Supplier relationships in a world of Brexit uncertainty

By Lila Mathiou, Mel Shutes and Alan Day

Last week’s referendum result has cast a shadow of uncertainty over the UK economy with repercussions across Europe and globally. Now, more than ever, is the time to invest in supplier partnerships.

Like you, we have seen numerous articles and commentary on the pros and cons of the vote and the current and potential impact of a British exit from the European Union. The one thing they all agree on is that the future is uncertain.

We are a global business that supports clients and employs team members from countries all around the world, and we are disappointed at the result of the referendum. However, we would like to look forward and focus on what a British exit from the EU could mean for your organisation’s supplier relationships.

With all the uncertainty surrounding Britain and Brexit, we are reminded of the saying that “in uncertain times, surround yourself with people you can trust”. This can equally apply to suppliers. You will need to make sure you work with those suppliers that you can trust, those suppliers that will go the extra mile for you, the ones that can deal with uncertainty and will help you do the same. Now more than ever you need to be working with organisations that are as committed to your future as you are.

Does anyone know what will happen with trade?

Amongst the many uncertainties facing businesses is the post-EU trading status of Britain and the potential changes to this. Do we know what will happen with UK’s trade agreements?

A big question remains on whether leaving the EU will mean that Britain will exit the EU trading zone. Leaving the EU does go against the trend of recent years, where a number of collective trade agreements have been signed. One such agreement is the the Trans-Pacific Partnership (TPP) between 15 pacific-rim countries, dealing with lower trade barriers (such as tariffs) between the countries.

Closer to home, the EU and the US have been focused on putting in place the Transatlantic Trade and Investment Partnership (TTIP). A proposed trade agreement between the European Union and the United States, with the aim of promoting trade and multilateral economic growth. According to the European Commission “TTIP would boost the EU's economy by €120 billion, the US economy by €90 billion and the rest of the world by €100 billion”. Britain as a leading player in this deal who’s now leaving the EU, potentially puts this deal and its own role within it in jeopardy.

Could Britain do it alone?

While Britain is America’s seventh largest trading partner (EU being the largest), President Obama has famously said Britain would go to the "back of the queue" for trade deals with the US if it voted to leave the European Union. Although since the referendum result - and amidst concerns that Britain might not be able to fund its contribution to NATO - the US seems to be backtracking on this stance.  So again, more uncertainty.

This uncertainty puts more emphasis on organisations taking control of their own destiny and forging or strengthening relationships with suppliers that will withstand the disruption of the changing trade arrangements. Remember, "It is not the strongest of the species that survives, nor the most intelligent, it is the one that is most adaptable to change", according to Charles Darwin.

The rise of the supplier partnership

In recent years large organisations have developed highly complex supply chains that cross multiple boarders. As they look to manage risk and harness innovation from within these supply chains, they need to develop strong supplier relationships and partnerships. At the recent SelectUSA conference on Innovation, President Obama said it best:

"The term global economy is redundant, as global supply chains are now tied into every element and every aspect of our lives. Partnerships are key for all of us to succeed".

Brexit uncertainty coupled with attempts to pre-empt and control risk, should lead to organisations turning to innovative and entrepreneurial initiatives with their supply chains and supplier relationships. Alex Kirk, Head of Systems & Automation at Mediacom discusses how his organisation “has a fundamental tenet - that we are ONE Mediacom. Wherever in the world you are, whichever department you specialise in, you are part of a connected whole that drives forward together”.

We’d extend this tenet to the organisation’s supply base as well. Organisations understand the need for shared goals and objectives. Leading companies tend to espouse a ‘one organisation’ culture and set of values. They strive to achieve consistent customer and employee experience in order to drive loyalty to their brand. We expect the same focus on a ‘consistent experience’ will be extended to their suppliers (especially those deemed strategic), as they seek to become more innovative and entrepreneurial, and ultimately increase their bottom line and ensure their business’s longevity. US Secretary of State John Kerry said recently: 

“When we do business together across borders, when we trade with each other and invest in each other’s markets and we each have more skin in the game, then our governments have even greater incentives to collaborate on a whole host of crucial issues. What’s more, our heightened commercial engagement is a net positive for economic expansion in every one of our communities, because we all do better when we grow together”.

Apply this principle to your supplier relationships and you will soon witness how solid supplier partnerships breed benefits beyond risk reduction. As organisations begin to forge supplier partnerships they will benefit from the diversity being more connected brings. Similar to cultures or governments, diverse organisations working in collaboration allow for alternative views on solving problems, introducing innovative solutions and new ways of driving value.

The day after

Strong supplier relationships will endure, adapt and grow from the challenges, however the shape of these relationships may change overtime. We might end up with stronger or more mutually-dependent relationships within whatever new trading agreements come into place. We might find ourselves on the wrong side of a new trade agreement, or suppliers might find themselves cut off from some of their traditional markets.

If relationships are strong they will withstand change, however, this will require flexibility and mutual understanding and possibly re-negotiation. Our own research on supplier relationship management (SRM) shows how organisations with stronger supplier relationships have shorter more effective negotiations which produce better results for both parties.

Change and challenges are not new. As Niccolò Machiavelli said back in 1505, “It ought to be remembered that there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things”. We are indeed facing a new order of things and these are perilous times. Together with your suppliers you can work to form an alliance against uncertainty.

To find out how good your supplier relationship management is, complete our 2016 global SRM survey. 

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