Could President Trump Make Procurement Great Again?

Nov 14 2016, 1:30 AM5 min read

Not that we’re saying that procurement isn’t already pretty great. But could a new man at the top mean major changes for the profession?

If you missed the result of the US Election last week, then you must have been on Mars. Or living under a rock/hiding behind your sofa. In an unexpected turn of events, Donald Trump was elected as the 45th President of the United States of America.

And irrespective of your thoughts on both the campaigns, and the ultimate result, it’s clear that there are changes coming. We have no idea what Trump’s first 100 days in office will look like, so much of what we’re seeing is still very much educated guesswork.

But should many of the agendas and policies from the campaign come to fruition, then procurement and supply chains, both domestically in the US, and globally, will be affected.

Automotive Indecision

A great deal of campaign rhetoric from the Trump camp came in the shape of American industry, and American jobs. The President-elect frequently stated he would look to remove the US from the North Atlantic Free Trade Agreement (NAFTA) should he win the election.

If this were to happen, it could potentially boost the US’ ailing car industry. In the past year, 8 new manufacturing plants have been created in Mexico, having been moved from the US for lower wages. Included in this number is Ford, who moved all small car production from Michigan to Mexico in September.

If Trump were to end US involvement in NAFTA, these car manufacturers would be just a few of the organisations with a big decision on their hands. Should they manufacture abroad and risk rising import costs? Or return operations to the US heartlands, and pay considerably higher wages?

However, though it’s easy for America to withdraw from NAFTA, it’s unclear what tariffs would be placed on imported goods. Beyond this, it’s likely to result in higher prices for American consumers (and buyers too), without any guarantee that jobs would return to the US either.

From a global supply chain point of view, it wouldn’t create much change. Mexico will remain an attractive proposition for non-US companies, such as Audi, BMW, and Toyota, none of whom are subject to NAFTA. So concerns the Mexican economy will collapse are unlikely to be realised.

Great Big Business Benefits

However, some big businesses and industries would stand to gain significantly from a Trump presidency. In the days following the election, shares in Oil and Gas companies shot up, following Trump’s pledge to make the US energy independent.

This would mean great exploration of the US mainland, and potentially relaxation of environmental policies put in place by President Obama. This would in turn impact procurement, who would have to bear in mind any changes in longer-term contracts.

Another group to benefit could be the Defence sector. There is likely to be great investment in defence in America, which may in turn move other countries to do likewise. Increased spending could free up previously-stalled projects, and kick off new projects benefitting both procurement and suppliers.

Finally, it’s fully anticipated that infrastructure procurement will be increased. With more money being promised to federal budgets, but greater efficiencies required, procurement will play a pivotal role in ensuring that funds are used wisely.

Investment Nerves

In the hours following the announcement of Trump’s victory, global markets dropped significantly. However, the drop, unlike Brexit, was a temporary one, with nearly every major market reporting an increase by close of trading.

Long-term, however, no-one is exactly sure what will happen. As one media source put it, “Investors are in wait and see mode”. This is likely to continue until the middle of 2017 at least, when formal policies will become much clearer.

A strong anti-globalisation message resonated through the Trump campaign, and there are concerns that major investments will be hedged until such times that investors are clearer on what the outcomes might be.

Countries like India have traditionally relied on US investment. Any major policy changes could in turn impact significantly on the linked global supply chain. Whichever way it happens, organisations at least have a while to prepare, with President Trump due to take office on the 20th of January 2017.

What do you make of the procurement implications of the election? How major do you think the changes will be? Let us know in the comments below (procurement/business only, no political views please!).

It’s not been easy with news cycles dominated by other events, but we’ve found some great headlines this week.

GM to Cut Production Shifts in US

General Motors are to cut production shifts and lay off 2,000 workers at car assembly plants in Ohio and Michigan.
The move comes amid falling demand for passenger cars, and shifting consumer trends.
GM is the latest in a series of auto makers taking steps to deal with softer retail sales.
Earlier this year, GM announced plans to invest up to $691 million to build new plants and expand current ones in Mexico.

Burberry Cuts Product Lines

UK luxury retailer, Burberry, is to cut the range of products it offers by between 15 and 20 per cent.
The company reported a 40 per cent drop in first-half profits, blaming rising costs for the fall.
Pretax profit for the first six months of 2016 was £72 million, compared with £119.5 million in 2015.
The company has recently written down a number of assets, as well as incurring major costs for restructuring plans.

Rio Tinto Suspends Executive Over Alleged Payments

Rio Tinto has suspended a senior member of staff following an inquiry into a $10.5m payment made to a consultant on a mining project in West Africa.
The company launched an investigation in August 2016 after email correspondence from 2011 was found.
The emails showed “contractual payments” made to a consultant providing “advisory services” on the Simandou scheme in Guinea.
Rio Tinto has also announced that its selling its stake in the Simandou scheme to another project stakeholder.

Review Called After Contract Dispute Payout

Calls for an urgent review have been made after new details emerged about a £1.25m compensation payment following a contract dispute.
Legal proceedings were brought by Triumph Furniture after it challenged a contract awarded to a rival.
It has now emerged the Welsh Government was alleged by the bidder to have breached EU rules.
The Welsh Government said it was taking the issue “extremely seriously”.