cases, even though procurement knows what it needs to do, objectives are simply not fully translating into an effective plan of action. Procurement must become fully dedicated to advancing its capabilities in analytics, customer-centricity, agility and more, while also investing in the right talent to help lead and implement change.
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.”