Procurement-and-Sustainability

How To Attain Sustainability In Procurement ?

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Few months more and we will be entering into year 2017 and many of us will be making “new years’ resolution”.  It reminds me of the fact that it is relevant to our professional lives too- since our professional lives are relevant to our personal lives. Eating or drinking too much is too bad as we are exercising too little. The above all scenarios have their own outcomes which impact us negatively. We know they are bad and we also know that to change them is hard.

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In previous years, the newspapers and other several media outlets were swarming with stories about procurement professionals for using bullying tactics against suppliers with claims that big brands and names were using their power to squeeze suppliers. Apparently and inevitably, a breakdown on trust started to emerge out and this clearly needs to be resolved!

We must have read about farmers protesting against some terms of contracts and norms or about Majestic Wine dropping their chief buyer post to its pre-tax profit dropping down to almost half and the supply chain relationship getting more tensed after asking its suppliers for funding them with cash towards the new warehouse. We also came to know about Carlsberg facing hostility from its suppliers and dealers after it extended its payment to 93 days.

Sadly, such practices are too common. These tactics are seemingly being used by every big business in the market today towards their suppliers have become a status of today’s market place, where price is king and any means of reducing and cutting costs seems to be valid and legitimate.

A more sustainable supply chain is needed, but it will only be revealed when the breakdown in trust between suppliers and procurement is resolved.

Now!! Let’s take a step back. A bit backward! The word which was frequently used by media was ‘bullying’; but if we are to put this right we should contemplate ‘behaviors’ rather. And personally I feel this as a much better word to focus on with much professional manner.

Bad relationships are not about negative publicity and brand damage, but it also, severely, impacts on the ambitious sustainability targets which many business and companies are now setting themselves with. Moreover, business’ struggle for economic survival must not come at the cost of just anything else. Big businesses, characteristically, operates in a top-down hierarchy. Supply managers issue suppliers with the codes of conduct and targets and bind them to comply which turn out to be not so sweet relation between suppliers and auditors.

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Not only is the compliance difficult to achieve but it’s only half the story even. A more effective solution would be for procurement professional and suppliers to work together and develop innovative solution to resolve supply chain issues and to help ensure each-others sustainability.

It strikes me too and has to be noted that the smaller and more agile supply-chain and procurement organisations are more likely to be able to innovate and implement than the behemoths of big business, stuck in their cycle of annularity and the requirement of convincing and satisfying all the shareholders at all costs.

So the question now arises is how can companies looking to become more sustainable tap to the creativity of their supply base. The first and foremost answer is to cut all the double-messaging. Because what we all have been observing that most of the corporate procurement teams are frequently blindsided by a ‘cost-out’ mantra. This mantra later on proves to be a risk of superseding all the other agendas which simply is not sustainable; at all.

These perennial issues of cost, time, quality and service were and would continue to be considered and featured in procurement decisions but social and environmental factors cannot be overlooked either. There is a need of making them a factor as well. For example, Marks & Spencer restricts its procurement teams from purchasing any product that cannot meet their terms and goal of corporate sustainability plan.

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What is needed is the change and flexibility in behaviors of the parties and development of more trusting relationships. Ideally speaking, procurement organisations need to co-invest in the long-term research and result and development with their key suppliers and as mentioned above, annularity dominates the mind-set and attitude of many of the large companies and firms. They simply focus on the short-term and sit back and wait for the proof of concept than stumping up the cash and experiment.

Ultimately, talk of sustainability-focused supply chain and procurement will only start to spread over when the breakdown in trust between suppliers and buyers get resolved. Well that requires a shift from a model based on adversarial brinkmanship to one of the mutual interest and transparency.

Perhaps, now is the time for procurement professionals to think about some different New Years’ resolution!!

 

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