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Brexit is finally there

Now it is final: Brexit is done, Great Britain is not a member of the EU anymore from January 31st. This does not mean that the links between the continent and UK have been cut – there is a transitional phase until the end of 2020 during which the previous regulations remain in force. During the next 11 months, Great Britain still will be part of the internal market and the trade union of the EU. So there is still room for uncertainty, because although an agreement on future economic and travel relations is to be negotiated until the end of the year, it is by no means certain that this will be achieved by 31 December.

Many companies have taken advantage of the long-standing Brexit process to position themselves well for the time after. But there are still three possible scenarios to focus on:

– The negotiations end inconclusively, so the hard Brexit comes
– There is an agreement, but it contains tariffs and other trade restrictions
– There is an agreement with extensive free trade

To develop strategies for all three scenarios, companies should first establish complete transparency about, including:

  • Spend
  • Supply chain
  • Contracts and terms
  • Price mechanisms
  • Stock levels
  • Fulfillment

The supplier pool, supply chain and the countries of origin for any requirements should be reviewed. On this basis, companies can identify critical and non-critical materials and preliminary products. For the most important critical material groups, procurement managers should develop solutions to avoid threatening trade barriers and customs duties (scenarios 1 and 2), for example:

  • Incorporate late deliveries due to necessary customs clearance
  • Examination of an increase in inventories to cover extended delivery times
  • Implementation of (digital) tools and methods such as analytics and supplier risk tools to improve transparency
  • Identification of and ramp-up with alternative regional suppliers
  • Evaluate the impact on their environmental footprint due to alternative delivery approaches

Be prepared for the economic downturn with robust procurement

Irrespective of what an agreement between the United Kingdom and the European Union eventually looks like, companies should be prepared for the economic challenges (e.g. a period of reduced growth, increased focus on sustainability) ahead. To be more resilient, companies should use their strategic procurement incl. more sophisticated levers, such as

  • Zero-based budgeting to curtail spending
  • Cooperation with the operations departments to optimize transport planning
  • Inclusion of suppliers in the innovation process, for example in a “concept competition”
  • Application of cost tear downs and should costing
  • Robust sustainable procurement plans covering environmental and social initiatives
  • Artificial intelligence to support procurement decision making processes

Companies must prepare now to succeed in the future, no matter what the trade agreement between EU and UK will look like.

If you want to discuss this any further please get in touch.

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