Category Archives: CSR

Walmart Changed the World 50 Years Ago, But Did It Change For The Better?

I certainly agree with this recent Time Business article on “10 Ways Walmart Changed the World” (July 2, 2012) since the first Walmart store was opened in Rogers, Arkansas on July 2, 1962 (four thousand, four hundred stores ago). But I’m not sure all of the changes created by the world’s largest private employer are for the best.

Let’s start with this nice and succinct quote from the article:

Walmart’s relentless drive for efficiency has bankrupted companies, put downward pressure on wages and upset a retail culture that some believe was less efficient but more personal and aesthetically pleasing.

It may be the story of American capitalism at its finest, but is that the story it wants to bring to the rest of the world as it continues its rapid (or is that rampant) international expansion?

Now, while everyday low prices, supplier partnership, data driven management, supply chain connectivity, focus on decentralized management, and sustainability are good things; and while better selection is neither good nor bad in and of itself; the suburban sprawl it generates is bad for the environment, the relentless drive for efficiency is an accelerating factor in the outsourcing of American jobs and stagnant wages for North American employees is making us poor, and the creation of an overconsumptive (& disposable) culture will make it almost impossible for true sustainability to creep into our culture.

From a simplistic perspective, 6 changes for the better compared to 3 for the worse would appear to be a balance in Walmart’s favour, but it’s not how many good deeds and how many bad deeds, it’s the extent of the damage of the bad deeds that matters. And the extent is pretty bad when we look at things from a modern perspective.

First of all, as the article notes:

The selection that Americans began to demand required bigger stores that could only be built on the outskirts of small towns or in the suburbs of large cities.

Thanks largely to Walmart, we began to sprawl so much that your average big American city is now sprawling into the next big American city. That’s why we have Mega-Regions where it’s hard to determine where one city ends and the next begins. This is about as un-green as you can get. There’s a reason that San Francisco, Vancouver, and New York are the greenest cities in North America. (See Metropolis.) Why? For starters, the bigger the city, the more gas we have to use to get around because public transportation covers less and less. Plus, we need more resources to distribute power, water, communications, and everything else we need to live.

In the last 10 years, the US economy has last over 4 million blue-collar jobs, mainly as a result of manufacturing job losses, which is largely due to outsourcing. Outsourcing accelerated by Walmart in its pursuit of the lowest possible cost.

But this doesn’t pale in comparison to the creation of the overconsumptive and disposable culture it has created. Thanks to Walmart, we not only want to buy more, because some products have become so cheap, relatively speaking, that we don’t even think about buying them. And, more importantly, because some products have become so cheap, we don’t even think about repairing them when they break, even if they repairable. As a result, we now generate more waste per capita then one would have ever thought possible even a few decades ago. Without Walmart, something else might have come along, but the reality is that Walmart came along and Walmart did the damage.

Any differing opinions?

It used to be that Doctors made Life and Death Decisions. Now Supply Managers do too!

This recent CSR briefing over on the CPO Agenda on “when good procurement can be a life and death factor” is great food for thought as it points that not Supply Management is more then just sourcing and procuring, it’s also also sustaining and securing — in more ways than one!

Focussing on how the early 2000s saw several incidents where hospital patients inadvertently received excess doses of their drugs that resulted in fatalities, the article pointed out how a poor selection of IMDs (Interactive Medical Devices) that didn’t do anything to prevent common human errors was the reason that a premature baby died after receiving 10 times the required dose of diamorphine and a person lost their life after receiving a dose 24 times too high after a daily dose was miscalculated as hourly when it would have been trivial to code in a dosage check that asked a nurse or doctor are you sure before administering a dose outside of the range. After all, it’s easy to mistype a decimal point and then 13.5 ml becomes 135 ml, or click the hourly instead of daily button if you’re in a rush (and what health-care professional isn’t overworked these days)?

Now, you could say that the real problem was lack of training, as better training could have minimized the possibility of human error, but in each case sourcing was involved. In each case, a wide range of IMD devices were in service in each of the hospitals. And in each case, each time a procurement exercise took place, a different machine was chosen as the most cost effective. The factor that should have been last on the list was placed first and people died. Remembering that Supply Management’s ultimate goal is value (creation), not cost (reduction), and in this case, the value was procuring the best IMD for the hospital, not the cheapest one today, where the best IMD was one that was easy to use, programmed with easy range checks, reliable, fault tolerant, long lasting, and safe and reasonably priced with respect to these requirements. Considering the inherent value in human life (and the cost of the lawsuit or settlement that the hospital is going to have to pay as a result of a preventable death), if that means spending 20% more, so be it.

If instead of sourcing IMDs as one-off sourcing events when a need arose, Supply Management put security and sustainability first and foremost and redefined IMF sourcing as a multi-year master contract agreement, negotiated against projected demand over the next 3-5 years, lives might have been saved as there would likely not be more than two types of IMDs at any one time (the ones sourced during the last contract, and the ones being sourced during the current contract, where the contract length is defined to insure all of the old machines are replaced before a new contract is negotiated with the possibility of switching vendors) and the amount of training the health care staff would need would be minimal.

And the reality is that medical device sourcing is not the only area of Supply Management where lives are at stake. Supply Managers also source food and beverage categories, and melamine in the milk, diethylene glycol in the toothpaste, salmonella in the spinach, bovine spongiform encephalopathy in the beef (which can cause Creutzfeldt-Jakob disease), and botulism in the chili sauce can all result in death, and if not caught in time, can be as deadly as a plague or coronavirus (SARS).

And Food & Beverage is just one example. The chemical sector is another. What if the chemicals are hazardous and the storage units are poorly made and leak? Cyanogen chloride is colourless, and deadly, and used in the production of Chlorosulfonyl isocyanate which is used in medicine in the production of Beta-lactams, which form the foundation of antibiotics (including penicillin).

Another is heavy machinery. Carbon monoxide (CO) is regularly produced by internal combustion engines in enclosed spaces. If the exhaust system is not airtight and properly insulated, CO could leak into the factory and poison (or kill) your workers before they even know it’s there as it is an odourless colourless gas.

The point is, where physical products are concerned, almost anything you source could be a hazard to human health, and even life. (We still have problems with led in the paint and asbestos in the insulation when sourcing from overseas.) This doesn’t mean that you don’t have to worry about services — it just depends on what you’re sourcing and what products and materials the service providers have to use in the performance of their jobs. For example, Janitorial Services could be a problem if the company is contracted to provide the cleaning products and they consistently use cleaners with too high a borax concentration which is not properly cleaned up.

So, next time you source, get out that corporate social responsibility scorecard; make sure safety, security, and sustainability play a prominent role, and remember that, indirectly, you could be responsible for someone’s life.

Your job just changed, didn’t it?

The Procurement Game Plan: A Review Part I.2

Charles Dominick of Next Level Purchasing and Soheila R. Lunney of Lunney Advisory Group recently released The Procurement Game Plan: Winning Strategies and Techniques for Supply Management Professionals. In our last post, we set the stage with The Purchasing Professional’s 10 Commandments. In this post we’re going to continue our fairly detailed review of this book, which will span four or five posts. We’ll start by covering the first four chapters of the book that discuss organizational role, supply management strategy, talent, and social responsibility — the stage that a modern supply management professional has to act upon.

The first chapter on Procurement’s Place in the organization starts out with an overview of management’s expectations of modern Procurement — something every Procurement Pro needs to know when finding a (new) job in today’s highly competitive skill-based marketplace. We’re well beyond the time when all that was expected of Supply Management was cost savings. Now, with costs rising and consumer belts tightening, Supply Management is also being tasked to deliver productivity improvements, brand & differentiation support, customer satisfacation, cash flow improvements, great service, competitive advantage, and sometimes even revenue. It’s a tall order for a single organization — it’s good that the strategies and tools exist to deliver. (And that’s kind of what this blog is all about, but the doctor digresses.)

The chapter then dives into the types of goals that Procurement / Supply Management organizations have, and this is where the value of the book starts to kick in. Organizations, depending on their stage of maturity, either have no (documented) goals, which is very bad, vague goals (with no meaningful measurable targets), which is bad as a professional will not know how important each goal is relative to other goals, SMART (Specific, Measurable, Attainable, Relevant, and Time-Bound) goals, which are good and a minimum requirement for organizational success, or Strategic SMART goals, which are great as they also tie the SMART goals to overall organizational strategy. A world-class supply management organization puts the good of the organization before the good of itself.

The chapter also discusses strategic vs. tactical procurement, Procurement as a Profit Centre, Procurement as a Service Centre, and Procurement’s Role in Specification Writing — but the other key section of the chapter is The Procurement Manifesto. Because it can be difficult to gain buy-in from functional departments when trying to get them to accept Procurement’s involvement, it is important to have a list of reasons why it will benefit them to work with Procurement. Your Supply Management organization should have such a list and should describe then in The Procurement Manifesto that can be given to the other organizational units. For details on what to include, see the book.

The next chapter discusses Supply Management Strategy — The Procurement Playbook if you will. The existence of an appropriately written guiding document will help keep the organization on the same page and help it to achieve its goals. Such a document must contain the following five sections in order to meet the department’s needs:

  1. The Procurement Organization’s Business Plan
  2. The Procurement Organization Structure
  3. Cost Control Strategies
  4. Risk Management Strategies
  5. The Supply Management Sourcing & Procurement Methodologies

Each piece of the puzzle must be clearly defined and outlined, and each organizational member must be on the same page. For details on how to write the Procurement business plan, on what types of cost control strategies to focus on, and what types of risk management strategies might be included, see the book.

One of the key parts of this chapter is the section on standard supplier selection criteria. The authors note that you should use a hierarchy of constraints and criteria every time you select a supplier. That hierarchy must include all of the relevant selection criteria, ordered and weighted so that each supplier can be compared fairly. This is sometimes the only way to determine which supplier will be the best fit for an organization. Generally speaking, this hierarchy should contain cost, value, quality, service, social responsibility, convenience, risk, and agility at a minimum, with other factors added depending on the goods or service being sourced. The weightings and rankings will be project specific.

The next chapter on Procurement Talent Management is one of the key chapters of the books and contains one of the key messages, talent is key to success. Without it, no amount of technology or transition management will help. It does a great job of discussing the five facets of the talent management cycle — Assess, Retain, Develop, Recruit, and Unify — and how each is necessary for organizational success. It also points out that they are not sequential and, depending on organizational needs, they may all need to be addressed simultaneously. Not only is talent management more important than many organizations prioritize it in their key issues list, but it is more difficult than many organizations would lead you to believe. This is a chapter to be reviewed in depth as almost every point matters, but a key point it addresses that is often missed is that education is a retention tool. Real professionals want to learn and improve, and will value an employer that not only allows them to do that, but that sponsors their education and efforts to improve themselves. The value of educating a resource is many times the up-front investment. Many, many times. The only point I’d disagree with in the entire chapter is the statement that by working with the business schools of the universities in your area, you can hire (at no cost/credit only or at minimal cost) intelligent and hard-working interns to take away the burden of tactical work from your strategic sourcing team members. While it is true that you can hire these intelligent, eager, hard-working resources at little-cost to do just this, they will need regular supervision from your senior Procurement Professionals, and this is a hidden cost you will need to account for.

The next chapter, and the final chapter that we’ll cover in this post, is on social responsibility in procurement: the new rules for a more responsible game. Whether this is important to your organization now or not, it will soon be as more and more consumers demand environmental or social responsibility, so you better get a handle on how it is going to impact your organization now, or you’ll be scrambling later when the media has you under the gone. Not a situation any Supply Management organization wants to be in when they can eliminate the risk with some careful research, planning, and a social responsibility program – which may not have to be all that extensive or demanding.

One of the key points covered by the chapter, which is often missed by other books, is ethics. Not only does social responsibility start with ethical behaviour, but a perceived lack of ethics, real or not, can land you and your organization in hot-water. As an example, the authors describe some recent government scandals, including one that got their mayor in some very hot water. In 2007, Mayor Luke Ravenstahl accepted two days of golf in the Mario Lemieux Celebrity Invitational from UPMC and the Pittsburgh Penguins, valued at $9K. His defence is that while the city’s ethics code limited city officials to accept admission to cultural or athletic events valued at $250 or less per year, charitable outings were exempted. This may have been a charitable event, but it’s value created a perceived conflict of interest that landed him in very hot water with the media. Then, a few months later, he decided he wanted to accept free tickets to go to a Stanley Cup Final game against the Detroit Red Wings. This time, he asked for an official legal opinion first, but it didn’t matter because the ticket value was very high and another councillor said he made half of the Mayor’s salary and pays for his hockey tickets out of his own pocket and the mayor should do the same. The lesson is that even if you don’t violate the ethics or gift acceptance policy of your organization, if there is any chance your actions could be perceived by a (large) group of people as unethical, you probably shouldn’t do it. And if you have to think about whether or not something is ethical, and, even worse, think you have to ask permission, just don’t do it.

The sections on the supplier code of conduct, green procurement, and supplier diversity, which for the most part cover all of the basics, are also quite good and worth a careful read.

That’s it for Part I. In Part II, we’ll discuss the next four chapters on Strategic Sourcing, Supplier Qualification, and Negotiations. Stay tuned.

Has Your Product Been Greenwashed?

About a year ago SI published a post that asked if it was green, or just more greenwashing after Terrachoice released its annual “Sins of Greenwashing” study that found 95% of the 5,296 products that were reviewed were still committing at least one greenwashing sin.

In response to this post, a reader has directed me to an awesome graphic, “Green Marketing Exposed”, created by Marketing Degree (.net), embedded below (with permission), that breaks down the seven deadly greenwashing sins of

  • no proof
  • hidden trade-off
  • smoke and mirrors
  • vagueness
  • false labels
  • irrelevant
  • bold lies

and the top three ways consumers can avoid the greenwashing traps

  • shop at big box retailers (heavily scrutinized by media)
  • beware of the electronics, DIY construction product, toys & baby product, and household cleaning product industries in particular
  • look for trusted logos

This is very useful for your supply chain sustainability manager. Know what to look for before your customer finds it!

Green Marketing Exposed

If You Want To Be Sustainable, Be Consistent

Over on the Procurement Leaders Procurement Blog, Steve Hall penned a good post on the importance of consistency in “sustainable sourcing”. In particular:

  • consistency in the way Procurement speaks to stakeholders and members of its supply chain(s),
  • consistency of the message across the company, and
  • consistency across the community as well.

This is because there is a lot of confusion around sustainability and environmentally friendly, thanks to overuse, and, more importantly, misuse by PR “pros” around the globe. Harking the need for responsible sourcing and a confusion free lexicon, Steve zeros in on the importance of consistency because if a company can identify what a sustainable product is, they’re in a position to tell customers/consumers what that is and why, rather than just slapping a green label on it (and possibly committing one or more greenwashing sins). And that’s a good thing.