The Trump administration won the presidency with a promise for increased employment opportunities, strengthened national security, infrastructural developments, affordable healthcare, federal and corporate tax cuts, and reduced dependency on China. After President Trump assumed his position in the White House, there have been amendments to various laws, regulations, and policies, which would subsequently have its impact on the procurement process. Most amendments are enforced to making the procurement process easier, but some of them have a negative impact on the current business scenario and pose a challenge to an organization’s Chief Procurement Officer (CPO).
Here’s a look at how the Trump administration would impact the scenario of procurement function as an industry:
Changes in Trade Policy
The Trump administration has considered reviewing all US free trade agreement with an agenda of declaring economic independence. With an increased focus on American made products and American hired services, dependency on China is bound to decrease. For the purchasing manager, it’s a logistical nightmare, as a major part of sourcing and procurement must be done within the US. It would affect the organization in terms of increased overhead and material cost, identification of new suppliers, consideration for GSA (General Services Administration) contracts, and process outsourcing.
Changes in Tax Policy
Reducing the corporate tax rate from 35% to 15% was one of the prime campaign promises of the Trump administration. The reduction in the corporate tax rate would prompt CPO’s to reconsider the offshoring business processes to destinations like Mexico and China. Consolidating the business processes in their home country would result in shorter buying lead time, reduced transportation cost, and increased investment in the domestic market. Apart from the corporate tax, the Border Adjustment Tax (BAT) would levy a 20% tax on all imported goods; thus, raising the cost for procurement divisions.
Changes in Environmental Policy
One of the major changes in the environmental policy is how the Environment Protection Agency (EPA) combats pollution, pollutants, and harmful pesticides and toxins. The EPA would look into the matters of classification and use of toxins and pesticides used in everyday goods and consumables such as food, fruits, vegetables, detergent, cleaners, dye, etc. The procurement manager would have to reconsider options in terms of supplier selection, verify that the materials are not hazardous, and control the use of harmful chemicals like lead, mercury, and asbestos.
The Trump administration is expected to bring a lot of changes in terms of policy making, which is bound to impact the procurement department of organizations. It would affect not only the cost of sourcing and procurement, but also the lead time, supplier selection, and host of other considerations.
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