Why de-risk your supply chain, deal or no-deal Brexit?
To deal or not to… Boris Johnson’s recent bid to suspend parliament and his consequent push for an early election only makes the likelihood of a no-deal Brexit a reality. Having said that, there’s still lack of clarity on where this debate is heading. Therefore, it is important that businesses prepare for hitherto unforeseen post Brexit scenarios.
Gartner recommends establishing ‘committees for specific activities, such as IT and supply chain responses.’ It stresses the importance of conducting risk assessments and impact analyses, as well as mapping the supply chain to get an understanding of unknown exposures.
Supply chain, no-deal strategies
At Efficio, we couldn’t agree more and believe that businesses should review key procurement focus areas in order to assess the effects of Brexit across the supply chain. This review should include sourcing strategies, contracts and existing suppliers. It will help organizations determine the impact of a no-deal Brexit on demand, costs (and profits, as a consequence), ongoing risks to logistics and the continued supply of materials and labor.
Organizations can follow our recommendations to de-risk supply chain functions across the key areas detailed below.
- Review sourcing approaches
By revisiting strategies that are already in place for category management, businesses will gain a thorough understanding of their category objectives, sourcing strategies and the volume of work they need to undertake in a no-deal Brexit situation. Consequently, organizations can identify elements that will be affected by an EU exit. In categories where the impact may be significant, businesses can account EU exit activity within their category plans.
- Check contract compliance
Start identifying your contract risk profile against a hierarchy of needs. For instance, potential risks could include reliance on EU funding, restrictions on freedom of movement, which creates pressure on costs by impacting the availability of labor – resulting in an increase in wages, forex and tariffs. It is important to examine specific contract clauses linked to EU exit readiness. Examples of this may include clauses linked to termination, cost pressures and continuity as a result of legal change to determine future risk potential
- Encourage supplier collaboration
Focus on cost and risk drivers in key categories by engaging with your suppliers and by also assessing the wider market. Collaborate with your suppliers to review the most probable outcomes as a result of Brexit. Get a view of their mitigation plans and the areas that pose a greater risk to their business. Work with them to support you in a no-deal scenario with recommendations on robust business continuity plans.
Those businesses that forego a thorough review of their procurement functions and fail to put in place contingency plans, run the risk of experiencing disruptions to their supplier landscapes in a post Brexit world.
Procurement preparedness pays
In the event that a no deal situation is avoided, businesses that have already assessed the risk readiness of their supply chain functions for Brexit should not consider it a wasted effort. This is because their procurement risk readiness preparedness:
- Will cover any alternative outcomes that are put in place.
- Provides a valuable health check of the entire supply chain, as it identifies inherent risks that may be unrelated to Brexit.
- Offers an opportunity to apply supplier management best practices, which should not be considered as additional work.
While there’s no certainty on whether the October deadline for Brexit will be extended, risk proofing your procurement function certainly offers many competitive business advantages.