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Greening the business of procurement

13 мая 2022, 13:02    Публикации 0    0 0

For the third in our series of interviews on sustainability in procurement (catch up on parts one and two), AIMS International reconnected with Rohit Sathe, Chief Procurement Officer at personal mobility manufacturer Sunrise Medical. Having heard his thoughts on procurement’s contribution to organizational agility and resilience, we wanted his perspective on environmental sustainability.

Sathe starts off saying, “The 3R model for the circular economy – reduce, reuse, recycle – needs updating. Recycling adds processes to waste management, from recovery of materials to sorting them to production of new goods. These processes require energy and other resources themselves. That doesn’t mean it shouldn’t be done, of course, but, from my perspective, it becomes more important to source materials that are easy to separate and have a high recyclability value”, he explains.

Broadly speaking, Sunrise Medical focuses its efforts at environmental sustainability in five areas:

 

1. Repurposing – It’s important to look at how existing stock could be used to meet needs for which it wasn’t originally intended. You may, for example, discover that a fabric you planned on using is not currently available on the market. In looking for alternatives, you might assess the suitability of material lying around your warehouse. Repurposing parts and material also avoids them occupying your shelves for a lifetime!

2. Improved durability – As we all know, product longevity contributes significantly to sustainability. Sunrise Medical prioritizes reliability and durability in its wheelchair business. A pneumatic wheelchair tire offers superior comfort, but it isn’t as durable as a solid one – it’s not puncture proof. The company researched and developed an alternative that combines comfort and durability. It was a win-win for the end customer and the vendor (who benefits from reduced servicing costs and total cost of ownership). Durability and comfort come at a premium, but price shouldn’t be the driver behind a company’s pursuit of sustainability. Look at sustainability as a lever for value creation. By incorporating reliability and sustainability into its brand proposition, a company can increase its value.

3. Inventory & operations planning – These have a huge impact on a company’s carbon footprint. Planning further ahead, shifting your focus to what customers want in the next 12, 24, 36 months, you can group purchases more effectively, reducing transportation costs but also increasing efficiency. During the pandemic, Sunrise Medical increased the frequency at which it exchanged information up and down stream. With improved awareness of customers’ needs, sales was able to help procurement align changing requirements with suppliers. The suppliers could in turn contact theirs – all the way to Sunrise Medical’s Tier 4s – to ensure a steady supply chain. Taking these changes into account, they could ship full containers, rather than half-full ones.

4. Complexity management – You have to strike a balance between creating value and managing complexity. Sales may want to drive revenue by offering tailor-made solutions, but neither R&D nor procurement will feel the same way. Ordering heavily specialized parts is a risk. If a customer changes their mind on a highly-customized item, there’s waste and a loss on the P&L. 

5. Logistics & transportation – This is something that applies to most manufacturing businesses. While barging increases lead times two or three times, it reduces costs by 50 to 60% compared to trucks, while also reducing carbon emissions by 30%. By paying close attention to these issues – to efficiently batching and barging goods – a company can reduce both its carbon footprint and costs.

Managing change

It’s leaders’ job to raise awareness and ensure there’s a cohesive response. You have to ask the right questions and communicate the answers clearly and robustly. Management consultant Peter Drucker said, “What gets measured gets improved.” Anything relevant to your sustainability drive should be expressed in metrics. Quantifying them as a whole and monitoring them across the business, you develop a certain baseline from which you are able to drive down the carbon footprint. Many startups already offer the necessary tools to measure carbon reduction efforts.

UPS was a pioneer in the 2010s. Companies that shipped through it received a label – and not only internally: it was slapped on the packaging for the consumer to see. The greener the label, the more eco-friendly the package’s shipping was. This took a few things into account: the packaging itself; right-sizing (the packaging being no bigger than required); and damage prevention – think bubble wrap, packing peanuts, etc. 

Over 30% of waste in landfill in America is packaging materials. That’s just a number to most people. The UPS label drew the sender and the recipient directly into the story, helping raise awareness and a sense of accountability. 

About the Author:

Olivier Legrand

Managing Partner
Global Head – Automotive

Olivier has a broad knowledge and understanding of business challenges as he spent the first half of his career in the FMCG industry first in Purchasing then in Marketing before moving to Automotive industry first leading International Marketing teams then managing EMEA businesses covering Sales, Marketing, Logistics, Finance, HR etc…