Kearney: making digital procurement work for you
Digitalisation, one of the top trends of the decade. As industries across the board race to be disruptive, we look at Kearney’s research on digital procurement.
Over the years, the use of technology in business models has evolved into not only providing value for a business, but has become a powerful force for top-line growth, bottom line efficiency and radical business transformation, allowing businesses to become smarter, faster and more scalable. As a result of this disruption to the supply chain, business leaders are beginning to rethink the traditional operating methods for procurement, real time access to market data and trends has taken procurement to the next level, offering valuable insight into top-line strategic decisions.
What does digital procurement look like?
Over time, the functions role has changed from transactional management to strategic sourcing. With this in mind technology such as automated downstream procurement activities can be harnessed to shift the focus onto driving collaboration with external partners, creating innovative business models.
To achieve this new approach there are two challenges that need to be addressed:
Adopting technology to become more effective
Using digital innovation to work in new ways
Utilising technology such as artificial intelligence, automation and advanced analytics will empower the procurement sector, to be able successful management of more complex categories to unlock new value, while maintaining downstream transactional activities.
However with this expansive amount of technology available to the industry to digitise procurement. It is important to maintain a clear picture of what is needed, this can be broken down into two areas: upstream strategic procurement and downstream operational processes.
Upstream strategic procurement
When it comes to upstream strategic procurement, it is essential to have a deep understanding of spend and market insights as well as having a connected supplier network. To make this digital, the strategy must feature spend visibility, transparency and advanced analytics.
Downstream operational processes
The downstream operational processes in procurement are frequently transactional and involve a lot of vital, but repetitive tasks that require accuracy and consistency. To make this process digital, companies should focus on automating these processes and ensuring compliance.
With any successful digital transformation journey it is important to build the right infrastructure in order to learn and adapt to emerging technologies. Typically, forward-thinking companies invest in becoming proficient in the key technology areas, by adopting a variety of innovation models.
As the procurement sector embraces the world of digital, companies should also keep in mind that there will be a structural change within the organisation as resources have new allocations, and the ways in which people work change. It is currently predicted that by 2025, 20% of procurement employees will become data experts, with 70% of savings being generated by data analytics.
For more information on procurement, supply chain and logistics topics - please take a look at the latest edition of Supply Chain Digital magazine.
Image source: Kearney
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.”