Reimagining the supply chain: Exclusive interview with Barry Padgett, SAP Ariba President
As the recently appointed President of SAP Ariba, Barry Padgett knows all too well that the changing demands of customers and the effect that has on the supply chain are all crucial elements that need to be met and supported as we head deeper into 2018 and beyond.
Following on from its recent SAP Ariba live event in Las Vegas earlier this year, there are some clear and stark expectations regarding the role of procurement and beyond that Padgett refers to throughout our conversation. At the top of the list is transparency, efficiency and innovation.
“Not only are our customers looking for transparency in terms of their supply chain, but their customers are also asking for the same thing,” explains Padgett. “As consumers we’re more and more interested in sustainable ethical supply chains, ethical sourcing and trying to figure out who we spend our money with, where are our goods are made and what things are going into our foods etc. So, our customers are feeling it too from their buyers: whether it’s trad B2B buyers who are working towards business with a purpose and making sure they have sustainable business practices, or if they are a direct-to-consumer company and their customers are getting loud and demanding with respect to understanding the supply chain,” he continues.
Elsewhere, driving efficiency is going to remain key, says Padgett. “There’s no getting around it, we’re still a software company, we’re still helping our customers create a more efficient business and drive costs out,” Padgett explains. “Throughout the week at our event we heard a lot of success stories. There was also some discussion around this idea that the best projects are the ones that start with internal house cleaning and looking at current business practices before bringing in a tech vendor or partner,” he reveals. “If you take bad existing manual processes and add in technology or automation, you end up with a bad automated process. So, a lot of the stuff that came out of the conference around efficiency was about taking a real deep look at our businesses to work out what our best practices are and then we layer in the tech to really drive efficiency.”
At the Las Vegas live show, cognitive technology was another facet that was explored, including using IBM Watson to go through the Ariba system, as well as looking at blockchain and deep neural networks. “Once you get through the basic blocking and tackling then you really start to propel your business forward. And that’s not just for the individual CPO driving value through their office, but also pushing competitor differentiations for their company.”
All of this begs the question: where does SAP Ariba fit into this landscape? “One of the stats we don’t talk about a lot at SAP is that there are more than 3.3mn buyers and sellers on our network, and there’s a new one added every 60 seconds. Looking at the volume that goes through the network today it’s just over $1.6trn which, if you add up the volume globally of Alibaba, eBay and Amazon, the Ariba network is significantly bigger than all three of them combined,” says Padgett.
As part of SAP’s march into the future one of the key things it has done recently is to open access to insights on its supplier risk solution. In Padgett’s own words this forms part of ‘the key to the future of the company’. So, in a nutshell, you’re bringing increased sophistication to people’s programmes and putting the customer in control? “Yes, the customer gets to be the dreamer instead of waiting for Ariba to come up the next great thing. Maybe it’s risk, maybe it’s environmental or a sophisticated piece of specific IP. Or maybe it’s an oil and gas company that has some really complex procedures with their suppliers to get their things onto its rig, or whatever it happens to be; it can then go to its existing partners and work with them hand in hand.”
As we glance ahead, what does the future of procurement look like to Padgett? “I think you’ll see two things: one, a lot of cognitive technology being applied and I think we’ll talk less and less about the technology and more about the business impact and how we drive transparency in the supply chain. I think this will be in the next couple of years and there’ll be huge changes in these challenges that have traditionally been related to scale.
“Secondly, we’ll see a lot of interesting things in innovation that relate specifically to purpose. A lot of companies are weaving a ‘business with a purpose’ story into everything they do. It will no longer be a case of ‘we just procure tech and we go fix a problem’ and more ‘we want to do that, but we want it to have some sort of impact on our ethical and sustainable diversity goals’. How does that relate directly to the role of procurement? “A lot of companies are talking about making the world a better place and the impact they have in their communities. Procurement could have a transformative effect on how they interact in their communications and how they drive transparency in the supply chain. I think we’ll see great advances on both these fronts. We’ll solve a bunch of problems through the cognitive platforms that are becoming widely available to us today.”
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.”