The impending EU exit has meant a challenging time for UK procurement and supply chain professionals as they struggle to control revenues and create trading strategies in what is an unchartered and unpredictable economic landscape. From fluctuating costs to the effect on recruitment, we assess the impact of Brexit on the procurement and supply chain so far.
The impact of Brexit on supply chain costs The CIPS (Chartered Institute of Procurement and Supply) has been conducting surveys of the UK procurement community since 2017. In 2017 it reported that supply chain managers had started prioritising quick wins in an attempt to support their margins and that over a third were planning to drive down supplier costs in an attempt to mitigate the impact on their businesses. Preparing for the rough ride ahead, over a quarter were already assessing the impact of the new costs - their concerns were validated in the results of the second survey in November which revealed that currency fluctuations had caused 64% of businesses to struggle to maintain margins relating to business costs.
Rather than opting to absorb increased costs as they would have done historically, in Feb/March 2018, 32% of businesses reported raising prices to remain competitive, with a further 41% revealing they would do so in the future. While one in seven businesses were moving part of their operations out of the UK, two in five EU supply chain managers admitted a lack of faith that British goods would remain competitive in a global market place.
The impact of Brexit on import and export. As the expected date for Brexit inched closer, businesses turned their attention to more practical matters with companies reporting stockpiling produce to mitigate the impact of a no-deal Brexit and subsequent supply disruptions. Respondents to the CIPS survey in September 2018 were clear in expressing their concerns with 10% saying their business could go bankrupt if customs delays, additional checks and measures became more complicated. The follow-up survey in March 2019 revealed that one in ten UK exporters could have contracts cancelled if there are delays at the border. For more information access the CIPS full reports.
Questions procurement and supply chain professionals need to be asking to mitigate impact to their business
We appreciate the above isn’t exactly encouraging news for the procurement and supply chain industry. However, procurement and supply chain professionals are renowned for their ability to rise to challenges and seek out creative and progressive ways to solve problems and mitigate risks. Here are a few questions we must be asking ourselves to ensure we are as prepared as possible.
Do I have an airtight understanding of my supply chain and how much of it exists outside the UK?
Am I aware of the impact of increased tariffs following an EU exit?
How will my company control these costs? Will they be passed onto the customer or absorbed by the supply chain?
Have the associated contracts - supplier or otherwise - been reviewed and initial discussions taken place, where possible?
Do I need to review internal resources to accommodate additional tasks such as licensing or IT? Do I need to increase capacity in the procurement and supply chain department to support the business at this challenging time?
If you or your business do not have robust tactics and strategies in place to manage the potential impacts of an EU exit as we currently understand them, or if you aren’t able to fully answer the above questions, now is the time to act.
Looking to the future
On 1st August 2019, the government announced plans to set aside an extra £2.1bn for preparations for the EU exit. This included £344 for improvements to border operations such as training for customs staff to help businesses with declarations and improved readiness for transport disruption around ports in Kent. In a time of great uncertainty, the smartest businesses will be focusing efforts on unearthing opportunities, working collaboratively with their supply chain, getting ahead of the competition and making sure they have the best possible team in place to support them.
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