The Hackett Group: how digitalisation is redefining procurement
With digitalisation reshaping the future of businesses worldwide, we look at the Hackett Group’s report on the impact of technology in procurement.
As digitalisation continues to rise, so does the understanding of business leaders across multiple sectors, that technology will change the future of business models. recent reports show nearly 60% seeing high to very high impact on their industry, and 72% expecting it to change their operating models within the next two to three years.
Looking closer at the procurement sector, 82% are anticipating a high impact on business functions over the next two to three years, with roughly the same seeing digital transformation influencing their operating models.
What is driving this change?
Currently within procurement, there are a number of trends impacting the sector, encouraging organisations to digitalise their operations to become not only more efficient, but enable the sector to understand its strategic objectives. Key trends such as, increased demand, disruptive technology and increased competition, require businesses to quickly adapt or face being left behind. Aas a result procurement will need to become more strategic as a business partner and operational enabler, by adopting digital tools, agile thinking and behaviours, advanced analytics and performance measurements.
Image source: The Hackett Group
The three E’s of digital value - an insight into how procurement organisations can optimise their performance evaluation in a digital age
While traditional methods of performance evaluation remain relevant, as digitalisation takes hold, procurement companies have begun to move beyond inward focused KPIs to also measuring internal and external customers.
Traditional efficiency metrics capture resource utilisation per unit of work. However, as the industry becomes more digital, companies need to better understand the total cost to deliver customised services. Insights into a company's cost to serve will increase service portfolio optimisation.
Effectiveness metrics are also seeing the effect of digitalisation, with procurement organisations leveraging technology to enhance its business performance, as a result automation and optimisation has reduced error rates and the need for human intervention in routine tasks.
As the digital era evolves, procurement needs to adopt more sophisticated customer experience related KPIs by assessing the performance from the view of the consumer of the service, in order to optimse insight in this area.
For more information on procurement, supply chain and logistics topics - please take a look at the latest edition of Supply Chain Digital magazine.
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.”