Procurement teams may need to break the status quo – to protect it

A new role for procurement teams is emerging as they help housing organisations to plan for Brexit, but they will need to challenge existing assumptions, says Neil Butters

Both the UK government and the European Commission have stepped up their contingency planning for this worst-case scenario in an attempt to minimise disruption – particularly around transport, customs and freedom of movement.

But what about disruption to social housing procurement? It is well-known that a no-deal Brexit poses a big risk to labour and materials supply. As a result, housing providers will need more support on both contract management and supplier management from their buying teams to ensure that delivery targets are met, standards remain high and speculative pricing is avoided.

If the UK does leave the EU in March without a deal then there would be no 21-month transition period – and the need for extra support would be immediate.

A role beyond the price-led model

Now is the procurement function’s time to shine, showing the strategic impact it can have around risk and business continuity planning. Yet this is a very different type of activity from the traditional, price-led role that many buying teams are given. Rather than purely sourcing goods, negotiating prices and policing spend, procurement professionals have a chance to become integral to the future direction of their housing organisations.

However, if buying teams are going to tackle this new responsibility effectively, they might have a battle on their hands. Identifying business-critical areas is crucial to no-deal planning, yet this task will inevitably involve challenging existing assumptions – possibly at board level – about what to prioritise.

For example, an asset director may give precedence to both planned capital works and responsive repairs when it comes to contingency planning. But if landlords or their suppliers rely on EU-manufactured products or just-in-time delivery of parts, which could be delayed at the border, then something may have to give, and hard choices could have to be made.

This is where procurement leaders can help. In a chaotic, crash-out scenario, if a housing association board has to make a quick, live decision on whether they focus stock, labour or finances on either responsive repairs or planned works – such as how to use a finite number of windows that are in stock or available to them – then the procurement function can inform their choice.

Procurement leaders are aware of the intricacies and nuances of the supply chain and they can foresee and plan for multiple scenarios. They know contractors and their complex supply base tiers inside out, and they know where the risks lie. This insight can challenge existing priorities and help housing organisations to re-focus resources effectively.

But this new role for procurement leaders isn’t all about contest. Their supply chain intelligence can help asset directors to manage the expectations of their board. This may be particularly useful when board members are scrutinising performance and asking why a contractor hasn’t delivered on time, to budget or within key standards. With a procurement expert involved, board directors can understand risk rather than just focusing on performance. They can grasp the specific supply chain issues a particular contractor is experiencing, what has caused these blockages and the measures being taken to manage performance tightly.

Another task for procurement functions is around managing the risk of ‘Brexodus’. EU nationals make up 20 per cent of all labourers and tradespeople in the UK and 18 per cent of workers in UK warehousing and transport. Crashing out of the EU with no agreement is expected to push up the cost of labour and supply, particularly in specialist areas where there are already growing skills gaps.

If one-fifth of a housing association’s direct labour organisation (DLO) workforce are EU nationals then plans must be made in case large numbers of these workers leave once a future immigration deal is struck. A landlord with a DLO that undertakes both repairs and planned works in-house will have a different set of challenges to a housing association that outsources part or all of its works to a third party. Knowing the intricacies of their own organisation and unique supply chain; being aware of which trades are particularly affected and which contractors are most exposed; and mitigating this risk is something that the procurement function is uniquely placed to manage.

In social housing, procurement still has a reputation as a tick-box department. But the turbulence posed by a crash-out also offers buying teams a unique opportunity – a listening ear from senior employees. This is a chance for procurement to showcase its true value.

Neil Butters, head of procurement, Procurement for Housing

Published in Social Housing on 08.01.19