Daily Archives: January 22, 2008

Sustainability 2008: The Early Birds

In addition to Eric Strovink’s guest post this morning, a few bloggers have been quick out of the gate in their efforts to contribute to the first cross-blog series of 2008.

Dave Kuketz over on the Business Memory Blog was so inspired by the topic, that he couldn’t wait to get his entry up and posted it shortly after he received the invite two weeks ago. According to Dave, sustainability is about caring for the environment, about being green, about conservation, carbon credits and your carbon footprint, and the carbon footprint of your vendors; its about dangerous chemicals in toys or in consumer products, in our foods, in our skin care products; its about the humane care of animals; its about awarding business to those businesses who deserve it most because they follow the same principles you do; its about social corporate responsibility and making the world a better place. Furthermore, good clean data is the fuel that enables strategy and decision-making and analysis, good data enables change, (and) good data can … help companies strive toward their sustainability goals. Enter the age of e-Sustainability.

Brian Sommer of Services Safari was also quick to the draw with his post on a sustainability case study. According to Brian, sourcing of the capital equipment for the new facility [being constructed by his client] has also taken a green and sustainable approach and almost all of the equipment being installed has been from secondary markets … sparing landfills and junkyards from further (and unnecessary) debris. Furthermore, much of the discussion involving the feedstock for this facility centered around possible use of alternative technologies that would permit greater utilization of recycled materials. Brian also notes that many traditional sourcing techniques are not used frequently in the acquisition of alternative or recycled assets, and a special set of skills is required by these professionals. Thus, a sustainability mindset will require more than just training, but a new skill set as well.

Then, still not content that he had made a significant enough contribution to this very important cross-blog series, he followed it with a second post on sustainability vs. durability over on Services Safari. In it, he noted that while previous generations of cell phones were long-lasting with a high degree of interchangeable parts, today’s cell phones don’t hold a candle to their predecessors. They aren’t made to be durable or lasting, and, just like our laptops and desktop computers, failure and / or planned obsolescence is running at an ever increasing pace. The throwaway nature of today’s technology is clearly running counter to the concepts of sustainability and corporate social responsibility. Technology manufacturers need to do more when it comes to extending the lives of the products they sell and recycling technology that is no longer useable. As Brian points out, technology manufacturers should be focussed on creating products that can be easily upgraded (and, in this instance, Apple is doing a poor job with the iPhone and MacBook Air – the fact that you can’t even replace the battery is why, despite the fact that they are in many ways superior to competitor’s products, yours truly won’t buy them, even though he uses a MacBook Pro as his primary machine), that are durable, and that are supported for 10 years – not 10 months! (And, they should design for recycle from the outset!)

David Bush of e-Sourcing Forum jumped in with his warm-up post on carbon-neutral blogging where he noted that everyone these days seems to be jumping on the green bandwagon. He also brought up the question as to whether or not consumers would pay more for green products, which is important because consumers vote with their wallets, and if consumers don’t change their buying decisions, why should companies change their practices?

And the next guest blog goes up tomorrow morning! Stay tuned!

Sustainable Savings

Today I’d like to welcome Eric Strovink of BIQ who, in his contribution, reminds us not to overlook the importance of verifying we actually achieve the savings we negotiate, because that’s the foundation of a sustainable business. Even though this might not be the definition of sustainability that most of us have in mind, the fact of the matter remains that any business that is not financially stable can not contribute to sustainability from an environmental or social perspective, regardless of where it’s collective heart is. Thus, sometimes its important to be reminded of the basics.

P. J. O’Rourke’s Circumcision Principle states that you can take 10% off the top of anything. That seems to be true for sourcing many categories, true at least if you’ve never sourced the category before. However, it’s irritating to listen to (some) sourcing consultants’ confident claims about “10% savings,” when they clearly have no visibility into what may have been very competent internal initiatives that have already taken place.Can one keep taking 10% off the top, year after year? At some point, no matter how much fat was on the carcass originally, there’s nothing left; and even if there is, 10% of it can’t amount to a hill of beans. Conventional wisdom would seem to mandate that there’s a limit to the savings that can be achieved, and that there is diminishing value to sourcing over time.

Of course, this has not been the case historically — after all, if it were, sourcing consultants would be out of business. What happens in practice is that sourcing initiatives either fail to achieve their objectives, or they erode over time. For example, suppliers know that in order to win business they must compete in auctions and see their margins slashed to zero or even to negative numbers; but they are not foolish. They will find a way to restore those margins, either over time, or almost immediately, by raising prices that aren’t in the negotiated contract, or, in some cases, by ignoring the contract entirely. How many office supplies sourcing endeavors have returned zero actual savings? Answer: a lot of them. Of course, if suppliers are pushed to the wall, they may simply walk away; or worse, if they are a key supplier, go bankrupt and take you down with them.

Furthermore, some sourcing initiatives that appear to generate theoretical savings can’t be implemented in practice. If there’s a management change, and new management are unaware of (or dismissive of) the efforts of the previous regime (human nature means that they usually are), that same initiative is “discovered” all over again, fails once more, and it’s lather-rinse-repeat. Each new group of consultants or sourcing staff that’s brought in has its own ideas and agendas, but the underlying infrastructural problems that prevent the implementation of the initiatives remain.

Even when a sourcing initiative is implemented and a contract signed, there’s still no guarantee that savings have been achieved. As Jack Welch once asked an over-enthusiastic buyer who was claiming huge savings (I wish I could find the original quote, this is a paraphrase from memory): “How do you know you got the price?” Stammers ensued. Buying from an e-procurement system doesn’t mean you’re getting good prices, and negotiating a good contract doesn’t mean anyone’s paying attention to it. I saw a contingent labor invoice analysis a few months ago where not a single contractor — not one — was being billed within the price ranges negotiated.

Wendell Phillips said, “Eternal vigilance is the price of liberty” — and it’s the price of sustainable savings, as well. Economics mandate that suppliers will try for the highest prices possible, and that any means necessary to increase revenue probably be applied, despite all the fancy talk in this blog (and elsewhere) about “supplier collaboration.” Tariq Hassan has said, “Trust, but verify,” which is probably the most accurate summation I’ve seen of the attitude one should have.