The article below is written by Mark van den Berg on August 21, 2011
The term sustainable procurement is often a subject of discussion. One person considers sustainable procurement a catch-all term, whereas another views it as a unique method of sourcing products. But what is the best way to employ sustainability within sourcing?
Our view is that setting up a sustainable sourcing or commodity strategy is no different than the traditional way of setting up a commodity strategy; just with the addition of a touch of creativity and a dash of innovation. We will explain below
First of all it needs to be clear what people mean when they say sustainable procurement. Within this article we take on the assumption that one considers economical, social and environmental aspects whilst sourcing products and services. To make it very specific: try to purchase more for less, taking into account social and environmental aspects.
Whilst that is clear, let’s go back to the beginning. Developing a commodity strategy starts with a procurement vision: how does the organization look at procurement? How does the vision of procurement embrace the overall strategy and vision of the company? Formulating this vision forces management to take a good, long and hard look at the starting points and where one wants to be in the future. Together with the mission, the objectives, and the strategic starting points, this vision is part of the procurement policy which should be the basis for any commodity strategy. First step for any serious sustainable effort is to check if the procurement policy includes sustainable aspects,and if so, how explicit have they been made and have the goals been stretched? Without any explicit and stretched sustainable objectives and aspects, the sourcing specialist will not have anything to fall back upon and the entire commodity strategy will be loose sand.
Another step is the spend analysis and usage of the Kraljic matrix. We will skip this step for the time being and move over to conducting an analysis on the processes, the organization and the technology; a step which is usually not thought through sufficiently. An analysis of the processes and the organization teaches the sourcing specialist not only what value the products or services add during the process but also how it is handled, used, how it is ordered and what bottlenecks are created. It teaches the sourcing specialist how the organization creates innovative products and how procurement can contribute in that process. Solving bottlenecks can contribute to using fewer resources and to efficiency. More for less…! To repeat this step on a continuous bases leads to ones awakening, insight and building a relationship with colleagues (please note we are not using the term internal clients, since that creates a distance and promotes working in silo’s). These are all ingredients for creativity, close ties with other departments and innovation towards the future. Technology is closely tied to analyzing the supplier market. We don’t mean sending out RFx’s. We want to go one step further where Procurement creates a view of the entire product and supplier market: who are the players, what do they do, how is the product created, what are the cost drivers, what are the trends (in sustainability) for the product and the way it is produced. Which innovations are ground breaking and how can all this information be utilized by your company, within the process you know so well? Which innovations can be incorporated in your commodity strategy?
These steps mentioned are not new but can be a main driver for sustainable procurement. In fact it will ignite the drive to source in a sustainable way and promote creativity and innovation. Sustainable procurement should “force” the sourcing specialist to go through these steps specifically and to look beyond the usual “adding sustainable criteria to an rfx”. Be creative and innovate your way of sourcing by putting some extra effort in the process, and during in the internal and external analysis go back to the basics.
Obviously this is easier said than done, otherwise sustainability wouldn’t be such a constant topic of conversation, but the challenges faced will be the same as the challenges a procurement organization faces trying to develop towards that next step of maturity. The key is procurement’s capability and whether or not one can look beyond the boundaries of the procurement department., but we can elaborate that in future posts.
In future posts we will discuss sustainable procurement as it relates to TCO calculations, Procurement capability, Innovation Driven Procurement, and Supplier Management. Stay tuned.
Mark van den Berg
Capgemini Consulting The Netherlands