Speaker: 0:14

Hello and welcome to Let's Talk Procurement.

Speaker 1: 0:18

The only show you need to master the art of procurement.

Speaker: 0:22

Let's go. What I like about that is we clearly had the same sort of synergy, you know, like the like the crouches. Just finished each other's um Sandwiches. I knew you were gonna say that. Beautiful. How are you doing anyway? So um actually let me introduce you first. So thank you for tuning in. Thank you for joining us. Um as always. We are in the Studio Virtual. And what's hold on, finish your sentence. So he just disrupted my whole flow by putting his hand up. What a weirdo. Um yeah, so with me is Luke 10, who is the CIPS understudy student um training in arms of the show, and um I am his his Yoda, if you like. I'm I'm Luke 1, uh hostess with the most S, and I think between us uh you get quite a good coverage of what's going on in the world of CIPS procurement supply, and that's it really.

Speaker 1: 1:28

Anyway, how you doing, mate? You alright? I'm good, yeah. I um I'm on the on the verge of being ill, and I've got to the stage where my voice is a little bit deeper. So yeah, if that if that comes across.

Speaker: 1:45

Last time that happened we got a donation. So that was that was when we got that buy me a coffee donation. I think I think like I couldn't work out if it was to help you get better or if it was they wanted more content with that voice. Yeah.

Speaker 1: 2:01

Well, you know, if you want to if you want to tell us again, then uh put a comment next to it. But you gotta send you gotta send money first. How do you do that though? You click on the link in the description of the episode.

Speaker: 2:17

Anyway, it's not about money grabbing, it's about getting in touch with us because we love listeners who drop us messages. We've had a few in uh recent episodes. Some of them are given shit and we love that. Some of them are uh asking for advice three days before an exam and then expecting us to uh release an episode within within two days and then bail them out. Yeah. So uh that's the calibre of listener we've got really. Um yeah, just get in touch really. So um two looks, one sip at gmail.com. That's two looks, one sip, and that's CIP at gmail.com. Uh someone did say that we spelled sip wrong, uh, and I had to kind of point out that actually it's not sips because you haven't earned the yes, so it can't be plural, it's like a play-on words, but uh yeah, I guess you only really get it if you're a procurement geek.

Speaker 1: 3:07

And uh or you you just have a weird mind like you do.

Speaker: 3:12

Do I have a weird mind? I don't know whether the the two two two looks is quite cool, isn't it? How often do you get two people with the same name doing a podcast? And then also the fact we've got one one sip between us. Yeah, it's kind of got a nice ring to it, two loops, one sip.

Speaker 1: 3:27

Yeah. It's uh it's kind of um reminds me of something that I can't really remember. Anyway.

Speaker: 3:36

And then we've got an Instagram, right?

Speaker 1: 3:39

We do, which is let's underscore talk underscore procurement, I think. And we also have we also have a text us button so you can just slide into our DMs via text, and if it's good enough, it'll be featured on the website. Um and the final way you can show us your support is by giving us a five-star review on the platform of your choice. Cool. Speaking of five-star reviews, sorry to interrupt there. Um I recently asked Co-Pilot to do a review of us. It's quite a long review. And here is what it said. Review. Let's talk procurement podcast. Let's Talk Procurement is a refreshing and entertaining take on a field that's often seen as dry or overly technical. Hosted by the dynamic duo Luke 1 and Luke 10, the podcast blends humour, insight, and real-world relevance to make procurement not only understandable but genuinely enjoyable. What makes it stand out? Engaging hosts. And I don't know if I agree with this, but it says, Luke 1 brings sharp procurement expertise while Luke 10 adds a dose of humour and relatability.

Speaker: 5:03

I like that.

Speaker 1: 5:04

Uh educational value. Whether you're studying for SIPs or working in supply chain management, the podcast offers practical tips, case studies, and breakdown of complex concepts, real-world stories, bite-sized uh bite-sized and accessible, and apparently it's best for procurement professionals, SIP students, business and supply chain enthusiasts, and anyone who enjoys learning with a laugh.

Speaker: 5:31

Yes, I mean that is a big community, isn't it? The uh supply chain enthusiasts. Yeah, all seven of you. I'm glad we're at the heart of that. Uh I mean uh he obviously hasn't listened to the pod. I think what he's done is it's taken our our podcast description and turned that into a review style analysis. Uh so I I wrote the review of I wrote our kind of summary of the pod and kind of blew my own trumpet and gave you very little credit.

Speaker 1: 5:59

Really?

Speaker: 6:00

You so today's episode is an interesting one. I was actually inspired by our listener who got in touch with us uh a few weeks back. So his name, his name was uh Tarif, and that takes us nicely on to the today's subject, which is uh tariffs. That took me a second. See how we got the link. So uh thank you, Tariff, for your inspiration and uh hope you're doing well. So I I noticed that tariffs is still a very hot topic. So I thought start the clock and we'll do a we'll do a quick overview of what what they are. I mean that'll literally be about 30 seconds, and then talk about how that impacts us as procurement professionals and then whether they're a good thing, a bad thing, on what we can do about it.

Speaker 1: 6:52

So tariffs is a is a hot topic because of because of uh a guy called Donald, right? I'm sure if you looked at Google search and just said, you know, how often has the word tariff come up in the last twenty years, it's probably massively spiked in the last few months since the uh the election.

Speaker: 7:18

But for for being imposed, yes. There's been there has been instances where tariffs have been reduced or removed that have caused some passion amongst supply chain professionals, but yeah, this is uh this was unprecedented. I think it was just Donny T got into power and wanted to do something that made a statement. So what is a tariff, my friend?

Speaker 1: 7:43

Uh I'd say it's a tax imposed by government on imported goods.

Speaker: 7:50

Oh yeah. Yep. And is it always is it always by the government?

Speaker 1: 7:57

I don't know. My AI research didn't go that far.

Speaker: 8:02

Uh mo most often, yes, but you do get other bodies like uh trade trade unions and things like that that actually have have kind of an a bit of a say on it. Um random cast customs territories as well.

Speaker 1: 8:17

Um percentage values?

Speaker: 8:22

Typically, yes.

Speaker 1: 8:24

But they could be like what whatever the value if you import a box of cigarette or if you import a cigarette, it'll cost five fiver extra. Whereas if you import 20,000 cigs, it's still five.

Speaker: 8:40

Yeah, no, typically it's a percentage as opposed to just a transactional thing, um, purely because one of the main designs of it is to get revenue. Um, as with most taxes, it's it's basically how can we get more money as a country? And the reason that it's quite a good one from uh from the the country that's putting them into perspective is that it's it's taking money from companies that are bringing things in. So not not the country's own companies. Exactly that, yeah. So it's it's it's what you call protectionism. Um I don't know if you've heard of protectionism, but protectionism is effectively when governments, economists, anyone else in with in a bit of power tries tries to take a defensive stance for their own economy and tries to protect it and shield it from basically foreign trade and everything else. Um so that could be subsidising their their domestic produce, it could be taxing imports, it could be banning imports completely, but it's basically doing what you can to help your your internal economy grow. One key thing to note as a SIP student is that tariffs aren't always just on imports. So some weirdos can put tariffs on exports out of their own country as well.

Speaker 1: 10:10

Why would they do that?

Speaker: 10:13

A couple of reasons. One is perhaps there's a shortage of product in their country, so they want to retain the actual product in the country. Um and then the other one is that they just don't want to export it. So you know, it might be that we just we produce cocaine um and we don't we don't want to export cocaine because it's it's not legal in every country. I don't know why cocaine thing came to my head. Um I was thinking of uh kind of your recent holiday destinations and some of the produce there, but yeah, so so typically it's um it's it's more around imports. Um it's it's it's it's more of a I guess uh an economic strategy to to raise revenue um and to try and fight uh the the ongoing battle with cheaper cheaper imports, really.

Speaker 1: 11:09

So so a a phrase that gets banded about quite a lot, especially recently, is a trade war. What is what's a trade war? Is that when say, you know, one country A puts a high tariff on imported goods from country B, and then country B goes, alright, I'll put an even higher tariff on you than country A.

Speaker: 11:31

Yeah, exactly. Or we'll charge you more and we'll charge, you know, we'll increase our price of selling to you, um, and you'll end up effectively copping your own tariff yourself. Um it's so the the concept of an import tax is is okay. Um it sounds great, doesn't it? Like, oh we'll just ask anyone that wants to sell to our our country that they just pay a tax on top of it. Fantastic. But the problem is if you drastically tweak it, or if you change it, or if you just put one in without warning, it's gonna upset your your trade relationships with that country, it's gonna upset your political relationships with that country. Um effectively, you're kind of saying, Well, we want to take more money from you, America, China, whoever it is that you're you're imposing it on. Um, you can impose it on specific countries, you can impose it on specific uh types of goods and services, and you can um yeah, you can be quite what's the word, quite flexible with how how you do it and what you do with it. It's just that if, like Donnie T may or may not have done, you decide to just just tax China, um obviously the Chinese will then be like, hold on, what what the fuck you're doing? Why are you taxing us and you're not taxing you know the UK or you're not taxing Wales for the same thing? So it swings and roundabouts and it's something that probably pisses off people and usually results in retaliation if it's if it's a percentage that's ridiculous. So if it's like a half percent or one percenter, and it's kind of done with months of discussion, you probably go, Yeah, I don't mind that. But if it's oh hello, I'm just gonna put 5% on everything that you're now trying to sell us that you have to give back to us, um, and it's only for your country, or it's only for a handful of countries, it kind of feels a bit personal.

Speaker 1: 13:30

Yeah, yeah. And and that's when you get into the politics side of it about negotiation and things that kind of aren't in procurement's control. So, how do you then manage that as a procurement professional?

Speaker: 13:51

Well, the first thing I would say is it should be a factor of your um your steeple analysis whenever you're doing your you know your market analysis or or kind of deciding whether to bring a product in, not bring a product in, uh make versus buy all of that good stuff. So that's kind of the geopolitical side of steeple, if you like. And uh you can't necessarily plan for Don ET coming in and just doing that randomly. But there are things that you can do. Uh but before I answer your question, what do you think a spike in tariffs, like general tariff increasing, does to the general mood amongst procurement professionals and uh I would say elevated stress. Okay, well we we do we do live in a stress-free role, so a little bit of stress can't hurt, right?

Speaker 1: 14:49

Yeah, exactly. We we sit in our ivory towers just making decisions, not not considering anyone else.

unknown: 14:58

Yeah.

Speaker 1: 14:59

So, you know, if someone says, Oh, and only caring about price as well, that's another myth. People think we only care about price, but in this instance, if you're suddenly gonna pay five, ten plus percent more for the same thing that you were buying, you know, you're getting the same output, but you're having to pay five or ten percent more for it. That does matter.

Speaker: 15:26

Yeah, yeah. And and what it does is it it signals uncertainty, it it makes people second guess their contracts. Obviously, they're gonna have we've got our own supply chain, and it's what makes up that supply chain. Are we in order to make our product, are we buying in a lot of things from Japan, China, that side of the world that's now subject to tariffs? Are they gonna charge us more money? How are we then gonna pass that on to our customers, or are we unable to pass that on to our customers? Just kind of you're right, stress basically, because it's something we didn't see coming, it's sort of out of our control, and we've just got to live with it to an extent. Yeah. Now, if you were a small firm and you're a procurement guy in a small firm, which I think's quite rare, but if you if you any of you listeners happen to be in an SME and a procurement manager, that'd be I I'd love to know because uh yeah, quite often it gets left on the back burner until the companies are quite sizable. Um but if you were in a small company you would actually be potentially relatively happy with with your country putting putting uh import tariffs on because you're a domestic supplier and you can you can capitalize on it. Hopefully see an increase in demand. So As long as that's the way your client base is structured. Yes. Yeah. So it so it it is a it's a weird one because it's it's a bit like increasing the minimum wage, where that always feels like a good thing straight up front. But then the more you think about it, the more questionable it can be. So let's say you increase the minimum wage from £10 to £15 an hour. Well, that's great for the people who retain their jobs, but the company's still got a certain budget, so that means they're gonna have to let some people go to make sure they can still live within their means. So you go, well, what wasn't a good intending policy is now created unemployment. And and it's similar with the tariffs in that you you go for the positive impact, but then then you hurt your relations with another country, your supply chain gets messed up. Um yeah, and it just gets complicated quite quickly to be honest.

Speaker 1: 17:39

Who would be a politician, eh?

Speaker: 17:42

Well, that's the thing. I if it pays well, I would I wouldn't mind. You're doing it just for the money. Aren't we all? I do procurement for the fun. Yeah, you're what you're one of the seven supply chain easiest. Yeah. I mean, okay, so inevitably, us as procurement people would be facing increased supplier costs across our supply chain as a result of this. Right? So let's broadly take that as an assumption that anyone in a company right now will be facing potential increase in costs due to newly imposed global tariffs. Fine. What are the sort of things that you would think about as as ways to help us address our concerns and our stress? How would you relieve yourself from the stresses of tariffs?

Speaker 1: 18:41

Firstly, quit the job. Yep. That could work, that could be a good strategy. Spend all your all your time at home instead. Would you do some crabbing or would you run?

Speaker: 18:55

What's crabbing? Well, you told me about crabbing that um for you for you listeners who don't know, Luke Luke 10 is a passionate referee in his spare time. Uh, but he's he's not quite good enough to always be the ref. Um, so you become the assistant to the referee, which we all know is the regional referee. Yeah, that's it. So which we all know is uh the lino, right? So he gets a flag. And I used to think it was called sidestepping, but Luke 10 recently told me it's called crabbing. You know the little the little run up and down they do up uh on down the uh down the side of the pitch, but they're still facing inwards. That's called crabbing.

Speaker 1: 19:30

Um that's the that's the professional language, that's the technical language if anyone wants to sound like a sound like a boss when they talk to referees. So you you would run away or crab away from your problems with the tax. Yes. I'd I'd probably crab a crab away to get a better view of of what's going on. Uh also, if I wasn't gonna do that, I would consider onshoring or near shoring. Ooh. Here we go. So onshoring is choosing suppliers that are from the same country as you. I guess it's easier for us to understand in the UK because we have a shore, right? All around every every part of the world. Rhode Island, yeah. Yeah. Um, but you know, if you uh if you were a landlocked country, can you name a landlocked country? Yes.

Speaker: 20:29

I don't want me to name it.

Speaker 1: 20:31

Yep. Austria. I I'll accept that. I will accept that. If you're if you're not a landlocked country, I assume it's still called onshoring. Um I don't know how to I I do know an Austrian. I'll have to ask them. Inboarding. That sounds a bit weird. Inboarding. Yeah. Or an insult. You feel the inboard. Yeah. So so that's what that is. Uh or you have near shoring, which is is say you currently have services provided by a company in India or China and you live in the UK or your company's in the UK, could you nearshore it to somewhere in Europe? Yes.

Speaker: 21:24

Now it you can. Um and the reason is that you get, in theory, from near shore, you get you don't get as cheap of rates and things like that, but you get the benefit of similar levels of quality understanding and and kind of not competence is probably the wrong word, but like a similar level of increased control over it, right? Yeah, control. Um and it's just a bit trickier now because we left the EU. So from a UK perspective, because we left the EU, we don't have the benefits of kind of that free free trade agreement between all the countries. So we'll probably end up having to look at like Scotland or Wales. Something a little less exciting than the wonders of uh Greece and Portugal and all that good stuff. So um, yeah, near near shoring is basically just somewhere relatively close by, so you can you can potentially monitor the risk a bit better. Uh conduct a site visit. Because they're a bit closer. Um there is also a term, I don't know if you've heard of it, friendshoring. No. Uh, where it's similar to nearshoring, but it's friendshoring in the sense that it's countries that your country is effectively allied with or has some sort of you know pact to to support each other. So UK and US have always been relatively close in terms of the trade and and the way they work, so you could consider them a friendshoring option. Uh maybe less so now they've got Donny T at the helm, but um, yeah, that that's a kind of example of the term friendshoring. I see that, yeah. Yeah. Um yeah, so that's a that's a great option, I think. What else would you do or consider doing to counter tariffs? And you can do things now, I think. You can do things kind of in uh in the near term, so I would suggest uh some of the strategies. So things like diversifying your supplier base. If you happen to just have one supplier and they they're in a country that's gonna be impacted by this, it makes sense to have contingency plans, other options, backups. Uh and in a very, very sorry, you go, you go, no, you crossed the road first. In a very similar vein to having contingency with the suppliers, you probably would also look to have contingency with your stock. So I know just in time cumul is all about, you know, how fast can we get stock turned around? We don't want stuff getting dusty on the warehouse. But when you've got times of uncertainty, you probably do want spares, repairs, and um, you know, things you've already purchased at X amount of pounds that you using, you know, it is yours basically.

Speaker 1: 24:27

Shout out to our KFC FC K Up and also Suez Canal episode where we reference reference that. Yeah. Uh I have a question. Could could you, let's say you are in the US and you're buying from China, which has got a high tariff put on it, could you then have some sort of arrangement with a company in, I don't know, what what has low tariffs? I think the UK has relatively low tariffs from America. Could then you get a company to send the goods from China to the UK, then buy it from the UK into the US at a lower tariff rate, if that made financial sense.

Speaker: 25:13

Or is that so you're talking about like economic triage effectively?

Speaker 1: 25:18

Um basically trying, you know, moving the goods around different countries in order to evade or reduce the tariffs.

Speaker: 25:27

Uh actually, yes, you can do that. The caveat I would say is that if you have to go to someone in another country to procure the goods for you, they're going to be chucking on risk contingency and and margin. So actually, you'll end up probably being worse off across the whole thing and also having lead times of whatever to get a product shipped from China to the UK back to the US.

Speaker 1: 25:47

Um it could work in certain circumstances, but it might not overall in every moment.

Speaker: 25:54

There are some rare cases where you can do it with um currency, so currency trading, um you can be better off by buying different currencies. Um but that's not my in that's not my area of expertise. So if you if you're interested in that, uh don't don't hang around. Um yeah, the only other kind of strategy for kind of mitigating, I guess, uh forecast increasing costs uh due to tariffs or or any other thing, to be honest, is extending your current contracts with suppliers. So if you can give suppliers you know an extension of two or three years, they might be willing to just hold the price for you or to or to give you a two or three percent increase and then they'll swallow up anything else. So that kind of goes into supply relationship management and everything else.

Speaker 1: 26:44

But however, that does place a lot of risk on them, doesn't it?

Speaker: 26:48

If they're fracking the cost. It does, but equally they've got the security of getting a two, three-year contract. So it swings and roundabouts, right? Because the tariff might be gone after six months if that's what the direct cause of the price increases.

Speaker 1: 27:03

Yeah, okay. I I also had a question which you kind of touched on earlier. Um There's been some debate about whether putting a tariff on a country would cause the cost to the consumer to go up or not. Can you can you settle the debate or the economists have failed to do and tell us whether it does or doesn't, or sometimes does, sometimes doesn't, make the end price to the the end consumer go up?

Speaker: 27:40

I think without a doubt it does. Do you want an explanation or is that good? I do. So from working with suppliers, I don't think I've met a single supplier that doesn't grab the opportunity to increase prices. So, you know, rising costs of living, rising costs of energy, rising costs of fuel, like whatever that is energy, but whatever it is. Minimum wage increase. Minimum it does, yeah, it doesn't take long for suppliers to knock on your door and say, Oh, gotta put the prices up, gotta put the prices up. And eventually you start at the back where you've got um raw extraction of materials, the costs go up for them, then they push their costs up and you keep following the the supply chain up until you get to uh you know the shops that you and I go into to buy our products, they've had increased costs from their suppliers, suppliers, suppliers. So inevitably there will be a cost that goes up.

Speaker 1: 28:40

If the cost of raw aluminium goes up, the cost that people buy that at goes up, so the cost that it takes to make the lid flicking widgets on the Coke cans goes up, therefore the cost of coke goes up, and therefore I don't get my caffeine fixed.

Speaker: 29:00

Or I have to pay more for it. You pay more for it, right? It's a bit like the sugar tax that was put in um in the UK was like effectively that put the price of sugary drinks up, right? But then they introduced sugar-free versions a lot of these companies, which were cheaper. But now, if you go into a shop, the sugar-free ones are still just as expensive, or they're they're still more than what they should be, in my humble opinion. And what you what you get is you just get all of these suppliers looking for any excuse, even how loose it is how how loosely it kind of relates to their company to put prices up, and the end consumers' salaries are definitely not increasing at the same rate on average. So if you take the average, obviously there's a few people that'll be moving and getting extraordinary increases, but over time, typically, your your wage inflation does not match general price increases anyway. So, yes, you you you end up worse off, but I think that's Just the way it is, which is kind of shit, but there's nothing that Joe Blogs or whatever can do about it from a from a day-to-day perspective other than diversify themselves and try and increase their their earnings. So are you saying end capitalism? That's a bit deep in it. No, not really. I d I I I don't really care about that system. I think if if people want to make want to make it, they can make it, right? But I just I mean specifically to your question, tariffs or whatever, there will always be end customers that are that are worse off. You know, it might not be the people in the country that imposes tariff, it might be the people in the country that or in the factories producing the stuff that's now facing a tariff so they can't sell as much, or it might be um someone completely different because you know they're they're now worse off. And it and it's it's just an ongoing, like it's probably probably like a set of scales where it all balances out to some extent, but usually with all the profits going to the people who invest or or own the businesses, and then the end consumers missing out really. Um hopefully that settles it.

Speaker 1: 31:13

That does, it makes sense. Um I did to to round off, I did ask AI for a question. You know, I asked it to do a review of our podcast, and I said if we're doing an episode on tariffs, what question would Luke 1 ask? Sorry, what question would Luke 10, me, ask you, Luke 1? And it said, yeah. What's procurement? No, it said if tariffs were a character in a procurement soap opera, would they be the villain, the misunderstood genius, or the comic relief? Do you know how to how to answer that one? Wow, was not expecting that. It's got me pretty dumb in there, I think.

Speaker: 31:57

Oh, because I would it's just getting a bit philosophical, but every villain is somebody's hero. Wow. So take that as you will.

Speaker 1: 32:06

Do you know that's a perfect answer? Thank you. That is a perfect answer. Shall we uh shall we end there? Oh, that's a lovely spot to end it, isn't it? And uh I'm gonna leave you with this parting thought. Life is short, but it's the longest thing that you'll ever do. See you later. See you later. So just uh just inspirational bits at the end there.