Supply Chain Management: Sustainable Practices

Supply chain organizations are continuously looking for new and innovative ways to improve procurement processes, minimize risk, and reduce costs. Leading supply chain companies are taking supply chain management to the next level and incorporating sustainability concepts into their procurement decision making processes.

Traditional supply chain management decision making has focused on Total Cost of Ownership. This is a process of evaluating the total lifecycle cost of a procurement decision. In the context of business sustainability, these criteria might include post purchase costs such as operational waste streams or product disposal.

More progressive supply chain management organizations include the value a supplier can bring into the procurement decision making process. Referred to as Total System Value by professional consulting firms, this procurement decision processes examines the potential benefit a supplier could be provide over and above the value of the product or service being provided. For example, choosing a carpet supplier that offers competitive “low VOC” options that result in reduced productivity loss due to healthier employees.

As a sustainability consultant, I have observed a number of sustainable supply chain management companies including risk in their decision processes. Choosing the right suppliers is becoming more a strategic process than a traditional cost decision. Leading companies are using project management decision tools, such as Decision & Risk Analysis, to evaluate key relationships and procurement decisions. These companies are defining business sustainability risks such as environmental regulations into their decisions.

Forum for the Future has recently developed a sustainable procurement tool to evaluate and access the impact of a procurement decision. The tool is intended to be a simple and consistent method to improve the sustainability of procurement decisions. These business sustainability impacts could be economic, environmental, or social.

Successful implementation of any sustainable supply chain decision process takes commitment. Our professional consulting focuses on the business drivers that help you drive sustainable value from your procurement decisions.