Recent issues in the supply chain have hit the headlines underscoring the importance of understanding your suppliers. Laura Timlin Associate Director at the Carbon Trust explains how through openness and collaboration procurement professionals are increasingly becoming brand guardians for forward-thinking firms.
You don't have to look far to see the reputational damage caused by poor supplier decisions. Last autumn, deliveries of the much-in-demand iPhone 5 were halted when thousands of Chinese employees at Apple's main manufacturing partner Foxconn, went on strike over their working conditions. Meanwhile, according to figures recently published by the consumer insight network, Kantar nearly half of us have now changed our shopping habits following the food supply chain crisis earlier this year that saw several major supermarkets withdraw products from the shelves after unknowingly selling dishes containing horsemeat.
In the wake of this controversy, Tesco chief executive Philip Clarke pledged to increase orders of UK-sourced meat from 20% to 90%, and ordered a wholesale review of how the company's relationships with suppliers could be made more "transparent and collaborative".
So how do you guarantee acceptable levels of transparency and collaboration - and select suppliers based not just on price, but good practice and shared brand values?
A lot depends on how you select suppliers. Then how well and often you communicate with them. Brand aware companies are beginning to understand and monetise the reputational risks at stake as a result of taking a narrow, cost based approach to supply chain management. Increasingly, smart companies are implementing a more holistic approach to managing their supply chain, led from the top by Chief Procurement Officers.
Most carbon emissions from the impact of a business's activities are created outside the boundaries of a business - and since purchased goods and services is often the largest category of these, there is a real opportunity for companies to improve their public profile by looking at their relationships with suppliers. If you've got poor resource management within your supplier base, then ultimately these inefficiencies will lead to reputational risks as well as future cost increases for you. By collecting and analysing data on supplier behaviour and performance, it's possible to build up a picture of where the hotspots and risk in the chain are - that is, identifying suppliers who aren't managing these risks within their own business; who are wasting energy or water, or over-packaging products - and then working with them to improve their environmental footprint.
Effective data analysis helps you understand who your main suppliers are and what their business is, and you can then use that business intelligence to decide how you engage and encourage your suppliers to prioritise and tackle these issues. It can be a challenge for complex companies who may use a network of distributors to do this, as they are likely to have many overseas suppliers, who speak another language, operating under different legislative regimes with different cultural norms and values.
Companies will want to address these issues in different ways, depending on the nature of their supply chain. If, for example, your supply chain includes big FTSE-listed companies, they are likely to have strong sustainability strategies in place, allowing you to focus on those that may need more support. But if your supply chain is comprised of hundreds or sometimes thousands of small and medium sized companies, then some degree of segmentation will be required. Determined to act ethically and responsibly in its dealings with all, BT is an example of a company that expects suppliers to meet high standards on human rights, employment, and environmental practice. The Carbon Trust helped to run a series of carbon reduction workshops, to educate and raise awareness within BT's supplier base and what they should be doing around energy and carbon management, and also as a way of signalling to the supplier base that this agenda was becoming more important to BT. This activity helped to underpin the introduction of BT's Climate Change procurement standard, one of the first of its kind in the UK, to help reaffirm its climate change credentials.
This approach actually improves the sustainability of your suppliers business too, because if you're signalling that you're going to be there for the long term then the company can invest in efficiency projects with longer paybacks, these projects are going to help them be more competitive than the supplier who isn't looking at improving their efficiency. You're building your relationship with your supplier so that they know what you want and you know what they do. And don't forget, it's a two way process - there may be opportunities to change the way you act as a buyer - are you inadvertently asking your supplier to act in an inefficient way. Collaborating gives you the opportunity to identify these pain points and address them for mutual benefit.