There has been much speculation about the impact of Britain’s departure from the EU on jobs, the economy and Britain’s relationship with other nations. Many organizations with UK operations had already started ambitious procurement capability development projects when Britain voted to leave the EU in June 2016. This is our view on the impact of Brexit on procurement skills:
1. A more international outlook
Post-Brexit Britain will seek to make advantageous trade relationships directly with the EU and non EU countries. Prime Minister Teresa May described the outlook in an interview on 4 September 2016, as “an independent Britain forging our own way in the world”. Procurement professionals will need opportunity assessment skills to determine whether new trade relationships with countries outside of their current supply base represent better value for money. Their research could influence business leaders within their industry to request that the UK government supports trade deals with countries of interest.
Knowledge of international trade legislation is going to be important, coupled with skills in negotiation with different cultures.
2. Reduced travel results in greater use of online tools
It is yet unknown whether it will cost more to travel to and from the UK (e.g. due to changes in visa requirements or air passenger duties). As the International Air Transport Association (IATA) outlined in June 2016, “broadly speaking, the closer the relationship with the EU, the less likelihood that the UK would need to amend air services agreements.” Higher costs of transport could impact the likelihood of procurement professionals visiting the facilities of overseas suppliers which is essential for practising skills such as cost analysis and evaluation of responsible business practices. Yet reduced travel could also reduce attendance at training courses for these skills.
Online learning like ADR’s Online Supply Chain Academy (OSCA) for procurement eLearning and virtual classroom courses can enable procurement professionals to refresh these skills. Online tools can also support supplier management tasks like evaluation of vendor performance.
3. Total cost of trade requires careful evaluation
The threat of poor trade deals for importing and exporting goods and services will mean that all business professionals need to hone their skills at calculating the total costs of buying and selling overseas. The Institute for Fiscal Studies (IFS) report “The EU single market: the value of membership versus access to the UK” (August 2016) states “Estimates suggest the costs affecting services trade may be over twice those in goods”.
Corporate services buyers will need strong skills in assessing costs such as changes to import duties, labour law and vendors down the supply chain. For example, the UK currently relies on many employees from the EU with a right to work in the UK. If that changes (or the cost to work in the UK changes), suppliers could face higher costs of hiring and wages, longer lead times to recruit staff and a greater reliance on overseas workers from outside the EU who also present working visa cost implications.
Skills shortages that already exist could become more acute and suppliers of labour services could attempt to increase prices in response to these challenges. Expertise in skills such as sensitivity analysis will be required in the evaluation of supplier proposals and in contracting.
4. Long term economic stagnation makes long term contracts better value
Following the Bank of England’s August 2016 inflation report, when the 2017 growth forecast reduced from 2.3% to 0.8%, the British Chambers of Commerce (BCC) observed “While the scale of the downgrade mostly reflects the greater political and economic uncertainty in the wake of the Brexit vote, it is significant that this is the fourth successive inflation report in which the bank’s expectations for UK growth have been weakened – confirming that the UK’s economic outlook was softening long before the outcome of the EU referendum was known”.
If Brexit does mean a long period of low growth for the UK economy, tactical sourcing may yield limited results except for categories in the most competitive of supply markets. Procurement professionals may seek longer term contracts with suppliers, exchanging greater commitment for preferential terms.
Buyers will need to make themselves more attractive to suppliers to secure a quality relationship. Supplier assessment will be a key skill to identify what makes their organization attractive for suppliers.
5. Standardized capability profiles
Global teams have traditionally used a highly regionalized approach to creating job descriptions rather than an international schedule of the desired skills mix for procurement (sometimes known as a competency framework). This often results in regional pockets of procurement skills strength and weaknesses.
In future, there could be a more global approach to capability development to support greater international buying opportunities. This could result in common global competency frameworks, international qualifications and sector-specific procurement accreditation. This could facilitate easy movement and development of procurement expertise, which can elevate skills to a consistent global level.
Conclusion: Brexit means opportunity for procurement skills
More internationalization means less siloed thinking and higher aspiration to apply new skills to collaborative value initiatives. The silo approach is where procurement is overly focused on local requirements and objectives, which can result in a zero-sum game where colleagues argue over who reports overlapping project benefits.
Brexit should remind any world citizen that people have more things in common with each other than not, which is the starting point for any win-win type relationship.