Brexit: An Opportunity for Procurement Professionals
With Article 50 triggered, we’re now on the two year countdown to our official ‘Brexit’ but do we really understand its impact on our businesses’ procurement and supply chain functions? Alejandro Alvarez, Director of Operations Performance, discusses what procurement professionals should be doing right now in preparation for the UK’s imminent departure from the European Union.
What’s the current situation?
As with most other debates concerning the impact of Brexit, there is still a lack of clarity on a many of the exact implications for procurement and supply chain. Nevertheless, we do know that the general expectation is that costs will rise – but hopefully deregulation will also provide opportunities.
As the two years of exit negotiations commence, we should start to gradually gain more clarity on when specific changes will start to impact our businesses. However, this does not mean we should just be standing still and waiting for more information.
Insight and forwarding planning are more essential than ever to ensure that, as businesses, we are prepared for our future outside of the European Union. Now is the time to be making the necessary changes to ensure our procurement and supply chain functions are robust and safeguarded.
Will current procurement practices & processes change?
There has already been some debate concerning the potential regulatory landscape post-Brexit, primarily in relation to public sector regulations such as OJEU. Whilst the UK has historically adhered to the minimum EU requirements, it is unlikely that there would be major changes after leaving the EU given the continued need to trade with EU member states. Moreover, entities and suppliers in the public sector are unlikely to welcome an unregulated environment.
For both public and private sector businesses Brexit would further highlight the need for procurement organisations to take a holistic view and explore all of their available supply and commercial levers; for instance, exploring alternative non-EU supply sources and SRM opportunities. Organisations should also assess their demand and technical levers, identifying substitutes, adjusting specifications and modifying demand patterns, for example. The ability of your procurement function to react, adjust and work together with all members of your value chain will be the key to success.
What might drive higher costs?
1. Limitations on free movement of labour
Understandably businesses are already voicing concerns about how any limitations on free movement of labour might impact procurement organisations’ cost structures and those of their suppliers. Many industries, including healthcare, agriculture and manufacturing, have significantly benefited from their ability to attract workers from the EU. If this becomes more restricted, or presents greater difficulties, this will pose not only a cost challenge for businesses but also an operational one. Notwithstanding, there are potential benefits from deregulation too that could balance the picture.
2. Trade tariffs
This is probably the area of greatest uncertainty at present. Experts currently estimate that up to 35% of UK imports could be subject to high trade tariffs post-Brexit as a result of renegotiated trade agreements and/or a weakened GBP. Obviously this is of great concern as it will harm our ability to trade competitively, however at present this is all highly speculative. At this point organisations should be mindful of this risk and be working hard on what they can control and impact: their department, their team and their supply chains.
What should procurement & supply chain professionals be doing now?
You need to be taking the time to really understand the potential negative and positive impacts of Brexit on both your business and industry as a whole. It’s only by doing this that you will be able to capture potential opportunities and create strategies to mitigate against possible risk. Your procurement Brexit action plan should look something like this:
1. Identify risks & opportunities
Conduct a thorough risk assessment to gain a clear picture of where you stand. Examine which areas of your businesses are most at risk of being impacted. Understand what the impact of Brexit will be on your industry. Identify potential opportunities, for instance as a result of possible deregulation.
It will be in suppliers’ own interests to ensure that your supply of goods and services remains efficient going forward. Now, more than ever, you should be drawing on strong supplier relationship management (SRM) practices and collaborating with all members of your value chain to develop a roadmap for successful future collaboration.
3. Agile & flexible operations
With the risk of value chains being impacted by Brexit, your ability to adapt will be paramount. Now is the time to start exploring additional sources (e.g. non EU suppliers) for key goods and services, as well as potential substitutes. Your team will need to be committed and capable to manage and drive change.
4. Develop & retain key talent
When we know the next few years will present uncertainty and possible instability, the last thing you need is a disengaged team or high attrition rate. Staff development and retention is nothing new, but it’s now more important than ever. You need a skilled team who are engaged, committed and empowered to drive forward and manage the changes needed to overcome the challenges ahead.
Providing you put the work in now to ensure your procurement function is in good shape, there is no reason why Brexit is something to worry about. Yes there will be challenges, but doing business is rarely straightforward anyway. These are just a new set of issues and concerns to overcome. Understand your business, your supply chain and develop your team and you should be in a good place to weather the Brexit storm.
If you’d like to speak to our Operations Performance team about how to make sure your business is Brexit-ready or to find out more about our Brexit Health Check service drop us a line today.
About the author
Alejandro Alvarez is Partner of Operations Performance at Ayming based in our London office. Alejandro has extensive experience within procurement, having previously held senior roles at Efficio and Henkel. He also holds an MBA from the European School of Management & Technology, Berlin.