Brexit – A “big deal” not “no deal” for Procurement Leaders

By August 28, 2018 August 30th, 2018 Procurement

Procurement Brexit checklist

A “no deal” Brexit is beginning to look increasingly likely with Mark Carney, Governor of the Bank of England recently quoted as saying the level of risk is “uncomfortably high”.

Accountable for over 44% of all UK exports, the EU remains Britain’s biggest trading partner enjoying free trade and zero customs restrictions with the 27 fellow members. When Britain leaves, this is no longer the case and the impact on supply chains cannot not be underestimated. For example, supply chains designed to deliver fresh food will be affected and it’s already been reported that large organisations such as the NHS and AstraZeneca* are preparing to stockpile drugs and blood supplies.

You don’t have to walk blindly into significant challenges

With all the sensationalist articles, plus the recent Annual Deloitte CPO survey identifying that 33% of procurement leaders see Brexit as the single most significant market risk for their businesses and 65% of procurement leaders have limited or no visibility past their Tier 1 suppliers, I wouldn’t blame stretched finance and procurement leaders not simply wanting to fake hibernation declaring ‘wake me up when it’s all over”.

However if you consider the Financial Times article ‘Big banks are increasing their budgets for dealing with Brexit’ states businesses will need to invest significant sums (big banks £100m+) and resources just to stand still, those not taking an active interest proportional to their business may be blindly walking into significant challenges and reputational issues.

After reading the Supplier Management March 2018 article titled ‘Brexit countdown: Time for procurement to get ready’ it occurred to me that with so many articles and opinions on Brexit readily available, despite much yet to be decided and understood, if I was a stretched finance or procurement leader of an SME with minimal time to look at the horizon, it may be useful to have a high level one page checklist of key topics to consider over a seven (yes that is only seven!) month period so I could decide for myself, allocate appropriate time and resources, tick them off and/or plan for how and when to mitigate any perceived risk.

The four key checklist benefits

This checklist (holistic for public and private sectors) is based on reviewing your current organisation circumstances from a procurement and operational perspective to:

a) support highlighting to the business the value of procurement

b) provide the board with greater informed understanding of risks and opportunities to support key decisions i.e. allocation of strategic effort and costs, investment in transformation, or even the drastic decision to (full or partial) relocate the organisation

c) ensure that procurement is undertaking key strategic activities (many of the below topics should ideally be embedded into a sustainable procurement function and not just for Brexit)

d) help with any tactical prioritisation. As an example a recent BBC article “Brexit: Warning of rising food bills and disruption to supplies” highlights the need to consider the possibility of rising food supply chain costs, therefore organisations with a high proportionate catering spend may wish to consider fixing pricing where possible

Supply chain audit

Consider Desired Result(s)
· Understand your business spend by area and categories

· Map who your suppliers are (by UK and non-EU)

· Map your supply chain by tiers (not just your direct suppliers but your key suppliers supply chain)

· Undertake a supply chain risk analysis (financial stability, sanctions, etc.)

· Enhancing existing, or establishing new, supplier relationships

· Identify key supply chain potential currency fluctuations

· Completed Supplier Relationship grids (by spend and location as a minimum)

· Research your market so grids are comprehensive with agile and flexible options (UK and EU)

· Complete and action the risk register

· Identify and build supplier networks

· Map and forecast fluctuation challenges and costs by key suppliers

By When: December 2018

Contracts review

Consider Desired Result(s)
· Client contracts. Examine what issues could arise (for your organisation or your clients) under existing contracts (i.e. specific references to EU territories, laws or regulations)

· Supplier contracts. Are templates fit for purpose and flexible? How might they need amending and how quickly can they be implemented?

· What contractual risks exist in live supplier contracts? How can these risks be mitigated? (attention on data protection and IPR)

· Identify and map key supply chain cost increases

· Analysis by client contracts and supplier template contracts of risks and mitigating actions

· Identify risks in current live standard contracts and mitigating actions

· Identify risks and mitigating actions in supply chain contracts (standard or supplier terms) based upon client contract flow downs

· Lock in pricing with key or volume suppliers for fixed term post March 2019

By When: November 2018

Comms

Consider Desired Result(s)
· Keep stakeholders and suppliers regularly informed

· Ensure ongoing understanding of legislative impacts to the business

· Design and implementation of communication plan relating to procurement planned activities
By When: September 2018

Make vs Buy

Consider Desired Result(s)
· Analysis of high spend or high volume suppliers to understand if full or partial services or goods can be managed in-house · Identification of areas for transition including action plan and collaboration with key suppliers
By When: December 2018

Contingency

Consider Desired Result(s)
· Design supply chain contingency plans i.e. overstocking of goods · Identify key supply chain failure points and implement contingency action plans from March 2019
By When: January 2019

Resources

Consider Desired Result(s)
· Understand any restrictions on EU/UK freedom of movement of workers and the potential need for visas or residence permits

· Ability to recruit and recruitment policies

· Complete a workforce risk analysis including forecast of increased impact on operations and costs

· Implement new recruitment strategies and processes

By When: January 2019

Forecasting

Consider Desired Result(s)
· Collaboration with other departments to understand their needs to design and implement support now and in future · Deep integration with business to ensure Procurement resources and efforts are appropriately aligned
By When: Ongoing

Supply of services or goods

Consider Desired Result(s)
· How much does your operations/legal structure/location depend on access to free trade agreements?

· What challenges would be faced in implementing a relocation?

· Impact of greater tariffs and import complexity

· Liaise with Finance and Operations to link business wide legal and geographical challenges with supply chain audit to support mitigating actions

· Forecast for additional administration and resources

By When: December 2018

Compliance

Consider Desired Result(s)
· Understand and map extent of compliance policies tailored to EU laws and regulations · Link to contract review processes

· Plan of action to maintain company status i.e. ISO

By When: November 2018

Travel and Expenses

Consider Desired Result(s)
· Travel and Expenses innovative solutions and policies to support reduction in costs without impacting business operations · Update and embedding of new internal and third party Travel and Expenses systems and policies
By When: February 2019

Project Management

Consider Desired Result(s)
· Hire (or promote internally) a Brexit Project Manager to oversee all internally appointed workstream owners

· (I have seen multiple crazy job adverts expecting one person to oversee all Brexit implications)

· An individual(s) that can report back into the board on progress, risks and outcomes
By When: Immediately

Caveat time! This checklist is of course not exhaustive. It does not cover key business financial topics that would need to be reviewed (such as tax, financial ratios, sources of funding, credit ratings, etc.), PR challenges (such as public announcements and internal communications) or even tell you how to successfully undertake and deliver each topic. Also, it would need peeling down further relating to any specific industry, and assumes other strategic initiatives, such as managing and rationalising Tail Spend, has been undertaken or would be incorporated.

A recent Supplier Management article stated Brexit provides “a great opportunity to elevate the profile of procurement” and “Procurement leaders have it in their gift to add value, and show how we are in control of this risk”
With only seven months to the March 2019 deadline and the prospect of a “no deal” this is a “big deal” for procurement leaders, there is a continued opportunity to action what we can now rather than waiting nearer the December 2020 deadline, when the agreed transition expires, and any external specialised support may be less readily available.

If this checklist raises any concerns and you need support on any of the categories listed or to discuss your Brexit Supply chain strategy further we’d be happy to help – Good Luck

*Source BBC, article: AstraZeneca to stockpile drugs for Brexit

James Ball is a consultant at Retearn and has extensive procurement, supply chain and operational experience across private and public sectors, including senior roles as the buyer of outsourced services for blue chip organisations, as well as delivering outsourced services

Thoughts? Questions? Need more help? We’d love to hear from you at hello@retearn.co.uk or

Call us on +44 (0) 7795 236664