Category Archives: Sustainability

Recycling Efforts in Trouble due to the Political Climate?

Today’s guest post is from Brian Seipel, a Procurement Consultant at Source One Management Services focused on helping corporations understand their spend profile and develop actionable strategies for cost reduction and supplier relationship management.

There are plenty of opinions when it comes to the environment on both ends of the political spectrum. You can likely find thousands of posts across the internet on the topic, were you so inclined. I promise that this post doesn’t delve into either side’s take on the planet or our stewardship of it.

So where else might a post of recycling and politics go? More to the point, how does it align with news Procurement Pros may be interested in? As it turns out, plenty of Procurement pros have a stake in the fate of our collective trash.

And in terms of America’s biggest partner in the recycling process, China, we have a problem thanks to a ban set to take effect in Q1 of 2018.

Setting the stage

A good amount of paper, corrugated, and plastic packaging products can be recycled and reused to create new packaging materials. These same materials can also be transformed into other products and, likewise, other products can be turned into packaging. Plenty of packaging procurement initiatives touch upon recycled materials.

At the heart of this recycling transformation are the organizations who purchase these recycled materials so they can be remade into valuable products. Since the early 2000’s, these organizations have been overwhelmingly found in China. In terms of American exports of bales of scrap, China is our number one partner, with these facilities importing over $5.6 billion annually in American paper, metal, and plastic scrap.

It isn’t just the US that exports recyclable scrap to China – the International Solid Waste Association reported in 2014 that 56% of the world’s scrap was exported to China. Clearly, any disruption to China’s buying habits of this scrap material will have very real effects on recycling initiatives globally. In turn, companies involved in the purchase of products made from recycled materials should keep an eye on these import-export relationships.

So what’s the problem?

Recycling isn’t easy – a lot of work needs to be done to get scrap material in shape to recycle. It takes real resources to process scrap material. The cleaner and better sorted scrap is when it arrives at a Chinese factory, the easier, faster, and more lucrative it is to convert to recycled materials. As such, it isn’t surprising that China has been more and more interested in ensuring a quality scrap product in recent years.

This demand for better scrap material, and objection to what China is calling excessively contaminated shipments, have led the country to ban a number of solid waste imports.

This could potentially have a direct impact on the availability of “virgin” materials as we move forward into the ban next year. For example, fewer sources of recycled paper products could lead to a tighter pulp supply and higher costs.

How Will the Scrap Industry Respond?

Assuming China does, in fact, move ahead with plans to ban key scrap imports, American companies are going to have to come up with a response. Several are on the table:

  1. Forego recycling, and send scrap shipments to the landfill instead.
    This is not the greatest of solutions by any means, but if companies take no steps to change behavior, this will be the natural result of a “do-nothing” stance on the problem.
  2. Fight the ban on a socio-political basis.
    From the language of the ban, to the impact the ban will have on businesses both foreign and domestic, there is certainly opportunity to challenge China’s path forward in terms of viability.
  3. Add more quality controls.
    In terms of recycling, an empty soda can is both garbage and a product. If China’s main concern is one of quality control, then steps taken to improve quality levels (in other words, ensuring a process that removes contaminates before bales of scrap are sent to China) may alleviate China’s concerns, and help move the scrap industry back on track.
  4. Further develop and strengthen alternative markets.
    Local organizations may also benefit from building some diversity into their strategies. China put a very fine point on the issue with this waste ban, but their intentions aren’t new, either. China has been increasing their scrutiny of imported scrap bales for the last several years, leading to the rejection and return shipment of subpar bales – Some American exporters have used these intervening years to plan alternative outlets for their scrap. This may include finding other countries to export to, or finding local customers for this scrap material.

The Institute of Scrap Recycling Industries (ISRI) is a US-based trade association made up of organizations from 30 countries that represent the lifecycle of recycled materials; from processing to brokerage, to industrial consumers. ISRI released a nine page response to China’s ban, which provides a few key talking points – Essentially, ISRI’s opening response combines items two and three above.

The response opens by challenging the language of China’s ban, arguing that clarification is required on China’s end to better outline how the band will be enacted (ISRI suggests, of course, that China should follow guidelines developed by ISRI to achieve this goal. Simultaneously, the response calls China’s own capabilities into question in comparison to the United States’ recycling industry: “where it takes 1,150 tons of recyclable fiber to make 1,000 tons of new paper in the United States, it takes 1,300 tons of recyclable fiber to make the same 1,000 tons of new paper in China. As a result, Chinese manufacturers have come to rely on the supply of high‐quality scrap from abroad in order to stay competitive.”

Moving forward

It is too early to say what the true impact will be moving into 2018. The American scrap industry has set wheels in motion to fight the ban politically, as well as ramp up efforts to either improve scrap exports to China or find alternative destinations for the material.

One thing is certain, however. Moving forward, Procurement teams in markets that rely on recycled materials should keep their eyes open and attention focused on China’s next moves.

Thanks, Brian.

Compliance – A Complex Problem with few Procurement-Centric Solutions

Why is compliance a complex problem with few Procurement-Centric Solutions? Because compliance goes well beyond the narrow view that many platforms take. At a high level, we have:

  • Regulatory Compliance
    which consists of government regulations at various levels that need to be adhered to and consists of requirements across organizational governance, workforce, materials, services, trade, and environmental considerations
  • Organizational Compliance
    which consists of adhering to the policies your organization puts in place for purchasing, inventory tracking, regulatory compliance, auditing, etc.
  • Industry Compliance
    which consists of adhering to industry standards and collective agreements
  • Governance
    which consists of ensuring that all governance requirements of the organization are met across the regulatory, organizational, and industry efforts

And when you look at the market, most of the solutions on the market are narrowly focussed on:

  • Environmental Compliance across environmental sustainability factors
  • Trade Compliance to insure that all trade regulations are adhered to (and appropriate paperwork filled out)
  • Tax Compliance to insure all appropriate taxes paid (or reclaimed)
  • Workforce Compliance to insure all workers are eligible, appropriately paid, and/or appropriately insured
  • Governance Compliance which makes sure appropriate internal processes are followed (and documentation maintained for audit trails)

… and, to slightly modify a common phase, never any two shall meet. And that’s why it’s a complex problem with few solutions in Supply Management. Will this change soon? We shall see …

Demand Control: Reduce, Reuse, Recycle, Redefinition and … Requisition Everything!

Part of good cost avoidance in Procurement is good demand management — reducing the consumption, and expenditure, on MRO, T&E, one-time buys for events, etc. We’ve covered the classic techniques in the past, which include:

Reduce: which can be accomplished by accurately predicting needs (and reducing waste) based on past use and current trends (and not maintaining volume levels on toner cartridges for a printer line being phased out)

Reuse: which can take the form of repurposing old equipment (as old developer workstations are probably just as powerful as the business user desktops used in the rest of the organization) or simply collecting unused/discarded collateral at an event and using it again next time

Recycle: where MRO inventory can be replenished by breaking down equipment (like workstations, production lines, etc.) that go out of service and harvesting still working parts that can be used in other equipment

Redefinition: where it’s not a need for more paper, but a need for second / bigger monitors so that people don’t need to print invoices / documents still submitted as (scans of) handwritten documents that can’t be OCR’d or that aren’t in a format the OCR recognizes or for tablets that allow executives to access their reports on the go

but a new type of demand management is popping up in the Procurement world, and it’s called:

Requisition Everything: where you have to literally submit a requisition to the procurement system so that all demand, and consumption, is tracked (and you can be visually guilted to control demand or utilization if you are consuming significantly more of a resource than your peer).

Now, this probably sounds very onerous to you and not worth it, but it all comes down to the implementation and user experience. At Coupa inspire, one company described an innovative method that they used to track and control demand on the factory floor (where workers would forget where they put their gloves, or realize they left them in the lunch room, and just go to the closest supply room or where workers would store extra tools or parts at their desks, just in case, leading to low stock signals and unnecessary ordering). They installed vending machines and when a worker needed something, they needed to go to the machine and punch in their id and slot number. Nothing was restricted (and no limits were placed), but every “requisition” was sent to the central Procurement system which not only updated MRO inventory but also tracked who used what, and allowed Procurement, and departments, to understand usage patterns better. This simple process reduced demand as it instilled the notion of cost consciousness and responsibility in the workers (who knew that their usage patterns could be analyzed and if they consumed considerably more than their peers, it would show), and didn’t really add any time or complexity to the process (as all the workers had to do was punch a few buttons) — especially since this process insured that the workers always knew where the stock was (which wouldn’t happen if it was moved around on the shelves).

Moreover, this technique is not limited to what fits in a vending machine — one could also use cheap RFID tags for larger items (of sufficient value) that would automatically be requisitioned when the tag left the store room (and be assigned to the right person using the employee record obtained from the entry control system when the person swipes their key card).

And, with micro-budgeting, it can be used to insure departments don’t go over their allotted new-hire budget unnoticed. New hire equipment can be kept in the secure storeroom, automatically tracked when retrieved, and automated re-orders made if stock gets too low. Plus, reusable equipment can be returned on employee departure, residual amortization amounts credited back to the micro-budget, and employees / departments who opt to use recycled equipment can be charged a deep discount against their micro-budget (and, more importantly, rewarded at annual recognition events as reuse stats can be tracked).

Now that almost everything can be automated, it might just be the time for Requisition Everything as the new method of employee-based demand management and cost control. Thoughts?

Swegways for Smegheads this Valentine’s Day!

Despite the fact that more and more natural resources are becoming scarce, there are still quite a number of smegheads that haven’t adopted the 3Rs.

Up until now, it’s been quite perplexing as to how we can deal with this problem.

However, after catching up on the public defender‘s blog and reviewing the 10 cautionary supply chain tales of christmas, we think we have a solution!

Since these smegheads often feel entitled (after all, they are taking the environment for granted), play to that entitlement and give them a free Swegway hoverboard and tell them they deserve it, that they shouldn’t have to use their own two feet to get around. And when the Swegway goes up in smoke, chances are, one way or the other, they’ll get the message. 😉

On the Seventh day of X-Mas (2016)

On the seventh day of X-Mas
my blogger gave to me:
Sustainable Posts
e-Procurement Posts
some SRM Posts
some CLM Posts
some Best Practice Posts
some Trend Bashing Posts
and some ranting on stupidity …

Sustainability. Corporate Social Responsibility. They are more than just buzzwords. They are essential to not only productive Procurement but corporate survival. If you’re not careful, and a critical resource required for production gets exhausted, then what? If you’re not cautious, and banned materials get into your products and you get hit with tens of millions of fines your company can’t afford as it is operating on razor thin margins, then what? And so on.

The reality is, Failure to Monitor a Supply Chain for Risk Can Tarnish Your Brand.

Don’t forget! A Major Disruption to Supply Chains Occurs Every Day — Is Yours Ready?

That’s one reason A Financial Health Check Should Be a Pre-Qualification of Every Supplier Qualification.

You have to Stop Blaming the Supplier! Melamine in the Milk is STILL Your Fault
After all, You’d Think It Would Be Obvious By Now that You Should Not Poison Your Customer!

You Need to Get Sustainable Because Customers Won’t Pay!

Sustainablity Requires Shared Understanding

Waste is costly. More costly than you think.
So here’s A Starter’s Guide to Zero Waste
Reasons you should Waste Not, Want Not
and Grocery Retailers Waste So Much Food It Should Be Criminal!

And even though you’re focussed on that bottom line, remember to ask yourself:
Is Your Supply Management Ethical?
Do You Know the Rules of Ethical Supplier Interaction?
Dilemma or Not, Buyers Still Must Take Ethics into Account!

And while you might not be big on document management,
Content is a Cornerstone of Compliance

In conclusion, come back tomorrow for the eighth day of X-Mas, and Don’t Be a Smeghead!