Estimates by the House of Commons Library state that rules pertaining to procurement affect goods and services worth £200bn each year. This figure is massive and highlights the importance of Brexit procurement. However, the political landscape is steeped in ambiguity and uncertainty, and this has impelled organisations to take a second look at their procurement processes from the EU with the aim of mitigating the impact of Brexit.
Here we have collated a few things that organisations can do to improve Brexit procurement.
Organisations should closely monitor spend for each business unit and category. This will result in sourcing success and will boost operational effectiveness. Businesses will be able to save costs by centralising procurement for high-volume purchases.
Your organisation should look to consolidate spend data from all sources into a single spreadsheet. Segregate the data based on categories. This will allow you to analyse the data to see whether your organisation has negotiated the best deal with suppliers from the EU for each category, service or product. You would also need to analyse the increase in supplier spend for each category for every EU country. This will help you identify where expenditure has increased. Start negotiations with those EU suppliers to work out a better and more cost-effective deal.
Identify countries for cost saving in un-optimised categories
If there are categories where your organisation is spending too much money on purchases, it is time to look at other trading countries, which may or may not be part of the EU. For this, you will have to determine certain criteria such as the availability of raw materials, logistics costs, utility costs and local labour costs. Based on these pre-determined conditions, you will be able to decide the best country for sourcing for each category.
It is prudent to remember that cost savings for categories will vary. However, this should not deter you from starting negotiations through trade talks with non-EU trading partners, like Mexico, India, Australia and South Korea.
Cost model analysis
For each identified country, compare the product cost breakdown. Be sure to take into account direct and indirect costs, like labour costs, energy costs, overheads and cost of raw materials. Based on this analysis, you can begin negotiating with suppliers located in prospective trading countries to ensure cost-effective, steady and consistent flow of materials.
Using these Brexit procurement strategies, you can offset the adverse effects of Brexit. Remember, you will need to monitor raw material prices in EU and non-EU countries as well to ensure that you are prepared for changes in exchange rates.
Nick has over 30 years procurement experience in consulting, outsourcing and line roles within industry with international experience across many sectors and industries and led many procurement programs with blue chip organisations.