Economic uncertainty can have a significant impact on procurement operations. Whether it’s driven by inflation, political instability, global issues or supply chain disruption, a lack of confidence in the economy brings additional challenges to the procurement process and makes it more difficult to reduce risk, control costs and still achieve positive project outcomes.
At a time when many procurement teams are being asked to do more with less, here are our top tips for managing procurement effectively during economic uncertainty in the UK.
Jump to:
- Reassess your current procurement strategy
- Work on supplier relationships
- Utilise flexible frameworks and DPS to streamline procurement processes
- Manage supply chain volatility
- Prioritise value over cost
- Turning economic uncertainty into procurement opportunities
- How Procurement Hub can help
Reassess your current procurement strategy
In response to economic insecurity nationally, it’s usually a great first step to review your current procurement strategy to determine if your model provides enough flexibility to deal with market dynamics that are changeable. While long-term contracts offer a degree of stability, they can also have an element of risk if market prices go on to drop or if suppliers are unable to deliver on their promises due to economic factors.
While procurement strategies do vary between organisations, some of the areas you may find it useful to review could include:
- Existing contracts – looking at supplier performance and pricing structures to identify any aspects of high risk. Check against your procurement KPIs to measure success.
- Scenario planning – have you modelled potential outcomes for a range of different economic challenges?
- Could you utilise more flexible frameworks or Dynamic Purchasing Solutions (DPS) for your projects which offer a high level of agility and can often respond quickly to market changes?
Work on supplier relationships
In an increasingly digital procurement world, it’s actually human relationships that are becoming even more critical. At times of uncertainty, working with suppliers where transparency and trust runs both ways can be hugely beneficial to all parties. Dedicating time and effort to forging stronger supplier relationships can help pre-empt potential disruptions by bringing any issues to light early, when action taken can mitigate the problem more easily and lower the risks to the wider project.
At Procurement Hub, we have a dedicated Supplier Relationship Manager who works closely with our suppliers to help build trust, improve collaboration and help ensure continuity and quality across all projects. Organisations using our solutions can benefit from these outcomes as part of the service that we offer.
When looking at your supplier relationships, some of the areas you can focus on may include:
- Mapping out your supplier base to assess risks. This could be geographical, financial or operational.
- Establish regular and open communication channels with your suppliers, helping to ensure issues are flagged early and solutions can be collaborated on.
- Utilise your supplier network for backup plans, building resilience into the supply chain.
Utilise flexible frameworks, dynamic markets and existing DPS solutions to streamline procurement processes
With the introduction of the Procurement Act 2023, dynamic purchasing systems (DPS) have been replaced by dynamic markets, although existing DPS solutions can still be accessed and used until they expire. Procurement frameworks, dynamic markets and DPS routes offer a combination of ‘tried and tested’ with flexibility, which can be invaluable during times of economic volatility. Existing procurement solutions can be used to save time and money, with pre-vetted, high-quality and diverse suppliers with compliant terms already in place.
Dynamic markets and DPS models can bring the useful flexibility of ongoing supplier onboarding, which can give innovative new options in response to market changes.
Making use of the solutions that already exist and are proven to be effective can help significantly reduce your procurement lead time, which is always a positive thing during times of change and uncertainty.
Manage supply chain volatility
In recent years, supply chain volatility has become a key concern for all sectors. Fragile supply chains can have a devastating impact on project success and outcomes across the board. To help manage this proactively, you can:
- Conduct a supply chain risk assessment across key categories, identifying single points of failure and high-risk regions or components.
- Increase inventory for critical items where possible—this can act as a buffer while you strengthen your supply chain strategy.
- Diversify supplier locations and types to avoid over-reliance on specific geographies and make it easier for SME suppliers to have greater involvement.
- Consider working with procurement partners, such as Procurement Hub, who already have resilient, pre-qualified supplier networks in place.
Being proactive about managing supply chain risk is not only about avoiding project or service delays, it's also about safeguarding your reputation, delivering great outcomes and keeping costs under control.
Prioritise value over cost
With economic uncertainty comes the temptation to always opt for the lowest priced option, but as the procurement objectives outlined in the latest UK industry regulations indicate, success is about delivering overall value rather than focusing just on the cost. Some of the ways to potentially approach this include:
- Taking a more holistic view of ‘value’. This means including factors such as the social value to the local community and economy, the quality of works or services, supplier reliability and resilience and, of course, the long-term sustainability of the project and its expected positive impact.
- Calculating the total costs when assessing suppliers, including lifecycle costs, maintenance, support and end of life operations.
- Ensuring that your evaluation criteria includes qualitative (as well as quantitative) attributes, such as innovation, BNG in construction procurement and other ESG goals.
Turning economic uncertainty into procurement opportunities
There’s no doubt that a changeable economy, nationally and globally, brings many challenges to effective procurement. Taking a proactive approach can be key to turning what can be a negative into an advantage instead. It gives procurement teams an opportunity to demonstrate strategic value.
By leveraging the flexibility and efficiencies of DPS and frameworks, building stronger supplier relationships and taking a holistic view on success, performance and outcomes, procurement operations can become more resilient, while also keeping a firm handle on costs.
How Procurement Hub can help
Managing procurement strategy during uncertain times can be very complex, with teams being tasked with balancing all of the factors that can be controlled as well as mitigating external risks too, when possible.
At Procurement Hub, we have extensive experience in helping organisations to overcome procurement challenges. Our ready-made flexible solutions and consultancy services offer all the support needed to put in place strategies and processes that work for your specific needs and deliver on procurement efficiency and effectiveness.
You can sign up for free to gain access to our current solutions and enquire about expert support for developing a tailored procurement strategy that can help future-proof your projects and processes.