Since Britain’s departure from the EU, the nation has been bombarded with news updates of port delays and cross-border friction, as businesses face the immediate shocks of Brexit. In fact, these Brexit ‘teething problems’ could be symptomatic of widespread disruption that will force many organisations to restructure, or in some cases, will put them out of business altogether. It has become clear, however, that rather than take place as a single event, Brexit will continue as a series of smaller obstacles that businesses are yet to face. As supply chain managers continue to battle with the relentless post-Brexit changes over the months ahead, speed and agility will be essential to keep pace. In order to navigate the unknown landscape ahead, businesses will also need to implement quality procurement solutions as quickly as possible.
But, does a business truly understand how each of these moving parts is functioning and how effective they are being? And is there the ability to re-establish strategies and react quickly? This build-up of uncertainty has become a minefield following Brexit, and it has meant that supply chains have most definitely been stress-tested. In doing so, however, many revealed procurement weaknesses and inefficiencies that already existed. Continual change needs a more joined up business, and the ability to adapt quickly to create value. The following question must be asked: when confronted with an unavoidable incentive for change, such as Brexit, does that change signify more of a challenge or an opportunity for the chief procurement officer (CPO)?
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Weaknesses uncovered by challenges
The answer, as ever, is probably a balance of the two. For many companies, early Brexit assessments indicated that only half of the risks discovered through stress testing the supply chain were exclusively Brexit related.
This largely reflects the evolution of procurement over the past decade, moving away from the idea of – or even obsession with – control. The right type of contract with suppliers and partners is therefore key. It’s important to have a handful of key commitments from your suppliers and customers during any disruption, and businesses need to update contractual frameworks for such events. A joint approach with your key suppliers will help you to establish a more reliable supply chain and improve your strategic partnerships.
The reality is that nobody can predict exactly what will happen in the next 12 months. Brexit is just part of the puzzle that will impact supply risk management. There are other factors to consider, including the new President in the US, and the trade deal between the UK and US needing to be renegotiated, plus Covid-19 and how the vaccine, and the impact of new Covid variants will affect lockdowns. Each brings its own set of challenges, making it essential to be prepared, and this is where the processes put in place for Brexit will be an advantage to mitigate other change.
Creating variety in the network
When challenges are being fired from all angles, it’s clear that the narrative, the approach, and general attitudes to the supply chain all need to change in order to survive a changing landscape. This requires both an external mindset change in how businesses compile and manage their supply chain networks and procurement channels and also an internal overhaul beyond procurement being a siloed operation.
Addressing the former, the CPO needs to completely rethink how the industry is evolving despite the unknowns. When you’re struggling for complete clarity or precision in your forecasts, then there at least needs to be heightened agility and resilience to whatever trends you may face in the future.
Initially, this requires more of a conjoined outlook alongside the marketing director to attain a stronger picture of the supply and demand equation. A business cannot prepare for what it may need to procure in the future if it doesn’t know what is likely to be in demand. It sounds simple, but at present this notion is often negated by a siloed approach.
Covid-19 has shone an additional spotlight on this above necessity, proving that demand – volume, trends, prices and goods – isn’t a constant in any environment, and can’t be based around historic data and individual decisions. By establishing stronger insights into market demands, organisations can then focus on preparing a more flexible and diversified network that will meet these needs, while also offsetting unforeseen challenges that could derail supply channels.
Traditionally, the CPO has tried to limit the number of suppliers across the network. Now, when faced with the prospect of increased tariffs, customs checks, lengthened supply times, data regulation clashes and a host of additional unknowns, the physical network – and the terms being agreed – have to become more diverse and malleable off the back of this more conjoined outlook.
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Maintaining control during times of change
As alluded to already via a stronger connection between CPO and marketing director, the second phase of change needs to happen internally. The breaking down of department silos will be key in navigating supply chain challenges as it will present the most holistic and informed picture possible, even if that picture still isn’t complete.
This needs to occur across procurement, marketing, and finance primarily, with stronger communication channels established. For example, marketing and procurement need to agree a better demand profile; procurement must then look at the incoming supply chain options and scenarios, including risk management; and finally, marketing, procurement, and finance must all agree a response to the changes in the supply chain. The result will be a better understanding that comes from solid procurement work, and means all areas of the business are in agreement on how to manage impacts. By proxy, improved communication with that inbound supply chain will ensure an additional layer of foresight and collaboration at a time where independent guesswork simply isn’t viable.
Working together, from manufacturing to sale, again seems like an obvious strategy. But it has traditionally been avoided due to a sense of mistrust between each silo. Self-preservation and a desire to protect their own departments or interests, has created a hierarchal strain where the CPO often takes the brunt.
Times of crisis are a great time to forego these conflicts, however. And, by creating a more linear and collaborative dynamic between internal disciplines, and then the supplier portfolio, organisations can form a more united and robust defence in the face of unprecedented challenges.
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A free pass to start again
Many have learned that a business focus must be applied to the procurement function when reacting to a changing world. In essence, it is time to shake up the procurement department and prepare for the future. Upskilling procurement teams will be vital for this process, so that they are prepared to deal with the wide-ranging issues and variables heading their way to ensure they have the right knowledge and tools to navigate a post-Brexit supply chain.
The more open and aligned conversations that take place in the coming months, the more prepared businesses will be to manage procurement challenges triggered by both Brexit and Covid-19. And beyond that, it will be more likely that they’ll be to set their procurement function on a better trajectory than has been in place over the past 10-15 years. So, not only are business working to overcome the challenges being presented today, but they are automatically putting plans in place to capitalise on tomorrow’s opportunities.
Those businesses that were previously failing to inject resilience and visibility into their supply chains have been given a free pass to start again. As the impact of Brexit becomes clearer, businesses that fail to adapt risk face a minefield of challenges. This could hinder your organisation’s progress even further once we come out the other side. Instead, reacting to the changes as a series of smaller obstacles with speed and agility will be instrumental in building an effective supply chain post-Brexit.