STRATEGIC PROCUREMENT & SUPPLY MANAGEMENT
Solution 1 –(SPM, 2018)
There are several blue-chip companies with major U.K operations conducting preventative activities. These depend on the dread of import duties and the loss of access to the single market. Companies have even moved their production facilities and staffs to continental Europe.
E.g.-Goldman Sachs -They have shifted their vodka production out of Scotland to Italy and the U.S and Airline to Vienna.
The reasons behind their shiftiest are:
1) To position their manufacturing assets in a secure supply chain environment.
2) To find base camp inside the administrative condition,which will expand their entrance to key European markets.
Besides the high –visibility announcements, our view is that few attainment and store network capacities have a genuine all encompassing arrangement to address Brexit dangers Few companies are delaying investments as a standard method in times of uncertainty. Many companies had cut their cape budgets but this seems to be short term solution .U.K companies taking this initiative may miss future productivity gains while their competitors in continental Europe to invest in their production tool and boosted by higher growth.
The level of willingness of European organizations with significant sales in the U.K but without any operational base is lower but careful consideration is required as they will still have supply chains and cost impacts in the U.K involving tariffs, taxes, currency and interest rates, regulatory decisions and labour flows.
Solution 2 –
Supply Chains under Threat from Four Key Risks
Following are the four key risks areas of supply chain which Corporations with heavy U.K. exposure are facing: Export of goods and services from one country to another tends to affect the cost base, changes to the regulatory environment and also affects the workforce. And hence, these impacts will lead to increase costs which will either decrease edge or increment costs to clients; clients may likewise feel trouble because of these complexities. Momentum inquire about proposes that particular enterprises are at higher generally hazard than others, with money related administrations standing out in hazard terms.
THREAT #1 – Challenges in exchanging products and enterprises crosswise over outskirts. The point of view toward the kind of exchange bargains the U.K. might anchor in the wake of Brexit is still exceptionally hazy. This can be in numerous structures, going from full single-advertise access with proceeded with tax organized commerce on merchandise and ventures to the more protectionist end of the range, where taxes are connected on all products and enterprises exchanged between the U.K. what’s more, EU, likely dependent on costlier
WTO rules. While the U.K. government has been very clear that the U.K. will leave the single market and EU Customs Union, their specific deal target means a lot of uncertainty as it is uncharted territory. Non-tariff barriers such as new physical customs borders and labour rules will undoubtedly be more flexible on a company’s ability to move goods across EU borders, and the costs to do so.
THREAT #2 – Higher costs
Trading from UK to EU will invariably have an impact on the cost base of businesses with U.K. operations or sales regardless of the type of deal that is secured. This could be in the form of new tariffs, which will be passed directly onto customers, or other costly measures. Brexit has already had a significant impact on costs in the U.K. through exchange rate changes which themselves have resulted in higher import costs.
THREAT #3 – Rapidly changing regulations (GEP, 2018)
The regulatory environment for both U.K. and European companies has the potential to change significantly, due to which there will be some degree of additional friction between U.K. furthermore, EU exchanging accomplices, including cost, time and hazard to most cross-outskirt supply chains. Regardless of whether the final product is a ‘delicate’ or ‘hard’ Brexit will to a great extent decide if controls of every industry are set to remain firmly lined up with the EU or whether they will move far from existing conditions. Current signs are that the feasible result will be toward the ‘hard’ end of the scale.
This will result in an expanded administrative weight for organizations because of the need to consent to various administrative frameworks. U.K. organizations that need to work in Europe will be required to follow the General Data Protection Regulation (GDPR) or any comparable direction later on, and European organizations with U.K. tasks should follow new U.K. controls as legitimate structures veer. We will likewise observe jumps in everyday business activities – for instance, an extra authoritative weight of enrolling EU nationals in the U.K.
THREAT #4 – Availability of workforce
The British economy could face a labour supply shock due to Brexit, if foreign workers stop coming to the U.K. In recent years, foreign and particularly EU workers have made up a growing proportion of the U.K. workforce, which will ultimately help the economy and companies grow and fill key skill requirements. Some U.K. industries and regions are more heavily impacted by restrictions on immigration than others.
All Sectors Will Not Be Equally Impacted (US News, 2018)
These four key supply chain risks shows how would have an impact on the U.K.’s top sectors under four different high-level Brexit scenarios. These scenario scan provide an indication of business challenges by sector.
Whereas, we found that single-market access would be the least detrimental to all sectors, we also found that some sectors were more exposed than others in the alternative scenarios.
Money related Services is most affected in many situations since ‘pass porting rights ‘are basic to banks’ capacity to work crosswise over EU fringes. The main situation in which pass porting rights would be ensured is under an EEA-type bargain. Some other situation would not naturally give these rights to U.K. money related establishments post-Brexit. Which is as of now driving extra expense, for instance, with office development and anchoring of office space. This is probably going to grow further and will result in increment in going through examples with associations keeping up numerous areas with costs crosswise over offices, land and bolster administrations. We expect the Financial Services area to spend fundamentally on expert administrations charges for legal advisors, bookkeepers and specialists to enable it to explore the Brexit change difficulties.
Makers should be worried about store network, add up to cost of merchandise, and access to both high-and low-talented work. Upgraded traditions checks will demonstrate impeding to organizations with items that have short expiry dates or life expectancies. The nourishment business is likewise intensely dependent upon an exceedingly European workforce with more than 30 percent originating from the EU.
The U.K. Life Sciences segment is maybe best situated to alleviate the effect of Brexit as it faces zero levies for items, for example, medications and therapeutic gadgets, even in case of ‘finish separate’ from the EU coalition. Be that as it may, its capacity to research and market new items might be influenced by the loss of access to EU R&D subsidizing and access to ability of EU inception. We are as of now observing administrative associations and subsidizing moving out of the U.K, for example, the European Medicines Agency moving to Amsterdam from London. Also, we could see administrative difference causing issues, for example, in item marking.
Additionally spotlight can be put on inventory network and acquirement regions to recognize contracts, providers, estimating and effects to business progression in another U.K. /EU traditions condition.
Solution 3(Floyd, 2015)
MEASURES THAT CAN BE TAKEN
Procurement and supply chain leaders should act now and implement five simple steps:
These steps can be as follows:
- Measure exposure to Brexit risks
- Develop alternative supply strategies with trigger points
- Reductions in cost
- Be equipped for the heavy lifting
- Become an enabler for Brexit opportunities
MEASURE 1 – Measure exposure to Brexit risks
The Organizations can identify business areas affected by Brexit. Key parts of this cross-functional initiative can be facilitated and act as a perfect opportunity by the procurement and supply team chains particularly keeping strong supplier relationship (SRM) framework and tools in place.
With this action we can ensure a joined-up approach when developing and implementing eventuality plans. After following this, we can further focus to put on supply chain and procurement areas to identify contracts, suppliers, pricing and impacts to business continuity in a new U.K. /EU customs environment.
Information can be collected across direct and indirect categories.
It should include:
*Spend not realized’ in GBP,
* Suppliers/categories impacted directly and indirectly by exchange rates,
* Supply categories highly dependent on an EU workforce,
* As well as evaluations of incumbent suppliers’ readiness for Brexit in their own supply chains.
* Conduct an impact assessment on supply planning and distribution within the U.K. and EU.
A starting point is to triage your supply base by evaluating two factors:
A. criticality to your business and
B. exposure to negative Brexit risks and costs.
MEASURE 2 – DEVELOP ALTERNATIVE SUPPLY STRATEGIES WITH TRIGGER POINTS
We need to identify what routes to market, network planning and delivery locations. Also establishing target commodity groups by conducting a critical prioritization based on goods/services, availability of supply and time required to qualify supply sources.
As the U.K. concludes trade deals with non-EU partners these alternative sources should be identified locally or in a tariff-free geography or locations. Larger firms can leverage their relative strength to boost up and motivate the key suppliers to shift more of their operations to the U.K.
Example: Auto producers Nissan and Jaguar Land Rover
The two firms as of late welcomed an extensive gathering of worldwide makers to their U.K. base to help in advancing moving their tasks to the U.K.
Manufactures from the continent which are currently sourcing from the U.K. should be able to identify alternative sources based in the EU and also introduce higher levels of risk monitoring across their U.K. suppliers.
Buyers in continental Europe reduce their volume commitments or contract to shorter period of time it’s expected that U.K. manufacturers could be hit over the next 12 months.
Preparing the procurement function for Brexit will require significant investments to ensure sufficient capability across vendor negotiations, contracting and SRM.
MEASURE 3 – REDUCE COSTS NOW
A pressure has been created on the costs of goods imported for U.K companies due to a weaker pound (since Brexit vote) creating inflation throughout the economy and also impacting growth.
Depending on the agreement and details of political discussion on the transition this deterioration could highly accelerate as we approach the effective Brexit date.
Identification of what total cost of ownership models by the organization will be impacted and start ’Request for Information’ processes using ‘should Cost’ modelling.
Execution programs and opportunities of reduction in targeted cost will provide competitive advantage as whole sectors are hit by Brexit.
Other potential approaches include:
*securing extensions to contracts during at-risk supplying base areas can protect against cost increase and risks
MEASURE4 – BE EQUIPPED FOR THE HEAVY LIFTING
We require a significant investment from businesses for the preparation of procurement function of Brexit to ensure sufficient capability across vendor to negotiate, contracting and SRM.
Contract amendments and notations are required on a large scale for some organizations and anticipate sourcing are to be exercised as well.
Most associations will be constrained by limit and ability, needing outside support.
It’s often seen that contract amendments require a level of flexibility from essential and imperative providers, who will think about their own position and might possibly be available to these changes.
There are organizations that keep up elevated amounts of coordinated effort with their supply base.
It helps in being all around put to run a smooth procedure, while others should concentrate currently on molding basic providers ahead of time.
Any new understanding finished up from now until the point when the Brexit date ought to be refreshed to incorporate the correct level of adaptability against the different Brexit situations.
Other down to earth ventures for readiness incorporate recognizing firms who can help and planning for this in like manner.
Associations that expect to be one stage ahead are as of now archiving the inward procedures which are probably going to be affected and are building cross-practical groups that will be entrusted with conveying execution exercises because of Brexit.
MEASURE 5 – BECOME AN ENABLER FOR BREXIT OPPORTUNITIES
Its becomes clear that the U.K./EU trade negotiation outcomes and the U.K includes trade dealing with non-EU countries, now the purchasers should expect to counterbalance cost increments.
Be that as it may, may likewise access wellsprings of supply at lower cost and even advantage from more development from their merchants.
An opportunity to create competitive advantage for the organizations can be provided by proactive firms and also identifying the geographies and vendor upfront.
A compelling method to locate the correct answer for how to moderate new costs together for instance, by implanting co sourcing as a feature of a SRM program.
Thus, acquisition has a chance to help its association’s development in new markets.
- To do this, it needs to furnish itself right on time with neighbourhood showcase information of the focused on topographies.
- A concrete and straightforward methodology is to create hearty class procedures which incorporate short-and long haul guides covering the abovementioned.
Brexit is an extraordinary case of how district particular occasions produce worldwide repercussions affecting acquisition and store network. It will have noteworthy ramifications for any worldwide or European organization with major U.K. tasks or deals, and additionally U.K. organizations with noteworthy activities or deals in whatever is left of the EU. Numerous elements will prompt expanded store network costs, which will decrease edges or increment valuing to clients, making this a vital board-level hazard. Acquirement and production network pioneers and their capacities should be at the core of all inclusive Brexit arranging and usage and they have to act currently to look for upper hand and to maintain a strategic distance from the expanded expenses and dangers if this is left past the point of no return. With the principal phase of political transactions finishing and certain parts of the approaching Brexit structure getting to be clearer, an opportunity to act has plainly arrived.
- GEP (2018) Bracing for Brexit: An Action Plan for Procurement and Supply Chain | GEP. Available at: https://www.gep.com/white-papers/brexit-action-plan-for-procurement-and-supply-chain (Accessed: 12 November 2018).
- Floyd, D. (2015) Brexit, Investopedia. Available at: https://www.investopedia.com/terms/b/brexit.asp (Accessed: 12 November 2018).
- SPM (2018) Course: Strategic Procurement and Supply Management [MSIPS-SPM/Dub/PT]. Available at: https://moodle.griffith.ie/course/view.php?id=2715 (Accessed: 12 November 2018).
- US News (2018) Brexit. Available at: https://www.usnews.com/topics/subjects/brexit (Accessed: 12 November 2018).