“Forward planning is critical to weathering the Brexit transition period,” says CIPS as it issues guidance ahead of the UK leaving the European Union on 31 October 2019.
While many procurement professionals are “remaining fluid with their strategies”, the CIPS guidance provides advice on how businesses can protect their supply chains, customers and reputation.
This can be achieved by “anticipating the possible impact areas that Brexit may have on import restrictions, possible bottlenecks in process and the managing of goods being imported into the UK that support production processes,” CIPS says.
According to CIPS, 44% of procurement teams are still preparing a risk analysis plan to identify significant areas of change or cost that could impact financial turnover or production capacity.
While firms are struggling to secure contracts with a term that extends past 31 October 2019, some have turned to alternative ways of securing contracts that give flexibility to both parties. This includes new clauses that allow for price renegotiation or change of goods in consideration of potential changes to tariff rates and customs regulations.
CIPS recommends companies consider using alternative currency to the pound sterling for new contracts in case the British currency continues to devalue.
Potential tariffs and customs delays remain an issue, with vehicles expected to wait for up to three hours at ports. Delays at borders are likely to put pressure on businesses’ cash flow as consequent late deliveries, lost contracts or delayed goods are expected to incur penalty fees, CIPS stresses.
It recommends firms start training employees in customs clearance “as a matter of urgency”, including awareness of potential additional tariffs, systems and data updates, and customs clearance documentation.
With EU tariff and duty rates marked as “one of the most concerning areas for procurement and businesses”, CIPS recommends companies buy goods earlier than planned in the supply chain cycle.
UK warehouses are at full capacity, according to CIPS, and procurement professionals are urged to secure additional warehouse space immediately in preparation for Black Friday and Christmas; otherwise they risk not having storage space available.
Other areas explored in the report include VAT, auditing of the supplier base, trade deals, recruitment and workforce and EU grants.
“Until such time as the political landscape becomes less murky, the UK is set to leave with or without a deal on the 31st of October 2019,” CIPS adds.
“Though the time scales to prepare are painfully short, procurement professionals and business managers must make efforts towards protecting their supply chains, business, customers and reputation.”