Navigating a Changing Political and Legal landscape in a Procurement Organization

Companies large and small are highly susceptible to changes and shifts in their industry. Understanding and adapting to these external forces is critical for any organization’s success. Sourcing and procurement are upstream in the supply chain, oftentimes causing them to be hit first with these shifts, and forcing them to navigate new obstacles to stay competitive. A “PESTEL” Analysis includes many of the most pressing external factors (below), but this blog is going to focus on some of the direct effects of Political & Legal Changes in the sourcing and procurement space.

Performing a PESTEL Analysis provides a bird’s eye view of factors that should be considered when developing a plan.

  • Political Changes
  • Economic & Financial Environment
  • Social or Cultural Shifts
  • Technological Advancement
  • Environmental Fluctuations
  • Legal & regulatory factors

A change in specific government, policies, or individual laws can have a significant influence on a procurement organization. These changes can have varying effects on how organizations do business; including who they do business with and the costs incurred during business. It is crucial that procurement departments stay vigilant regarding changes in the political & legal environments and be ready to adapt their strategy when changes occur.

At a basic level; governments, policies, and laws can lead to regulatory reform that will impact how companies’ supply chains are structured. These reforms can cause vast changes within a procurement department and can encompass many of the following:

  • Employment Laws and Wages
  • Health and Safety Concerns
  • Ethics
  • Quality Assurance and Control

However, many of these factors come with potential associated costs. Picture a situation where a new law creates higher wages for a specific set of workers. An organization needs to dive into what the potential implications are for:

  • The wages of other associated workers
  • The effects on different business lines
  • The intermingling of labor wages into other facets such as:
    • Benefits
    • Item pricing
    • Worker availability

These effects generally go much deeper than surface level, and without preparation and a clear understanding, there is potential to underestimate the impacts and face consequences down the road.

So, what can you do to attack these issues head on?

  1. Stay current! – Know what is going on in your industry and the political and legal landscapes of the businesses in which you operate. What is coming down the pipe?
  2. When you know there is going to be a change: dig deep, create scenario analysis, and find out all facets of the business that will be affected.
  3. Move early and often – Leadership teams do not want to be caught off guard. If there are large changes or cost implications, move the concerns up the chain.
  4. Finally – Prepare! Don’t wait until after the changes occur to adapt, and if you do have to wait at least be prepared to adapt. You do not want to miss the boat and pay for it later when time may not be on your side.

With enough preparation, you can put your organization in a position to hit the changes in stride rather than playing catch up until the next wave hits.

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