With uncertainty regarding how Brexit will unfold, Jon Ridgway provides his views on what it might mean for global procurement and how companies can start to prepare.
On Friday the 24th June, the UK revealed that it’s people had voted to leave the European Union. But with actual Brexit still potentially 2 years away, what should companies who are sourcing or supplies from UK or the rest of Europe be thinking about now and how can they prepare for future?
Currency is in the hot seat
Depending which side you’re on, the currency impact seen so far might actually have been positive news. But the reality is that it’s not easy to predict where the pound will end up. In the context of global procurement it is worth making sure that any UK businesses you are dealing with has robust currency policies and can support your request to purchase in your own currency.
Evaluate your suppliers
Depending on how new trade agreements will be structured, Brexit may end up having minimal impact on current trade. Or, it could mean significant change and the need to re-evaluate who your suppliers are and whether it is still feasible to do business with them.
For UK based multinationals for example, prices from European suppliers might be unfavourable under new terms so it might make sense to switch to local. It’s wise to begin to think about your supplier strategy as details around the impact on trade agreements come to light.
Borders and the supply chain
With a likely tightening of borders, the potential impact on logistics and moving goods through borders must be kept in mind. This could impact import costs – but it’s still up in the air whether they will reduce, rise or stay the same. There is also a strong possibility that whichever way it goes, administration for logistics will become more complex (think VAT, duties, etc).
So, how to prepare?
- If you haven’t already done so, take the time to do a thorough evaluation of your current suppliers. This includes identifying any that may be impacted by Brexit (ie – related EU subsidiaries, EU manufacturing bases).
- Think about your current logistics network and consider any changes that can be made to minimise the fallout of potential hikes in costs and administration complexity.
- Finally, keep up to date with movements in currencies and the market in general, and be ready to change your supplier terms to make sure you are well protected if Brexit does look set to impact your own business operations.
Our procurement and logistics specialists would be happy to discuss your current strategy and look at ways to protect your business in the future. Contact us for a chat.