Brexit - Hold your nerve and reflect! ......

According to Masser, reported in Supply Management 27th June 2016, compromising on quality and service now is not a solution to extraordinary conditions and executives should “hold their nerve”.

Masser echoed a wider concern in the profession that the Brexit-effect could make procurement exclusively cost-based again, having only recently been recognised as influential enough to deliver greater benefits to businesses, from improved product and services and value generation to sustainability and responsibility.

Anybody who compromises on quality or service to minimise the currency issues risks coming unstuck, he said: “There is an inevitability that it will catch up.” Instead, take this opportunity for cross-functional engagement within the company, talk to all departments in the business as a team, and take an holistic approach, he advised.

Allow the dust to settle before considering any restructures to your company, he added. “For me there is a period of reflection – a couple of weeks.” As the exchange rate tumbles and forecasts fluctuate from one hour to the next, it is the currency implications, not tariffs, that are the current focus, and the next couple of weeks will be quite informative. After that, businesses will of course have to start having conversations with suppliers, asking about strategies, he said. “As a major client or supplier, how are you viewing the whole scenario? How should we set out together to ride this storm?”

Every industry is going to feel it, said Masser, and the loss of profit margin is not going to be borne by one business alone. Stakeholder engagement has never been more important than now.

Masser’s advice to procurement and supply professionals is to start scrutinising their contracts, and check:

• Security of supply. Consider the organisations that might fall by the way. Have you got alternative sources?
• What clauses are in your contract around pricing? Do you have the ability to make changes in extraordinary circumstances?
• What clauses do you have around material costs – are you going to be chasing scarce resources?
• Service levels and lead times – are these battened down? And, conversely, are you locked in to these contracts, or can you start these over again and renegotiate?

This article can be found in Supply Management 27th June 2016.