The value of the Pound Sterling has dropped 15% since the Brexit vote in late June reaching remarkably low valuations against both the Euro and Dollar (Sterling Collapses, Buyers Face Price Rises And Tough Negotiations). Impacts will likely be broad and far-reaching.
We will leave the discussion of causes, blame and political impact to others. Of particular interest to us at Scanmarket is how do buyers deal with this situation, both inside and outside the UK? As discussed in the Spend Matters article referenced above, there’s a very real chance that UK-based buyers could be facing sharply-increasing costs in the very near future.
What steps can a buyer take now to help mitigate the impact of this situation? How can you use the strategic sourcing tools you already have in place to help? Five practical, actionable items come immediately to mind:
- Understand where you are. You can’t manage your exposure if you don’t understand it. Your Spend Analysis platform can help you quickly investigate which spend areas might be susceptible to price increases by looking at categories where you have significant UK spend exposure with non-UK suppliers. This step will help you focus your efforts and reduce the amount of time spent on spend areas that have limited cross-border impact.
- Extend the contracts that you can (and should). Evaluate the expiration and extension components of your existing contracts with non-UK suppliers. You will likely find some contracts that can be extended at current terms. This action could be well worth the effort, assuming of course that you’re satisfied with the current supplier’s performance.
- Expand the pool of suppliers. Chances are you have suppliers who you’ve looked at, or have come knocking on your door, but have not yet made it through your supplier evaluation and on-boarding process. Use your Supply Base Management to accelerate the process of incorporating them into your pool of bidders. This will help you improve the competitive dynamics in your bidding and get better results from the events you do run.
- Accelerate your savings opportunities where possible. There’s a good chance that your progress toward savings targets may be adversely impacted by macro-economic factors completely outside your control. However, there’s an equally good chance that you’ll still be expected to meet those targets. Now is the time to “step on the gas” in your competitive bidding through eAuctions or elsewhere to capture as much savings as possible to offset.
- Turn the tables when you can. This is also an excellent time for non-UK buyers to look at their spend portfolio for opportunities that might have been passed up previously. If you have categories under consideration for competitive bid that have a strong base of UK suppliers, now may be the time to go to bid.
We’ve had multiple customers ask us about this risk in recent weeks and these five steps represent the core of our advice. Obviously, each situation is different and some steps may be more applicable for your organization than others.
For more information on these approaches or to learn more about how Scanmarket can help you achieve your business objectives, please visit us at www.scanmarket.com or contact your Scanmarket account manager.
Easy. Proven. Results.