May 17, 2020

A new approach to marketing procurement

Supply Chain Digital
Marketing Procurement
Charterhouse
d
Freddie Pierce
3 min
Chief Procurement Officer positions have more responsibility than ever, e-LYNXX reports
By David Fincham, Business Development Director at Charterhouse, the marketing services production company (www.charterhouse.tv) The gap between mark...

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<em>By </em><em>David <span data-scayt_word="Fincham" data-scaytid="3">Fincham</span>, Business Development Director at Charterhouse, the marketing services production company (<a href="http://www.charterhouse.tv/&quot; target="_blank"><span data-scayt_word="//www.charterhouse.tv&quot; data-scaytid="1">www.charterhouse.tv</span></a&gt;)<br />
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The gap between marketing and purchasing has been gradually spanned over the past ten years. As might be expected, the pace of progress varies wildly across sectors and industries, providing examples of the potential cost savings available with increasingly productive relationships.</p>
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Increasing pressure to cut costs while remaining effective has fueled this cross-department collaboration. Indeed, the latest IPA/<span data-scayt_word="BDO" data-scaytid="4">BDO</span> Bellwether Report confirmed that marketing budgets were revised down for the third consecutive quarter in <span data-scayt_word="Q2" data-scaytid="5">Q2</span> 2011. This board level quest for cost-efficient agency relationships, combined with greater marketing awareness, has also changed the role and skill set of a typical purchasing department.</p>
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A minority of companies are still living in a &lsquo;coupled&rsquo; relationship where creativity and production are controlled by agencies and the purchasing department has no input. However, the benefit of getting a procurement perspective on agency relationships has been realized by some, with purchasers offering advice on matters like service level agreements and pricing.&nbsp;</p>
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Additional cost savings have been made through de-coupling certain production disciplines, including media and pre-press. While a number of companies are lingering at this level of maturity, some have taken the idea further into a fully de-coupled model. In this situation, marketing retains its relationships with its agencies but purchasing has a holistic view of not just pre-press and media but spend for all channels including TV and print.</p>
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Though the majority of brands are currently operating under this fully de-coupled model, it is not necessarily the most cost-effective way of working. A small number of forward-looking companies are starting to move full circle into a &lsquo;re-coupled&rsquo; model. This entails full categorization and consolidation across procurement channels, full visibility of spend and the use of a single supplier for production, ensuring maximum economy of scale and value. &nbsp;</p>
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As with anything new, an innovation curve will see a small group of early adopters taking up the initiative, followed by a delayed interest from organizations that prefer to wait for evidence of the promised benefits. Purchasers need to decide if their business can afford to be a laggard or whether they will be one of the first to reap the rewards of re-coupling. &nbsp;</p>
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Companies moving from a coupled to a re-coupled model may view this new procurement approach as too great a leap of faith. Still, de-coupling will see major improvements in efficiency and cost-savings, from which the transition is then a natural one. Good management of agency relationships will help to diminish fears of over-dependence on one production partner.&nbsp;</p>
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Re-coupling eliminates significant overheads, including the need for multiple account directors and account managers who perform similar roles across all production channels. It also improves brand consistency, and perhaps most significantly, offers marketers a partner who can genuinely deliver integrated marketing campaigns.</p>
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In addition, this focus makes it easier for companies to bring production insight and expertise to the campaign creation process at a much earlier stage. Not only will this introduce new ideas to the table, but also campaigns are less likely to deviate from the brief.&nbsp;</p>
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De-coupling has saved as much as 30 per cent on production, and re-coupling could shave a further 10 percent off total spend. Though any restructure is a daunting process, effective management skills and selecting the right partner will open opportunities to bring production closer to the business and reap the rewards.</p>

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Jun 16, 2021

EU and US agree end to Airbus-Boeing supply chain tariffs

supplychain
Boeing
Airbus
tariffs
3 min
Supply chains embroiled in Airbus-Boeing dispute will no longer be impacted by $11.5bn tariffs imposed on food and beverage, aircraft and tobacco

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.”

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