In our last post we noted that environmental responsibility is no longer merely a regulatory burden, but a business imperative. As noted by Earl Sun, Jayanth Iyengar, and Max Goralnick of Deloitte Consulting in their Practical Guide to Green Sourcing, recently published in the Supply Chain Management Review, not only can going green can save you green when your sourcing process capitalizes on sustainability opportunities, but it can make you a leader in the eyes of the self-conscious consumer who cares about sustainability.
In this post, we’re going to review the six-step green strategic sourcing process being advocated by Deloitte. It’s very similar to the traditional sourcing process, but each step has been modified to take into account relevant green criteria. The revised process is as follows:
- Spend Analysis & Opportunity Assessment
In addition to a review of material and logistic costs, direct and indirect environmental costs are also considered. It’s important to understand volatility and trends of green cost drivers — such as the impact of recycling, industry demand expectations, and technology shifts. Be sure to go on “energy hunts”, because, in some types of manufacturing, energy is the most significant cost and even a small reduction will have a big impact on total production cost.
- Internal Supply Chain Assessment
In addition to a mapping of current processes and an identification of process opportunities, environmentally sound products and services are identified and compared. Be sure to define specifications that call for reduced raw materials and/or energy requirements. Don’t forget to include regulatory and disposal costs in your assessment. Set goals – such as a minimum of 90% recyclability, more than 25% recycled content, or 0% waste.
- Supply Market Assessment
In addition to the identification of potential sources of supply, an intense effort is made to identify and assess vendors who specialize in sustainable products and services. Don’t overlook the smaller, nimble, vendors, as they are often innovation leaders on the forefront who can offer insights into the latest technologies, methods, and processes above and beyond what your large, legacy, manufacturers may be able to provide.
- Sourcing Strategy Development
Desired outcomes are defined and the corresponding process is identified. Sustainability considerations are included in the identified process, be it an auction, RFX, or optimization. Be sure to gather feedback from the entire stakeholder group before committing to a process and sending out an RFX package to insure all business requirements are satisfied.
- Strategy Implementation
The analysis quantifies the cost/benefit of sustainability attributes and selects the best buy from a total value management perspective, where a value is placed on environmental friendliness and sustainability directives.
- Strategy Institutionalization
Sustainability attributes and metrics are closely tracked as part of supplier relationship and performance management. Identifying the right set of metrics might be a time-consuming process the first time around, but since choosing your metrics appropriately is key to your success, take the time to get it right.
Simply put, it’s your traditional sourcing process, but green costs and benefits take center stage. As such, it shouldn’t be hard to transition to. So consider making the modifications offered up by the article. It’s the right thing to do.