A company’s supply chain and procurement function as one unified body. They both act as primary interfaces between an organization and its suppliers.
They are incentivized to ensure materials and components bought from elsewhere are available in the right quality, at the right time, and at the right price for customers.
For most entities, procurement and supply chain processes don’t work hand-in-hand but sequentially.
At discrete intervals—during the development of a new product line or every few years after launch—the procurement function will identify suppliers capable of delivering specific material requirements at the forecast volume and the required quality.
Following the engagement with qualifying suppliers, negotiate favorable terms and fix them in a robust contract. Working this way creates significant inefficiencies and ignores important opportunities to reduce costs and add value for companies and their suppliers.
Inefficiencies arise because, even if overall demand meets forecast levels, the day-to-day detail of supply requirements can be highly dynamic. Seasonal demand variability, the introduction of competitive products, or promotional activity in retail channels can drive big short-term fluctuations.
On top of this, any number of exceptional circumstances, from floods to product quality issues, can require rapid and significant action by suppliers.
Some companies seek to overcome these issues by improving the collaboration between their supply chain and procurement functions. At its simplest, this approach involves procurement professionals gaining a full picture of supply chain requirements before negotiating supplier contracts.
The Transition: In Steps
Green Purchasing: Environmentally Preferable Purchasing
Environmentally Preferable Purchasing (EPP) or Green Purchasing refers to the procurement of products and services that have a lesser or reduced effect on human health and the environment compared with competing products or services that serve the same purpose.
This comparison may consider raw materials acquisition, production, manufacturing, packaging, distribution, reuse, operation, maintenance, or disposal of the product or service.
In addition to improved environmental performance, sustainable procurement works better than traditional products and can save money.
Switching to safer cleaning products can reduce allergic reactions, asthma, burns, eye damage, major organ damage, and cancer connected with the hazardous chemicals used in many traditional cleaning products.
Buying 100% recycled-content paper can reduce energy use by 44%, decrease greenhouse gas emissions by 37%, cut solid waste emissions in half, decrease water use by 50 percent, and eliminate wood use.
Similarly, energy-efficient vehicles and renewable energy cut greenhouse gas emissions and harmful air pollutants while lessening our dependence on imported oil.
Overall, the implementation and integration of green purchasing concepts constitute a system-wide process reform that collectively contributes to an organization’s reduction in carbon footprint.
Green purchasing can allow an organization to offset financial and environmental risk rather than inheriting it from their suppliers.
Organizations need to involve their suppliers at the design stage or develop a network to pre-qualify suppliers that have responsible environmental management.
Assessments and benchmarking can aid an organization with the process. Green purchasing can bring important benefits for its practitioners: risk management, eco-efficiency, stronger supplier relationships, and improvements in environmental performance.
Nexity Public Relations