??As pressure comes from increasingly competitive markets (with knowledgeable consumers) coupled with compliancy and legislative requirements many organizations are viewing corporate responsibility as an increasingly important aspect of their business. With sustainability being a key part of this framework organizations are looking to how they can implement “green buying” practices. For many organizations developing a mission statement is the easy part but putting it into practice can be daunting.
However as with any business change project getting the right approach can pay dividends. This guide looks at 6 key steps to consider when developing your sustainable purchasing plan.
1/ Get senior sponsorship – getting senior stakeholder support is crucial. You are much more likely to succeed if your senior management is supportive. This support should clearly articulate the importance of the project, its goals and timescales. This support must be visible (with senior executives seen to be directly involved) and communicated clearly to the organization. Senior support can add legitimacy to your project and assist in communicating its objectives and successes.
2/ Team up – your sustainability projects will need resources – you’ll need project managers and most likely a cross functional team. Consider your training needs at this point – does your in-house team have the knowledge required – will you need consultants or will you need to send your team for training. Ensure that the size and number of projects is suitable for your resource pool – don’t try and commit to something you don’t have sufficient resources for or you’ll most likely fail.
3/ Choose your targets carefully. Your organization will most likely have a set of related objectives or goals. You may wish to start with smaller projects in order to gain momentum that can be communicated back to the organization to gain credibility. Consider commodities or products that represent quick wins and where the environmental impact can be easily demonstrated. Ensure that as with any projects you utilize lessons learnt in order that you can re-invest this knowledge in future projects.
4/ Know where your starting from – as with any improvement projects its imperative that you have a baseline – your company has set objectives to improve but do you actually know your current environmental footprint? If not find out! This could be statistics around energy consumption, CO2 emissions, recycling rates or related costs. By knowing where you are you can set yourself meaningful and more importantly measurable targets.
5 – Communicate and engage – ensure you have a plan on how you will communicate your successes. Establish a plan that communicates how your team will delivery against the business strategy. Ensure that you regularly and simply explain your progress for example explain how environmentally friendly alternative products can support your strategy and save costs – look for things that engage your stakeholders and encourage participation.
6 Measure your success – Develop a set of KPI’s that help track the changes you are implementing. Collect appropriate data that can support your initiatives and assess the impact (cost savings or improving your environmental footprint). Don’t rely on subjective commentary use hard facts.
Buyers and Suppliers don’t have to do battle – why SRM and long term relationships matter
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Lets face it – the key result that most procurement professionals are still attempting to get is leverage on price. Cost down is still the top draw for many senior executives and decision makers and for many, the primary reason for the procurement team to exist. Developing relationships is often the last consideration and where it is considered the “how to implement part” is glossed over.
The standard relationship can place buyers and suppliers in gladiatorial combat at different ends of the arena with each focusing on their own primary targets (cost/margin) and failing to capitalize on any benefits that might be obtained through closer collaboration. Such a method relies on adversarial positions and relationships that foster competition (either squeezing or retaining margin).
Procurement executives should consider that there is more than one method that can be used to generate benefit and that the procurement task does not stop at contract sign off but involves close scrutiny of requirements AND the development of post contract opportunities which can both generate significant benefit.
Companies must consider appropriate mechanisms or incentives that foster this approach.
The contract is still one of the best weapons in the procurement executives’ arsenal. However, all to often the approach is not robust and focus on the initial contract phase is weak – all too often one of two things happen –
1/ The contract requirements are ill thought through focusing on short term goals overcoming long term aspirations and while today’s requirements (often current target price or crazy lead times) are met tomorrows (stability, efficiency, capability) are not.
2/ The contract is generated outside of the procurement team with often little focus on long term requirements (e.g. sustainability or compliancy). These contracts get thrown “over the fence” and the procurement team is left to pick up the pieces.
One key issue that businesses need to address is that to foster success, the contracting phase and relationship management need to be closely coupled and embedded within the same process.
If the contract is constructed correctly then everyone benefits. Total requirements are met, long term efficiencies targeted and mutually beneficial relationships developed.
When you think about it a robust approach to mutually beneficial supplier relationships makes sense – suppliers are looking to develop long term revenue streams and stable margins whilst buyers are looking to manage cost and consistency of supply whilst mitigating potential future issues – these requirements are far better suited to collaboration than fighting over a $10 dollar reduction in the price of the piece part.
Significantly a key issue of this approach is that it requires a greater perspective than merely Cost, Quality and Delivery (QCD). Businesses must consider how innovation and collaboration are included and measured. Both organizations MUST consider total acquisition cost rather than purely the initial purchase price. This is especially true for those organizations that maybe faced with increasing compliancy issues (sustainability) or other issues such as high levels of obsolescence.
Summary
Close relationships between buyers and suppliers does bring its own challenges (for example differing cultures, well established supplier networks). Companies must ask themselves how easy is it to revisit existing supplier contracts. Perhaps the key issue is that SRM must be approached from both perspectives. It is no good if the supplier retains an adversarial position focused purely on protecting margin where the buyer may want to form closer working ties. The skill is of course spotting and developing the opportunities and developing back office processes including sourcing and contract negotiation and ownership that compliment the strategy.