Today, companies are beginning to realise the importance and impact of sustainability in procurement on the well-being of the organisation. However, there are some that do not fully understand what sustainability in procurement actually entails and how this can be implemented effectively in the organisation.
With a clear understanding of sustainability in procurement, a company can save cost and apply these non-value added costs to the right place at the right time with the right products. This will bring about sustainable growth for the company and enhanced ethical considerations for corporate procurement.
Adopting Sustainability Practices for Procurement
Sustainability is not just a key role as a policy. The concept encourages procurement to make decisions that encompass the environmental, economic and social elements of the Triple Bottom Line.
Contrary to popular belief, sustainability in procurement is actually concerned about cheaper price, better quality and fast service. As a purchaser, this is a basic value to follow and to lead in procurement sustainability, and to facilitate business drivers for supply chain sustainability in this digital generation.
In order that a company can survive longer in this reality market, it needs to know how the company can create sustainable products. For instance, a company can innovate its products for the changing market demand or to meet evolving customers. When business is good, most companies will bring in materials in bulk quantities to realize efficiencies. They reduce cost of input materials, transportation cost, and energy. But are these sustainable in the long term? Procurement professionals must consider the long term implications to ensure sustainability in procurement.
Company also increases labour productivity to meet the market demand. However, a company must know how to protect the company’s reputation and brand value. As an example, Coach Bags registered patents on their branded bags. Thus, the product is protected by law so that no one else can use the same name in the market.
Sustainability in procurement is the process of acquiring goods and services that meets the user’s need, and delivers long term value of money. It also minimizes the damage to the environment and health.
Building Good Supplier Relationship is Key
Companies can ensure sustainability in procurement by building good relationship with their suppliers. This will enable a company to attain better quality of product or cheaper price. When a company has effective suppliers, this will save time to source or re-source from an uncertain market. At the same time, this relationship enable suppliers to know and understand the sustainability in procurement practices of the company. Suppliers will tend to be open and honest about their social and environment impact to customer. This is especially so during the periodical review session that a buyer will conduct with the supplier on the supplier performance and services. Reputation is very important to any company, and an effective buyer-supplier relationship will enhance the reputation. Cost down is an important point for sustainability in procurement. The purchaser has to ensure that their suppliers are fully compliant in business critical areas, and that the suppliers are responsive during times of urgent requirements.
The procurement strategy is to strengthen partnership, measure impact, and facilitate better integration. Purchasers have to give opportunity for potential suppliers to quote, and to adopt a reasonable and professional strategy towards negotiation with supplier to obtain the best-value price.
Five Ways to Achieve Sustainability for Effective Procurement
(1) A purchaser needs to ensure a company system is aligned with the company’s objectives, budget and production timelines.
(2) A purchaser needs to discuss with all key persons to embrace new procurement system in their thoughts.
(3) A purchaser must be pro-active, and set objectives to increase the revenue by boosting the availability of inventory.
(4) A purchaser has to work on a potential strategy through brainstorming, so as to meet the target and determine whether this will shave off enough time in the procurement cycle to be worthy of investment.
Benton, W C Jr. (2007). Purchasing and Supply Management, McGraw-Hill/Irwin, New York, USA, page 21.