Future of Sourcing - Proxima https://www.futureofsourcing.com/tags/proxima en Four Trends for Procurement in 2022 and Beyond https://www.futureofsourcing.com/four-trends-for-procurement-in-2022-and-beyond <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://www.futureofsourcing.com/sites/default/files/articles/Four%20Trends%20for%20Procurement%20in%202022%20and%20Beyond_0.jpg"><a href="https://www.futureofsourcing.com/sites/default/files/articles/Four%20Trends%20for%20Procurement%20in%202022%20and%20Beyond_0.jpg" title="Procurement has been an essential partner to businesses throughout the pandemic." class="colorbox" rel="gallery-node-2114-4iMn-kbl2r0"><img typeof="foaf:Image" src="https://www.futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Four%20Trends%20for%20Procurement%20in%202022%20and%20Beyond_0.jpg?itok=EJuciklG" width="624" height="325" alt="Procurement has been an essential partner to businesses throughout the pandemic." title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <p><em>CPOs at Fortune 50 companies are now looking at issues such as security of supply, energy prices, accelerating innovation, sustainability and Scope 3 CO2e emissions, says Guy Strafford,&nbsp;<span style="font-size: 13.008px;">Executive Vice President at Proxima</span><span style="font-size: 13.008px;">. While some of these current challenges will be long-term and more important than others, the question is how businesses will minimize the consequences.</span></em></p> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/how-procurement-can-respond-to-inflation-and-volatility">How Procurement Can Respond to Inflation and Volatility</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>Procurement has been an essential partner to businesses throughout the pandemic. While&nbsp;there are many factors that have led to its prominence, not all of them will have a long-term impact.&nbsp;In 2022, the tradtional function of procurement and the roles it performs will change drastically.&nbsp;</p> <p>We can&rsquo;t predict the future, but we can keep in mind the challenges and opportunities for 2022 and beyond. Procurement does not operate in a business vacuum and an important question to ask is how businesses will minimize the consequences of varying timelines for certain issues. Below, we explore four trends that are impacting the procurement function.&nbsp;&nbsp;</p> <h2>1. Dramatic Business Changes</h2> <p>The last two years proved once again that those who adapted and aligned themselves to the new 2020/21 business strategy fastest have done extraordinarily well. Power flows to those who know how to wield it and take advantage of circumstance.&nbsp;</p> <p>Many CPOs have seen their remit expand to include property, sustainability, risk, supply chain, or overseeing corporate incubators or moving beyond procurement full stop, and their voices are being heard.&nbsp;When talking about gaining a seat at the table or delivering value beyond savings, this is what it means and what evolution reaps. If your remit has not expanded in the last 12 months, what have you been doing?</p> <p>2022 will see more dramatic business changes. The CPOs who showed their worth during COVID will adapt to the <em>next</em> crisis and keep reinventing the positioning and narrative to remain prominent.&nbsp;The rest risk stagnation, or worse, still being replaced.</p> <h2>2. Building Resilience</h2> <p>We ran a good times supply chain model pre-2020.&nbsp;We all assumed that the just in time approach of undisrupted global supply chains would continue.&nbsp;But there were clues it would not. Case in point: the Japan nuclear reactor disaster of 2011 impacted the smooth running of the automobile supply chain, but CFOs responsible for managing the balance sheet put the pressure on their business to remove the spare stock and slack in the system because they (like the rest of us) thought that the boundaries of volatility that needed to be planned for were narrower than in actuality.</p> <p>It has only belatedly been understood how social media amplifies consumer demand to overwhelm supply.&nbsp;In a lemming-like panic we buy toilet paper, PPE or petrol, fearful that others get there first. And we are now all equipped with a portable supercomputer pointing us to where the last remaining roll, mask or gallon is stored.</p> <p>Into that mix, when COVID hit, every disaster plan was &ndash; to my knowledge &ndash; ignored.&nbsp;In conversation, I think many corporates have realized that risks are hard, if not impossible to anticipate, so there is a desire to create bigger buffers that provide protection.&nbsp;Some protection will be better visibility in the supply chain via e-tools to interrogate the public or coordinate private information about suppliers.</p> <p>But the primary buffer in 2022 will be more stocks and fat in the supply chain to smooth the bumps.&nbsp;This will provide more resilience because more events will be covered, which would have previously caused a problem.</p> <p>Of course, by 2030, a new generation of management will probably be in place, and the lessons from COVID will have faded from the executive memory, so expect pressure to mount soon to reverse these buffers until the next crisis.&nbsp;I already see that a wide range of executives did not remember the commodity volatility of the 2000s.</p> <h2>3. ESG As a Business Priority</h2> <p>If 2021 was about making promises on emissions, then 2022 is about figuring out how those promises will be kept! The rubber is genuinely hitting the road, but the road is slippery, and the GPS is not working well yet! However, four things are becoming clear:</p> <ol> <li><em style="font-size: 13.008px;">Companies will collaborate</em><span style="font-size: 13.008px;"> &ndash;To have the mass/momentum/credibility, non-competing businesses are cooperating to work with suppliers.&nbsp;As CPO of Diageo, one of the world&rsquo;s largest producers of spirits and beers, Janelle Orozco is looking to work with businesses on glass industry emissions, and I have heard many other examples.&nbsp;The nature of the openness required from suppliers and cooperation with suppliers is going to increase. Interestingly, I think it will improve negotiations and be more fun as the variables will more clearly trade off price and carbon emissions.</span></li> <li>&ldquo;<em style="font-size: 13.008px;">Greenification equals localization</em><span style="font-size: 13.008px;">.&rdquo; We will see an acceleration of more local, automated supply chains, which will create more socially, environmentally friendly options, but which may force clarity on the trade-off between higher cost relative to what may be available elsewhere and lower carbon. Without appropriate guide rails such as &ldquo;internal carbon taxes,&rdquo; this will cause a lot of tension in 2022.</span></li> <li><em style="font-size: 13.008px;">Reporting will begin to tighten up</em><span style="font-size: 13.008px;"> &ndash; A material number of quoted businesses have reported numbers on carbon emissions which are </span><em style="font-size: 13.008px;">at best</em><span style="font-size: 13.008px;"> fanciful.&nbsp;Companies will soon have to report on ESG factors impacting their business due to the rise of better auditing to verify reporting and the creation of the International Financial Reporting Standards&rsquo; (IFRS) International Sustainability Standards Board (ISSB) with standards for consistent and global ESG reporting. Both have a long way to go and 2022 will see some corporates get caught out as they start the journey. It is a natural stage of evolution for a nascent market.</span></li> <li><em style="font-size: 13.008px;">More information flows from suppliers</em><span style="font-size: 13.008px;"> &ndash; This is going to be the driver for procurement taking over sustainability in many companies.&nbsp;More and more tenders require information on environmental performance and the answers will be weighted accordingly; revenue will flow to the more sustainably-aware businesses. It is this link to future revenues and loss thereof which will drive business change.</span></li> </ol> <p>Underlying monitoring and measurement tech to feed this beast will be the next big trend in procure-tech, something that solves a genuine business need beyond cost to serve. The answer is going to emerge in niches.&nbsp;There will be an explosion of niche e-tools and services because that happens at the start of any market prior to simplification and consolidation.)</p> <h2>4. Procuretech &ndash; The Revolution Will Eat Its Parents</h2> <p>The tough thing is that less clarity exists in defining the replacement entity overseeing the new commercial architecture, its role and its responsibilities.&nbsp;In 2022, procurement will likely shift more consistently into leading business into a new era. Suppliers, customers, regulators, investors &ndash; the boundaries in which businesses operate &ndash; have fundamentally changed or are changing. And the role of procurement is to make sense of that change, calibrate it and then interact with the &ldquo;external enterprise&rdquo; in an optimum way.</p> <p>Digitizing, like ESG, is going to be an ongoing part of commercial life; while today they are separate, soon enough, they won&rsquo;t be. However, the biggest companies are not looking for digital to make their function more effective. They are looking to it to remove the need for a procurement professional to do most of the things that we have done.</p> <p>Sourcing, contracting, payment and negotiation will all be automated.&nbsp;In 2021, companies were experimenting and trying to sequence how this could be done.&nbsp;Some of the West Coast tech goliaths can see a route to revenues for them.&nbsp;Other big corporates see autonomous procurement or what I term &ldquo;self-service procurement&rdquo; as a way to deal with the tail. Either way, they need much more detailed data to apply algorithms and AI learning.</p> <p>Automating the tail so stakeholders do not need human intervention from procurement is only the start.&nbsp;Multiple motives lead to one inevitable conclusion &ndash; the revolution will eat its parents.&nbsp;</p> <p>Technology can enable the stakeholder to do most of what procurement does today without procurement, and AI will help it get better and better. To be genuinely autonomous, however, the technology must understand changing needs, open and competitive markets, non-standard behaviors human and technological behaviors. The tech needs to learn how to game.</p> <h2>Conclusion</h2> <p>2022 is a point of inflection for many.&nbsp;At the same time, procurement has made strides and will continue to do so. For procurement leaders, it will be incredibly important to keep in mind the shifting nature that these strides have occurred. We&rsquo;ve come to know procurement as an evolving function throughout the pandemic compared to the old school responsibilities, and we should treat it as such.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/proxima" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Proxima</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/resilience" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Resilience</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/environmental-and-social-governance-esg-0" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Environmental and social governance (ESG)</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/automation" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Automation</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="Four Trends for Procurement in 2022 and Beyond - Future of Sourcing" addthis:url="https://www.futureofsourcing.com/four-trends-for-procurement-in-2022-and-beyond"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Thu, 20 Jan 2022 02:00:00 +0000 Guy Strafford 2114 at https://www.futureofsourcing.com https://www.futureofsourcing.com/four-trends-for-procurement-in-2022-and-beyond#comments How Procurement Can Respond to Inflation and Volatility https://www.futureofsourcing.com/how-procurement-can-respond-to-inflation-and-volatility <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://www.futureofsourcing.com/sites/default/files/articles/How%20Procurement%20Can%20Respond%20to%20Inflation%20and%20Volatility.png"><a href="https://www.futureofsourcing.com/sites/default/files/articles/How%20Procurement%20Can%20Respond%20to%20Inflation%20and%20Volatility.png" title="How Procurement Can Respond to Inflation and Volatility" class="colorbox" rel="gallery-node-2054-4iMn-kbl2r0"><img typeof="foaf:Image" src="https://www.futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/How%20Procurement%20Can%20Respond%20to%20Inflation%20and%20Volatility.png?itok=cJFrXJLy" width="624" height="325" alt="How Procurement Can Respond to Inflation and Volatility" title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <h1>How Procurement Can Respond to Inflation and Volatility</h1> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/strategic-sourcing-in-a-hyperinflationary-environment">Strategic Sourcing in a Hyperinflationary Environment</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>Inflation is a word that has been on the minds of every procurement team in 2021. We are seeing a sustained period of supply shortages and price volatility of the kind that most commercial professionals will not have experienced in their working lives. In one way or another, it is having an impact on virtually every business.</p> <p>The causes and the severity of inflation are complex. Much of the origin comes back to either COVID or climate impacting the availability of raw materials, people and infrastructure. Thereafter, we can layer on compounding events like the Suez Canal blockage or <a href="https://www.bloomberg.com/news/articles/2021-08-28/one-stuck-box-of-fertilizer-shows-the-global-supply-chain-crisis" target="_blank">Chinese port closures</a>, as well as sudden and rapid shifts in demand for glass, plastics and corrugate, for example. And then there are semiconductors, of course, reflecting where a fast-growing global trend and just-in-time supply chain meet constrained supply.</p> <p>While the causes are complex, the outcomes are common &ndash; availability drops and prices increase. Service levels are often affected too. For example, major players in the logistics market are scaling back service levels and increasing prices. Why is this? Because they have to and they can.</p> <p>The same is true of shipping channels where prices are in some cases 10 times higher than in 2019 for an on-time delivery metric (at 38%) that is half as good as 2019. And then there are semiconductors, where some lead times have reached over a year.</p> <p>For a professional whose focus is buying, a sellers&rsquo; market is not where procurement wants to be. For many procurement professionals, it is not a place that they have been to before.</p> <p>So, is the only option being held captive to price? Well, you may need to accept that your year-on-year savings target may suffer, so it is time to think differently about how to create value.</p> <h2>Get in the Right Mindset</h2> <p>First of all, it is time to face the facts. Inflation and shortages are here, as are price increases. If you do what you have always done, you will not get the same outcome. If you procrastinate or hold off hoping for improvement, right now, you will not get the same outcome.</p> <p>Buying in inflationary markets is different. But it also enables you to focus on new ways of creating value. It needs you to be on your game and it needs the best of you as a supply market expert and a commercial architect. You will be faced with some of the following:</p> <ul> <li>Higher prices</li> <li>Unfavorable quality or service levels</li> <li>Slow lead times</li> <li>No supply</li> <li>Force majeure or unforeseeable circumstances</li> </ul> <p>Here are three tips to position yourself to get the best out of the current markets by looking at your organization, your supply markets, and of course, yourself.</p> <h3>1. Business Focus</h3> <p>How good is your data? How connected are you to your customers? Are you connected into product and commercial teams? These are all going to be areas of focus when tackling inflation to stabilize, reduce or eliminate demand or to embed the effects into manufacturing and commercial strategy.</p> <p>A good place to start is undertaking a risk assessment to map what you buy and the contracts you have to current market volatility and forecasts. You cannot do everything, so focus on critical goods and services and supply chains. Armed with this, identify the key business owners and form a crisis team to figure out how to bake the reality into the business.</p> <p>The tactics you are able to use will depend upon the specific market dynamics. But consider the following:</p> <p><img alt="" src="https://futureofsourcing.com/sites/default/files/Inflation%20%281%29.png" style="width: 900px; height: 289px;" /></p> <p>Understanding your internal position gives you options. There are likely things that can be done to reduce exposure. Further, where price and availability occur, other operational and commercial contingencies can be enacted to reduce waste, risk and cost exposure.</p> <p>Your business will thank you for it.</p> <h3>2. Market Focus</h3> <p>Suppliers may look like the largest part of the problem, but they are also going to be a large part of the solution. First and foremost, if you have to become a price taker, become an informed price taker. And that means navigating market data.</p> <p>Do you know if you are absorbing market-wide inflationary costs or if you are paying more because you are working with a certain supplier? Banging the table and asking for a discount probably is not going to work.</p> <p>But getting ahead on data is going to make you more informed when striking deals. What is the market rate and how is it trending? If you cannot answer this then you are uninformed and at the mercy of a sellers&rsquo; market.</p> <p>Getting ahead of the game is going to mean understanding the market and your position in it, as well as tirelessly searching for the best deal or alternate ways of creating value. It will not be easy, but it will be worth it. Consider these tactics:</p> <p><img alt="" src="https://futureofsourcing.com/sites/default/files/Volatility%20%281%29.png" style="width: 900px; height: 355px;" /></p> <p>As a procurement professional you are the expert on markets. By deploying some of the tactics above you will identify yourself as a problem solver, someone who understands business needs and uses creative supply solutions to solve them. Now that is better than being known as the process and price person, isn&rsquo;t it?</p> <p>We all want to move up the value chain after all.</p> <h3>3. Focus On You</h3> <p>Unless what happened above is your regular day-to-day or you are used to buying in inflationary markets, chances are that you will try and learn some new things in the coming weeks and months. So, what are the most important things for you personally to remember when thinking about mindset, business and market focus?</p> <p><img alt="Inflation Market Focus" src="https://futureofsourcing.com/sites/default/files/Inflation%20Market%20Focus_Proxima.png" style="width: 935px; height: 505px;" /></p> <p>Shortages and inflation are big business problems. Even if you cannot solve them completely, there is value to be made, success to be had and an opportunity to reposition your impact.</p> <p>Let&rsquo;s not pretend that you are going to outperform the market, but you might be able to get the best that the market can offer while minimizing further operational or commercial waste in your business. That might be what success looks like.</p> <p>But you will only be successful if you proactively make the changes that will allow you to do so.</p> <h2>The Outlook</h2> <p>Inflation and shortages are not going anywhere fast. In a normal market, we might be seeing a way through it by now, but the compounding factors keep coming. The mitigating factors like onshoring and automation, which may spark deflation in 2023/2024 are either mid-term plays or suffering from delays, skill shortages and inflation.</p> <p>So go forth, make the best of it and polish up your skillset at the same time. You might just come out on the other side stronger, better and a little further up the value chain.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/inflation" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Inflation</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/strategic-sourcing" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Strategic Sourcing</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/proxima" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Proxima</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/supply-shortages" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supply Shortages</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/price-volatility" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Price Volatility</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="How Procurement Can Respond to Inflation and Volatility - Future of Sourcing" addthis:url="https://www.futureofsourcing.com/how-procurement-can-respond-to-inflation-and-volatility"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Tue, 14 Sep 2021 02:00:00 +0000 Simon Geale 2054 at https://www.futureofsourcing.com https://www.futureofsourcing.com/how-procurement-can-respond-to-inflation-and-volatility#comments Four Considerations to Create and Maintain Sustainable Procurement Practices https://www.futureofsourcing.com/four-considerations-to-create-and-maintain-sustainable-procurement-practices <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://www.futureofsourcing.com/sites/default/files/articles/Four%20Considerations%20to%20Create%20and%20Maintain%20Sustainable%20Procurement%20Practices.png"><a href="https://www.futureofsourcing.com/sites/default/files/articles/Four%20Considerations%20to%20Create%20and%20Maintain%20Sustainable%20Procurement%20Practices.png" title="Four Considerations to Create and Maintain Sustainable Procurement Practices" class="colorbox" rel="gallery-node-2041-4iMn-kbl2r0"><img typeof="foaf:Image" src="https://www.futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Four%20Considerations%20to%20Create%20and%20Maintain%20Sustainable%20Procurement%20Practices.png?itok=bi-lLXM2" width="624" height="325" alt="Four Considerations to Create and Maintain Sustainable Procurement Practices" title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <h1>Four Considerations to Create and Maintain Sustainable Procurement Practices</h1> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/contract-provisions-for-esg-in-your-supply-chain">Contract Provisions for ESG in Your Supply Chain</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>With 80% of an organization&rsquo;s sustainability impact intertwined in its supply chain, businesses will need to identify where they can work with suppliers to realize their corporate purpose ambitions. On average, over 90% of an organization&rsquo;s carbon footprint sits in &ldquo;scope 3,&rdquo; mainly in its supply chain and product lifecycle. Defer that logic across the wider scope of business initiatives, and you uncover a better understanding of where most sustainability lies.</p> <p>Recently, Unilever announced an initiative to pilot carbon footprint labelling on food. Just think about what that entails and how many suppliers need to jump in to line. We should realize that ambition is going to take a healthy balance of reward and consequence. This is the inevitable direction that we are headed, and of course for the first movers, there is a balance between cost and competitive advantage.</p> <h2>1. Sustainability in Supply Markets is Evolving Fast</h2> <p>Sustainability is now one of the largest business imperatives today. Whether it involves regulations, shareholders, consumers or costs, there are multiple forces pressurizing businesses to act. Cultural change is a huge part of winning the sustainability battle, but internal impact can only go so far when addressing an organization&rsquo;s total footprint. With the vital contributions of supply chains, many companies are looking to procurement to lead on sustainability strategies.</p> <p>Suppliers are companies too, and most of these companies have the same challenges and ambitions as traditional businesses. Some may be ahead and some behind. There is a lot of innovation happening in supply markets with suppliers and their competitors. This means that opportunities exist for quick fixes, but this also makes some goals more infinite to achieve. Delivering on sustainability means orchestrating supplier solutions.</p> <p>For procurement, understanding markets is vital to deliver on a company&rsquo;s traditional and new values, as is positioning the supplier contribution in the value chain. There will be opportunities to set standards and drive compliance, but there will also be a need to support small businesses, develop critical suppliers and collaborate on the harder-to-solve business problems.</p> <p>The solution-to-purpose goals can be found with your suppliers. When you read about supplier collaboration and innovation, these are areas where it must happen first to succeed.</p> <h2>2. Sustainability Will Fail Without Procurement&rsquo;s Involvement</h2> <p>Procurement is becoming the face of sustainability within many organizations around the world, but there is also a prevailing feeling that procurement might miss its chance if positive action is not taken now by CPO&rsquo;s. Organizations are becoming more purposeful and procurement can seize the chance to be a driver in areas of business beyond just cost savings.</p> <p>Most of the work to become more sustainable is done within the supply chain. A majority of future innovation is in the supply chain and an organization&rsquo;s commercial processes are owned and governed by procurement (including requisitioning, tendering, supplier management, etc.). Procurement aligned with purpose is a critical success factor for a sustainability program. Commercial processes must encourage and sometimes force the right choices and behaviors.</p> <p>However, the real prize is moving upstream into strategy and supplier collaboration. For most organizations, big ticket sustainability impact (i.e., where they are most exposed and can make the biggest difference) can be found in critical operations. That might be energy, manufacturing, agriculture or water. Generally, business critical activities are intertwined with one if not multiple supplier partners.</p> <p>There will be a moment of reflection here for many business leaders, determining which type of procurement function they have. Is it rich in process and digital function? Is it deep in expertise for a supply chain function? Is it a highly networked innovation focused function? The reality is that you might need all three to reach world class maturity in sustainability.</p> <h2>3. Sustainability is a Business Purpose, Not a Procurement Initiative</h2> <p>While we champion procurement as an owner and driver of sustainability, the corporate purpose is as much a cultural shift as it is a business shift. Regulation and investor demands will undoubtedly lead organizations towards a style of sustainability that is more in tune with ESG (environmental, social, governance) measurement and management.</p> <p>However, successful sustainability programs also rely on a cultural shift, uniting the business behind purpose and creating a new definition of business value. How many times have we heard the debate around savings versus value, and the different types of values that stakeholders perceive? If you cannot align with a stakeholder on today&rsquo;s definitions of value, how are you planning to layer in the benefits of purpose that may result in change?</p> <p>Uniting stakeholders, suppliers and commercial teams behind common priorities will create collaborative relationships, and most likely, the best outcomes. This is an education piece that needs to frame &ldquo;purpose&rdquo; as a &ldquo;measure of value&rdquo; that is commonly adopted and understood. In the short or long term, it can be evaluated alongside other value drivers, or as a hurdle to working with a supplier. Purpose initiatives may force a business into new and different programs, which may cost more or less, but the underlying business value will shine through.</p> <p>It also helps that corporate purpose runs through the DNA of a business. Sustainability programs will falter or fail if what is being requested of suppliers is not also embedded in the culture and behaviors of those at the very top. Many chief procurement officers (CPOs) see sustainability as a key tool to attract and retain top talent, as well as foster a culture of innovation.</p> <h2>4. Technology is an Essential Part of the Answer</h2> <p>Technology won&rsquo;t deliver you a world-class sustainability program, but you can&rsquo;t run a world-class sustainability program without technology. The procure-tech market is rallying around sustainability and new solutions in procure-tech are quickly emerging. There is a vast array of solutions when it comes to monitoring, measuring and managing. But, with no holistic tech solution, knitting these needs together is difficult and costly for business leaders.</p> <p>Organizations seeking to set up world-class sustainability programs will be delivering on long-term visions, and in many cases, pioneering new ideas and solutions that are yet to reach the mass market. This is exciting time for &ldquo;the human&rdquo; as we solve complex challenges collaboratively with our supplier partners using some brilliant tech to do it (speed, scale and an affordable price).</p> <p>Aside from the certification platforms, there are few &ldquo;utilities&rdquo; in this space. Pioneering can be expensive, which means that a lot of the future advancements will be either driven by those with the biggest exposure, those with the biggest budgets, or those with the most innovative and collaborative mindsets.</p> <h2>Procurement is Here to Help, So Make it Count</h2> <p>As businesses look to build back better, sustainability is firmly on the agenda. Market pressures that test a company&rsquo;s green intentions, low cost, less sustainable choices are not going away, which is why collaboration is so important.&nbsp;</p> <p>This next driver toward business value involves a plethora of commercial strategies. It is time to redefine value and make procurement count.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/proxima" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Proxima</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/environmental-and-social-governance-esg-0" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Environmental and social governance (ESG)</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/supplier-relationship-management-srm" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supplier Relationship Management (SRM)</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="Four Considerations to Create and Maintain Sustainable Procurement Practices - Future of Sourcing" addthis:url="https://www.futureofsourcing.com/four-considerations-to-create-and-maintain-sustainable-procurement-practices"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Sun, 22 Aug 2021 17:00:00 +0000 Simon Geale 2041 at https://www.futureofsourcing.com https://www.futureofsourcing.com/four-considerations-to-create-and-maintain-sustainable-procurement-practices#comments