Impact of Brexit On Procurement: Supplier Management
Earlier this year, we asked you to submit all your questions that Brexit raises for Procurement. Here is Part 1 of the most commonly asked.
As we await the decision on Brexit, we spoke with procurement experts on how Brexit will affect the us: Jeremy Smith, Managing Partner, 4C Associates and Peter Smith, Managing Director, Procurement Excellence.
In this article we focus on their responses two questions on the topic of Supplier Value Management.
Q1. Do you envisage Brexit will cause as much of a challenge for cross-border buyers as for sellers? What sort of problems?
Jeremy Smith: Yes. The uncertainty will work both ways and it is important to think throughout the supply chain, end-to-end. End buyers will have fewer problems than people within the supply chain, who have problems as both a buyer and a supplier, but ultimately these concerns will flow through to the end consumer. Tariffs, border checks, workforce migration and changing regulations (particularly quality standards) will all impact as goods and services flow across the European borders.
Peter Smith: Yes! It must be a parallel set of issues. The problems are likely to be mainly around tariffs; however, potentially this does not simply concern immediate cost increases, but how that may start changing the whole shape of markets. For instance, some suppliers in Europe may simply decide to stop working in the UK.
Q2. How should firms manage uncertainty around suppliers, contracts and goods movement due to Brexit?
Jeremy Smith: Reinvigoration of the new supplier identification and onboarding processes is key. The uncertainty around Brexit has been its biggest problem and will continue to be even after any deal is agreed, until we know what the future will look like. There are no new approaches here, just the reprioritization of this approach with increased resources, using new sources of information that are now much more readily available; this will give you the agility your supply chains need depending on any deal/no-deal scenario. And even then, there are the subsequent trade negotiations, which are likely to be highly political.
Peter Smith: I see three key points:
First, you must make sure you have all the “basics” of good procurement in place. Understanding your current supply base and suppliers (good spend data, supplier information etc.), good spend control (from onboarding new suppliers to approvals and contract management), operating models (processes) and policies to support procurement … this is all good practice that will help, whatever happens.
Second, for critical purchases, look at “what-if” scenarios – both for the logistics if things get messy (for example, you should you be building up stocks in case of a no-deal) and also strategically – might you change suppliers if tariffs affected pricing and so on.
Finally, just keep close to the news and information as it emerges in terms of the specifics of Brexit!
Watch out for our next article on how Brexit will be impact your supplier contracts!