Spend Matters welcomes this guest post from Philip Woode, Principal at Efficio Consulting.
Britain leaving the EU brought about the biggest change in the UK’s trading relationships for decades. As businesses are dealing with the immediate impact of Brexit, the news is filled with stories of port delays, cross-border friction and plunging export figures. While Brexit appears to be the main factor for these disruptions, global supply chain problems resulting from the pandemic and the impact on trade in general from Covid are also being cited. Amidst the ongoing chaos caused by events in 2020, it has become apparent that rather than a single event, Brexit will see businesses face a series of smaller obstacles that are yet to be fully realized. Therefore, speed and agility will be key for supply chain managers as they deal with the constant changes over the months ahead.
But, with all of these moving parts, do you have the ability to change your strategy and react quickly?
Supply chains were certainly stress-tested in the lead up to Brexit, and this uncovered procurement weaknesses and inefficiencies that were already in existence. Constant change requires a more joined-up business and the ability to adapt quickly. So, when faced with an unavoidable catalyst for change, like Brexit, does that change represent more of a challenge or an opportunity for the CPO?
Change uncovers weaknesses
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 vital. It is 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.
Nobody can predict what will happen in the next 12 months. Brexit is just part of the puzzle that will impact supply risk management. But there are other factors to consider, including the ongoing trade deal negotiations, Covid vaccine, and the impact of new Covid variants affecting 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.
A flexible and diverse network
When challenges come from all angles, it is clear that the narrative, the approach and general attitudes to the supply chain all need to adapt. This requires both an external mindset change in how businesses compile and manage their supply chain networks and procurement channels, and an internal overhaul beyond procurement being a siloed operation.
Looking at the former, the CPO needs to completely rethink how the industry is evolving, even despite the unknowns. When you are 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 has shone an additional spotlight on this above necessity, proving that demand — volume, trends, prices, goods — aren’t a constant in any environment and can’t be based around historic data and individual decisions. By establishing stronger insights into market demands, organizations 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.
Breaking down the silos
As well as a stronger connection between CPO and marketing director, the next phase of change needs to happen internally. Breaking down 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 take place 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. 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 can agree on how to best manage impacts. 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.
A collaborative approach, from manufacturing to sale, again seems an obvious strategy, but it has traditionally been avoided owing 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 in which the CPO often takes the burden.
Crises present an opportunity to forego these conflicts, however. And, by creating a more linear and collective dynamic between internal disciplines, and then the supplier portfolio, organizations can form a more united and robust defense in the face of unprecedented challenges.
Reshaping the supply chain for the future
Moving forward, the procurement function must be more business-focused in order to react to the changing world. Now is the time to shake up the procurement department and be more forward-thinking. This includes upskilling procurement teams that will now be dealing with more wide-ranging issues and variables to ensure they have the right tools and knowledge to navigate a post-Brexit supply chain.
Overcoming procurement challenges brought on by Brexit and Covid-19 in the coming months will require more transparent and joined up conversations. Beyond that, however, the more likely businesses will be to set their procurement function on a better trajectory than has been in place over the past decade.
The changes that take place today to overcome challenges will set companies up to take advantage of tomorrow’s opportunities.
For those businesses that were not prepared for such momentous change and that failed to instill resilience and transparency into their supply chains have been given a free hit at the reset button. As the impact of Brexit becomes clearer, organizations that do not adapt risk facing a minefield of difficulties. This could put your organization even further behind the curve once we come out the other side. Those that react to the changes as a set of smaller obstacles with speed and agility, while breaking down the internal silos, will emerge as opportunists with an effective supply chain post-Brexit.
Disclaimer: The opinions are those of the author and not necessarily those of Spend Matters