brexit –what does it mean for procurement? speaker... · management procurement support for your...

Brexit – what does it mean for Procurement?Richard Gibson

30 November 2017

2© 2017. All Rights Reserved.

• I’m a “remainer”

• I’m “seasoned”

• I’m a “brexiteer”

• 32 years in procurement (14 at Proxima)

First off….a little bit about me

Who we are - Proxima :

Is the largest independent procurement services provider

Manages $12bn of expenditure on behalf of our clients, mainly in indirect spend areas.

Has built one of the world’s largest procurement functions to run great procurement on behalf of our clients in Europe and North America.

Works out of four main delivery centers in the UK and US, as well as our clients’ offices.

Aligns deep functional and process specialists to our client needs, when and where they need them most.

Are experts in analyzing spend, driving out savings and making sure they stick


Our services are focused on your business needs

What we do

Consulting ManagedServices

On-Demand Supplier Management

Procurement support for your business, today and tomorrow. Our capabilities become your strengths.

Design and build your function

Refresh and reinvigorate your team

Turn generalists into specialists

Make budgets work harder

Reduce cost or drive value fast

Everything you need to run a next generation procurement function - in a nice, neat package.

Get the next generation now

Full Source to Pay capability

A spend network of $12bn in action

Change from the inside out

Take it all, or just some of it!

A procurement service that you can turn on or off, when it suits you.

Get great procurement, now!

Fully flexible event based model

Turn fixed into variable cost

Plug into specialists on demand

No long term commitments

Catalytics from Proxima is an integrated procurement technology suite.

Cloud based technology to transform how you work with suppliers.

Smart, simple and affordable Supplier Management technology

Create a single source of the truth across suppliers


And what they say about us

“Their specialist knowledge and skills have been invaluable to this project and its success.”

“Their people engage really well with our people, they communicate well, and ensure our people are bought into any changes that are introduced.”

“They are very good at listening, and are always willing to challenge.”

“Proxima brought a discipline, a sense of rigour and thoroughness of approach to our business, without which we would not have been able to deliver such significant cost savings, and more importantly, we would not have been able to improve the underlying business process as effectively as we have.”

Many iconic brands and organizations choose to work with Proxima

Our clients


700 issues of administrative overlap simplified to 8 key issues

Brexit - this is as complicated as it gets

Timing

Ratification

Transition

ECJ Trade

Borders

Citizenship

Divorce Bill


Why are we waiting?

• 17 months ago we voted to leave an organisation that we have been wedded to for over 40 years

• 8 months ago we triggered Article 50

• We are in one the biggest periods of economic uncertainty (outside of wartime) that this country has ever faced

• Yet it appears we are woefully under prepared

• The Government seems to failed in its attempt to persuade the EU that we have a credible BATNA…………..more on that later

and according to a recent poll

• 85% of procurement professionals believe that their companies do not have a formalised Brexit plan……….mmm?!

Brexit

Quite frankly this is shocking and an incredible wasted opportunity for you


The convergence of these issues presents a perfect storm for Procurement to be re-energised

Why a waste

Currency

Regulatory Trading


Marketing showing its real value?

Shrinkflation


Its arguable that pricing elasticity theory is being put to the test

• Just a quick reminder on the theory:

• Microsoft moved Azure cloud services up 20% and enterprise software 13%

• Did we see demand drop? Gartner suggested that 10% would be wiped off technology spending but it didn’t happen

• Professional services

B2B is different

53% of business leaders have cost reduction as their highest priority


This is the time to think, plan and act responsibly

We’ve been here before

32 year perspective

1980-811990-912008-09

In addition to cost management

So things to think about


Cash is king at times of uncertainty

• Who knows what the future holds except uncertainty

• Uncertainty drives a need to review working capital an to be prepared to manage risk

• Working Capital = (AR + Inventory) – AP

• Banks are ready (they weren't in 2007) ………are you? Are your suppliers?

• Check the financial health of your suppliers

• Understand your business needs and how you contribute to its health

• You don’t know what you don’t know so prepare for a broad range of eventualities

Impact for working capital

Exchange rate

Interest rate

Inflation pressure

Declining sales


Need to identify risk, assess impact and plan to respond

Contracts - key risks and issues

• What volume of spend is exposed to Brexit implications?

• What contracts require review or amendment?

• Which contracts intersect with critical time frame of Brexit?

• What planned business benefits will be impacted?

• Which suppliers will be affected by Brexit?

• What value of spend if subject to foreign exchange liabilities?

• Which contracts could be affected by the UK not being part of the EU?

• How resilient are your suppliers to Brexit impacts?

• Which contracts involve data transfers, movement of staff or cross border logistics?

• How exposed are your suppliers’ suppliers to Brexit shocks?

• Will your suppliers be able to cope with loss of liquidity?

• When should you renew, extend, renegotiate or terminate your contracts?

• Could Brexit frustrate performance or trigger grounds to terminate?

• How well placed are you to deal with contracts affected by Brexit?

• How does Brexit influence your commercial strategy?

• How can you stimulate competition in a shrinking marketplace?

• How will your suppliers and contracts respond to increasing costs?

• Are you able to pass on cost increases to your customers?

• How will you deal with costs arising out of changes in and compliance with law?

Contract identification Suppliers and supply chain Commercial management

Source: PwC


The world as we know it is going to change – like it or not!

• 40+ years of law

• 700 different issues of administrative overlap that needs to be untangled

• 70% of statutory instruments are governed by EU law

• European bodies will need to operate well after March 2019 until we create our own or agree working relationship

• EU legislation will continue to impact the way we work

Regulatory


Just got more complicated

• The impact for perishables is stark - the UK imports 48% of its food

• We know that Dover will be ready but what about Calais and Dublin?

• For manufacturing the EU has provided a seamless market with movement of componentry being easy; the new world will / may be different….we just don’t know

• Do you know which elements of what you buy will be impacted?

• How will Brexit impact on JIT, does it have a future? What will that look like?

• Businesses are modelling practicalities and looking deeper into their supply chains

• Deeper vendor management transparency

Supply Chains


Necessity is the mother of invention

• Of course Brexit is not going to eliminate migration nor will it lead to any mass repatriation but it has created uncertainty

• Freedom of movement restrictions will impact UK industry

• Numbers have dropped

• Profile has changed

• Skilled as well as unskilled

• Real issues in construction, service and agricultural

• How does procurement respond to it?

Labour markets


Its time to create a narrative for the Board

Opportunities

Brexit present a fantastic opportunity for Procurement to raise its profile and be a significant contributor to their organisations growth

• Sterling devaluation – means you can come up with solutions where others are modelling doomsday

• Innovation – the challenges ahead require creative thinking and deep, sound exploration of the issues impacting supply chains and costs

• Simplification – Procurement can and should be at the table to bring ideas, drive and determination

Enablers

With these opportunities come challenges and we all need to make ourselves ready

• Understand the problem - you must be able to articulate the business context and be able to create solutions. Do not present a “procurement” solution to a business problem. Use the right language.

• Balanced scorecard – get this aligned to the business and make it relevant to each stakeholder

• Focus – on strategies that develop and deliver supplier innovation

• Know – your risks and have a plan for remediation

To conclude

Negotiating Brexit

Lessons from history


Win Win?

• Hittite Version

• Mutual non-aggression pact and alliance against future enemies

• Establish borders between the parties

• Repatriate refugees and criminals

• The Egyptians came asking for peace

• Egyptian Version

• Mutual non-aggression pact and alliance against future enemies

• Establish borders between the parties

• Repatriate refugees and criminals

• The Hittites came asking for peace

The Treaty of Kadesh (13th century BC)


What makes for a “good” negotiated outcome

• Congress of Vienna 1814

• End of the Napoleonic Wars

• Followed by almost 100 years of relative peace in Europe

• Goal: Prevent future wars

• France retained its borders

• Included in the Concert of Europe

• Treaty of Versailles 1919

• End of WW1

• 20 years later, the world was at war again

• Goal: Punish German aggression

• Loss of territory and reparations

• Excluded from League of Nations

200 years in the making


How would you advise Mrs May?

Probably the most complicated negotiation in our lifetimes…

• Unravelling 40+ years of EU membership

• Multi-dimensional: Economic, Political, Legal, Social, Financial, Military, Diplomatic, Emotional, Practical, Constitutional…

• Strong opinions – on both sides of the channel

• 27 countries with a potential veto

• Uncharted territory, no precedents, no road map…

Negotiation strategy


• Focus on the process and on principles of good negotiation

• Not on whether Brexit itself is a good thing or a bad thing; nor on specific negotiation objectives

• Take the UK Governments “12 Principles” at face value

• How would you approach the negotiation to maximise the chances of success?

• Article 50 gives the two sides two years to agree the terms of the split – work with that as the timeframe

• Try not to get too much into the weeds

• The real Brexit negotiation plan would probably fill the building; we are looking for a few distilled words of wisdom

1. Providing certainty and clarity

2. Taking control of our own laws

3. Strengthening the Union

4. Protecting our strong historic ties with Ireland, maintaining the Common Travel Area

5. Controlling immigration

6. Securing rights for EU nationals in the UK and UK nationals in the EU

7. Protecting workers’ rights

8. Ensuring free trade with European markets

9. Securing new trade agreements with other countries

10. Ensuring the United Kingdom remains the best place for science and innovation

11. Cooperating in the fight against crime and terrorism

12. Delivering a smooth, orderly exit from the EU

Some ground rules and the 12 principles


……………………………………………..facilitators crib sheet

• In your break-out groups, agree 3-5negotiation tips that you would share with the Prime Minister

• Be prepared to share your tips – and your thinking with the broader group

• 20 mins to prepare; 5 mins per group to feedback

• Develop a strong BATNA

• Prioritise objectives

• Negotiate interests, not fixed positions

• Approach negotiation as collaborative problem-solving rather than as a win-lose competition

• Manage expectations

• Write the other party’s victory speech

• Understand what drives the other party’s interests

• Set the bar high with the first ‘offer’ (anchoring)

• Divide and rule

• Build alliances

• Be flexible

• Be innovative / creative

• Keep options on the table

• WYSIATI – Framing

• Who are we negotiating with? Different audiences/constituencies…

• Attitudes to risk

Group exercise

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