Making procurement a 2012 priority
Written by William Gindlesperger, Chairman and Chief Executive Officer, e-LYNXX Corporation
A wise New Year’s resolution is to assess how more can be done with existing resources. This is certainly true as organizations continue to look for ways to squeeze every penny out of every dollar. One proven way of maximizing resources is to save on goods and services through the purchasing process.
Often relegated to back-office operations, procurement has earned its place at the strategic decision-making table of any organization that wants to improve its bottom line. According to the most recent survey of chief procurement officers by Capgemini, 79 percent of chief procurement officer respondents stated that procurement must be more focused on “improving an organization’s bottom line.” The Capgemini survey also found that more than 70 percent of purchasing functions now report directly to boards of directors, and more than a quarter report directly to chief executive officers.
Given the growing importance of procurement, there are some basics that must not be overlooked to establish a cost-effective and efficient program:
- Plan properly - Consult with departments within the organization to determine projected needs, timetables, quality and quantity requirements, budgets and frequency of orders. Inadequate planning will lead to problems. Centralize purchasing of similar items where possible.
- Assign accountability - Establish roles and responsibilities so all know who is responsible for such key decisions as quantity, quality, design, deadlines, final approvals, etc. Get as many decision-makers as possible involved in the planning process so all bases are covered from legal to shipping.
- Ensure transparency - Make sure all participants in the procurement process, internal and external, know that procurement ethics will be applied to ensure fairness and avoid favoritism or any relationship that may seem questionable.
- Be legally compliant - Be meticulous with all contracts, orders and licensing agreements so as to ensure that everything is legally sound with every client before the procurement process is initiated.
SEE OTHER TOP PROCUREMENT STORIES IN THE SUPPLY CHAIN DIGITAL CONTENT NETWORK
- Welcome innovation - Seek new approaches to procurement that were not available just a few years ago. New procurement technology, such as automated vendor selection technology, is reducing the cost of custom goods and services by an average of 42%.
- Be clear - Communicate in a way that is easily understood and in a way in which all participants are informed in a timely manner about key decisions, tasks, quality, quantity, deadlines, changes and delivery.
- Establish payment terms - Do not leave anything to chance regarding how payments to the successful vendor are to be calculated once they have been awarded the contract. Make payments on time.
- Document everything - Ensure that the whole process is adequately documented and recorded to demonstrate the decision-making processes to others. This contributes to full accountability by all involved and serves as an archive for reference with future similar jobs.
These basics come together when a competitive bidding environment is established for vendors. Of all new approaches to vendor bidding on the market, the one that is producing the best results is the automated vendor selection technology.
Savings of 25 to 50 percent on procured goods and services, such as printing and manufactured specialty parts, are being reported. The strength of this process is it has the buyer establish a database of pre-qualified vendors that the buyer maintains so that the database is up-to-date from project to project. All vendors in the database are carefully vetted so the buyer knows that regardless of pricing a quality job will be delivered on time by a trusted supplier.
When job specifications are entered into the computer, the automated vendor selection procedure matches the specs with the capabilities of all vendors in the buyer’s database but only invites those best qualified to do the work to bid. Low bid typically wins, and prices are discounted because vendors usually bid on the work to fill production gaps or downtime.
With advances such as this, every C-level executive should take notice and make a 2012 resolution to improve bottom-line results by controlling expenses with procurement innovation that will bring antiquated procurement processes into the 21st Century.
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.”