Procurement making strides in digital transformation journey
Procurement organisations have made significant strides with their digital transformation journeys over the past 12 months, although there is still plenty of room for improvement, according to a new study.
Research from the Hackett Group found that procurement leaders expect to rely on digital transformation to help them achieve an array of critical objectives in 2018, including cost-cutting, improving agility, and improving their ability to serve as a trusted advisor to the enterprise.
Procurement organisations are expected to dramatically increase their use of robotic process automation and AI related technologies (i.e., cognitive, machine learning, virtual assistants) over the next two to three years, the research found, as they also expand their use of more mainstream technologies such as cloud-based applications, advanced analytics, data visualization, and mobile computing.
But their ability to execute digital projects will require reassessment of competencies and realignment of resources, as procurement budgets are expected to remain virtually flat in 2018, the research found.
In addition, while procurement leaders acknowledge the importance of strategic enterprise objectives, including expanding procurement’s influence, elevating the role of procurement, and improving agility, procurement’s ability to address them is low.
The Hackett Group’s research identified four key capability areas where procurement must improve in 2018: aligning skills and talent with changing business needs; measuring and managing procurement performance and business value; obtaining more value from existing suppliers through relationship management; and obtaining more value from existing categories through category management.
These key capability areas reflect the need to continually innovate and expand collaboration by investing in resources and technology that promotes actionable intelligence, improves the user experience, and enhances supplier collaboration.
“Last year, procurement leaders told us that digital transformation was a priority. But most simply didn’t have the strategy and resources in place to move forward,” said Chris Sawchuk, The Hackett Group Principal & Global Procurement Advisory Practice Leader.
“This year, that gap has closed significantly. Momentum is growing. More organisations are planning for digital transformation and more are in a position to do something about it. But a significant number of companies have not gotten there yet, and digital transformation has the potential to be such a game changer that these procurement organisations are at risk.”
Virtually all study respondents (95%) said that they now believe digital transformation will fundamentally change the way procurement services are delivered within two to three years. A full 30% said that they expect procurement processes will be touched by digital transformation activity in 2018, foreshadowing a year of both benefits and disruption.
The percentage of organisations with a formal strategy for digital transformation more than doubled year over year, from 32% to 66%, and the number of organisations indicating they have the resources in place to handle the transformation also rose sharply, to 46%.
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.”