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Brexit & Your Supply Chain

Was 2016 Bizarre for you or is it the start of evolutionary times? With Leicester, Trump and Brexit, we can safely state that 2016 was turbulent, with similar excitement expected in 2017 due to Drones, Blockchain, IoT, French/German Elections, plus the true fallout from Brexit and Trump politics etc.

Focusing on Brexit for now and the potential impacts to your business, the people of Britain voted for a British exit, or Brexit, from the EU in a historic referendum on Thursday June 23 2016. This has resulted in 2 potential outcomes for the UK (with downwind impacts for Ireland);

1. Hard-Brexit

Essentially, it all boils down to trade – if the UK does not agree a deal that continues “tariff-free” trading with the EU single market, then it will be seen as having opted for a hard exit.

2. Soft Brexit

In direct contrast to a hard Brexit, a soft one would not involve giving up most of our current free trading arrangements when the UK leave the EU.

Unfortunately, it seems like a Hard Brexit is most likely while to-date the most visible outcome has been the volatile value of Sterling (with a noticeable ‘bounce’ since November)

So what can we expect?

1. The UK border agencies could charge import duties and also collect VAT on all imports.
2. The transfer of goods, services, people and data to/from the UK will likely become more complicated and costly – more of an inconvenience rather than a major barrier to trade
3. UK growth is expected to slow considerably in 2017, which will place increased pressure on the UK economy

 

As in all situations, this will impact some industries and businesses more than others. If you supply to, or import from, one or more of the following sectors, you can expect complications and change in your supply base from 2017;

 

As experts on the Lisbon Treaty (since we read it twice!), a country leaving the European Union has 2 years in which to negotiate a withdrawal agreement. This time-frame permits preparation in 2017 for the Brexit impacts of 2018, while businesses should invest in Procurement so as to;

 

1. Reduce your supply-chain risk if overly dependent on UK suppliers
2. Develop internal expertise to deal with customs, visas, tariffs, VAT, currencies etc.
3. Provide internal Category, Contract and Vendor Management expertise (3 investments which should be considered irrespective of Brexit)
4. Prepare for global sourcing events and opportunities
5. Provide Procurement Training, so as to invest in your buyers to improve their mindset, skillset and toolset

 

As always, please do not hesitate to contact us with your Brexit and Procurement queries.

Reduce your Logistics Spend

With fuel costs continually rising, and consumers demanding faster delivery (even for free) it is more important than ever for businesses to control their shipping costs. The dynamics of this industry have changed also with;

  • changes in business models e.g. drop-shipping and transport auctions
  • changes within the supply-chain e.g. The Pallet Network
  • increase in Networked Operators e.g. Fastway Franchise (amongst others)

Take note of the following Logistics Advice for your business;

1) As with all effective procurement exercises, define your requirements accurately. Ensure you fully understand your unique shipping profile defining characteristics such as weight, destinations, volumes, growth trends and product mix.

2) Keep abreast of industry rates. Due to the market drivers above and increased competition, market rates have been squeezed to the benefit of the consumer e.g. Parcels up to 30KG can now be delivered next-day nationwide for only €4.95. Conversely rates can increase also due to external factors (fuel prices) so keep informed of such economic factors.

3) New Thinking – Design For Shipping (DFS). At the design stage, ask, how will the product ship (individual pack, cartons etc.)? How many packs per pallet, any overhang (causing possible damage). How many pallets per container, will the container have lots of extra space, are you shipping air? Can the product be lighter, when shipping by weight.

4) Source a solid Logistics partner. You must be confident that your Logistics partner is your business partner. Look beyond cost – review on-time performance percentages and claims rates, then examine overall return on investment, rather than just price. As always, consider their financial stability, insurance, experience, technological advances etc.

5) Assess geographic coverage and infrastructure. When comparing your company’s logistics requirements, visit various operators to assess their capacity and facilities. Ensure their geographic locations match yours also including to accommodate peak seasons, new products and/or locations.

6) If appropriate, get your Logistics partner to meet your customers. Use your Logistics partner to define the exact customer requirements e.g delivery times, key personnel, stock holding, returns, reporting, invoicing etc.

7) Use a Logistics Expert. As you do with Insurance and Utilities costs, use a strategic partner to manage all your Logistics requirements. Their expertise will find the best Local and Global Transport solutions for all your inbound and outbound logistics requirements.

Tips to reduce your Merchant Services Fees

Merchant services relates to the broad category of financial services available to businesses to accept payments through secure channels to process a customer’s credit or debit card. Typically these include;

  •     Credit and debit cards payment processing
  •     Check guarantee and check conversion services
  •     Automated Clearing House
  •     Payment gateway
  •     Online transaction processing
  •     Point of sale (POS) systems

As with all Overhead Costs, opportunities exist to reduce Merchant Service Fees, even by comparing the various offers from the market. Additionally, correct usage and implementation of the following tips will reduce your Merchant Service Costs while enhancing you customer’s experience;

 

(1)    Broadband / IP Connection

Check to see what type of line your terminals are connected to. If you have a broadband router at your business, it is a great idea to connect your terminal to this rather than the standard analogue phone line. There are 2 great reasons for this;

  1. The router will eliminate the need for an analogue line. Cancelling this will eliminate any unnecessary Telecoms charges, and
  2. The experience is a much faster and more efficient one for both your company and your customers

 

(2)    Foreign Currency rebates on non-Euro denominated cards (DCC – Dynamic Currency Conversion)

If your business has customers from outside the Euro Area (e.g. Sterling and US Dollars etc.),  ensure you have the foreign rebate function switched on at your terminal point. Again, there are 2 great reasons for this;

  1. Your customers will know exactly what amount will be appearing on their visa statement once converted. This allows for easier reconciliation for them including far easier reconciliation when claiming expenses (for business customers)
  2. While as the facilitator, you will earn additional revenue for your business through a FX rebate

 

(3)    Over the phone / MOTO Transactions (card not present transaction (CNP, MO/TO, Mail Order / Telephone Order)

Double check that you are processing over the phone transactions correctly. Some terminals are set up that you need to enter these transactions in a different manner to the customer present one. If you are doing this incorrectly you could be incurring unnecessary surcharges.

 

(4)    Contactless Transaction

For your customers who spend less than €15 as an average transaction, ensure your terminal can offer contactless transactions. It speeds up the transaction and provides an enhanced customer experience. They just tap and go. No need to delay the transaction by entering the pin.

 

(5)    Tax refund transactions

For those of you who are offering tax refund service, you may have a separate terminal for this. Check with your supplier to see if they can offer it to you all on the one terminal. Saves on desk/counter space and frees up power and phone lines for your business. Also allows for a smother customer experience.

2017 Procurement Research

What concerns have Irish SMEs about Brexit, Trump, Blockchain etc ?
The 2017 Arvo Procurement research was developed to collate responses from Irish SMEs to clarify the impact from Trump policies, technological advances such as Blockchain, plus the true fallout from Brexit. Ratings agency Moody’s recently sounded a warning note about the threats to the Irish economy from Brexit and the Trump administration, particularly as Ireland was the “European country most exposed” to the two factors. The agency says the changing international environment are “key risks” for Ireland’s otherwise improving circumstances, while Brexit could be more disruptive to Ireland than initially thought (due to the hard exit outcome currently being negotiated).

 

With regards the survey findings;

  1. 100% of the Irish SMEs think that their insurance costs will increase in 2017, what about you?
  2. 26% of the Irish SMEs think that Brexit will increase currency costs and so impact their business
  3. While the top “2017 Priorities” for Irish SMEs are revenue growth and profit growth.;

The majority of Businesses surveyed during this research;

    1. Do not have a procurement function or role within their companies
    2. Do not have a budget for procurement systems and training
    3. While tasks relating to “banking and payments or documentation, order process” are potentials to automate today.

 

To review the complete report, please use this download link: https://bit.ly/2msMirM

 

 

As always please feel free to contact us if you have any queries about this survey and any procurement challenges or opportunities within your business.

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