What is Green?

13. February 2010 by admin.

As stated in prior blog editions, the concept of green is seen as an unknown at this time. Sure, there are many organizations and groups that will proclaim an item, or company, as green.  There are many more that will self proclaim that their products, services and whole organizations are green.  Are they truly all green?  If it was so easy to become green, then why has it taken so long for organizations worldwide to embrace it?  The concept of being green and the dialogue in the media and in advertising do not reconcile. That is the purpose of this blog edition, to begin to peel back what it means to be green from a theoretical view and begin to apply it to the real world of organizations and commerce.

Recently, the CEO of Duke Energy, Jim Rogers, was interviewed by ‘focusEarth,’ a Discovery Channel news show. In the interview, the discussion of Duke Energy’s newest coal fired plant was discussed and Mr. Rogers explained that the company’s goal was to be ‘Cleaner’ with the recognition that is cannot, at least not yet, be ‘Clean.’ In summary, Mr. Rogers gets it.  He understands.  As he explained briefly, ‘Clean’ is an absolute standard. By inference, ‘Cleaner’ is a relative standard.  Likewise, green can be both a absolute standard or a relative standard and that is what is happening today.  Organizations are widely claiming to be green based on a relative standard.  The problem is not so much with making that claim is that whose relative standard is being used?

Essentially, what is being asked is: Does any organization get recognized for environmental effort because they are doing more today than yesterday?

Right now, the basic answer is, ‘Yes.’  An organization with enough budget for marketing and advertising can hold itself out as environmentally friendly.  As being green.  While that can be debated, there is no standard by which those who would oppose the claim of being green can objectively, and rightly, oppose the claim.  It is a free-for-all.  It is the Wild West.  Further, the would-be advocates, usually environmental groups, are often their own worst enemies by having their single focus agenda.  Today, we discuss green as being associated with carbon emissions.  Many years ago, it was an argument on ozone-depleting substances.  Before it was nuclear energy and chemical spills.  It should be all.  It should be everything.  Here is the idea of green.

Harm No Living Thing.

It is a simple and straightforward concept.  Just make your actions and the actions of your organization not harmful to Life.  Easy.

Well, what is Life?

Does Human life only count or does mammalian life count?  What about insects, reptiles, trees and shrubs?  Where does one draw the line of Life and what life matters?  Then ask, what about the interaction of these different life forms?  Does that matter to me? Eventually, I believe, that it gets back to a simple premise.

Leave it as you found it.

In camping terms, it is called ‘packing it out.’  That means the plastic containers for foods, foils, etc. that you may use for camping is not left in the woods but carried back out of the woods to be disposed of in a proper method.  Your individual efforts and those of your organization should follow a similar standard to achieve an absolute measure of green.  It should be as if the organization never existed, or for those functioning and growing organizations, that its impact on Nature is neutral.  By this, it is not meant to be ‘carbon neutral’ but actually neutral.  No impact.  Can this actually be done?  If so, how?  What does this look like?  For now, recall this is a theoretical exercise on the absolute measure. The absolute measure will be explained by form of example.

Please continue reading ‘What Is Green?’ in the Green Procurement Blog’s next edition at www.recyclechain.com.

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Additional Insight into the Green Supply Chain [Part 2]

26. January 2010 by admin.

Is your supply chain green?

 

Starting from your own organization’s view of Green Procurement and Green Purchasing, we can begin to answer this question.  Assume your Buyers are trained to ask questions of suppliers and make some choices regarding placing purchase orders so that more green choices are made.  Let’s assume also that your purchasing group has a green strategy that requires a self assessment, recycling of scrap materials, remediation of waste streams and an assessment of suppliers that is currently being implemented for your top spend suppliers.  In sum, you are comfortable that your organization is becoming green if not actually already there.  As such, you, more or less, believe the question resides more so with your supply chain.

 

For your organization’s top spend suppliers, you have collected and verified about 50% of the green assessments.  Of the 50% collected, the majority of the suppliers pass your organization’s benchmark for being considered green.  Therefore, if you top spend suppliers account for 80% of your spend and at least 50% of them are considered green for a total contribution of 40% [80 x 50 = 40].  Your organization is also green contributing and contributed another 20% for a total of 60% that can be easily defined.  The result, the majority of your supply chain is green – right?  Or is it?

 

For now, the issue of what is the green measure is still being assumed so the 60% green score is truly a 60% assessment.  However, it is an assessment that may be flawed for right now, it is only an assessment of your ‘green-ness’ and the relative ‘green-ness’ of your direct supply base.  Arguably, it is not an assessment of the supply chain.  For it to truly be an assessment of the supply chain, the measure would, necessarily, cover other items such as:

 

• Sub-supplier assessments;
• Transportation suppliers, costs and assessments;
• Total ‘green cost’ of the supply chain;
• An evaluation of your total delivered package.

 

Total delivered package is meant to be the finished product in its box.  What form of packaging does your organization use?  Does your organization have an active program to return old products?

 

Sub-supplier assessments and transportation assessment can be thought of as nearly the same.  Is every organization in the entire supply chain working to be green?  Have the each achieved some level of being green?  When the cost of transportation, or of direct production, is considered, the most obvious answer is that, ‘Yes, the cost of transportation is accounted for and managed and the total cost of production is constantly monitored and managed for efficiency.’  That is the normal response and the one so many people, including procurement professionals, make their living on.  Cost efficiency.  The profit motive.

 

However, and this is probably one the largest environmental arguments held out today, what is the true cost of having a supply chain that spans most of the world for s relatively simple product?  Sure, your organization’s product can be argued to be green because it is solar powered and your production efforts are assessed to be 60% green, but what about the hidden cost of pollution and CO2 emissions from all of that transportation?  Would it not be more green, it would be argued, to consolidate all of the production into one geographic area and eliminate all of the transportation between supply chain links? 

 

Unfortunately for your organization, the answer is probably a ‘Yes.’  It would be more green to consolidate into one geographic region and that region may not be the place your organization would prefer to relocate.  Why is the answer likely to be ‘Yes?’  Because low cost countries, like China and India, effectively subsidize the cost of transportation.  Think about it, metal costs and petroleum costs are initially the same, or near the same, for many companies worldwide.  It is the cost of capital and labor that allows one company to compete on costs for an item that should be considered a commodity-like item [such as plastic knobs].  If the cost to purchase those knobs in another country, depending on the lot size, etc., is much cheaper than the additional cost to ship to your plant, the profit motive drives your organization to source from the other country despite the additional fuel costs to get the product.  It is cheaper in your currency but not cheaper by the effort exerted.  Said another way, with exceptions, is will be almost always true to state that going Green will also be patriotic [or nationalistic pending your vocabulary] as being green will require less exertion.  Purchase from the plastics company in the next town and not across the next ocean. 

 

The other element that is being missed in the quick assessment of our green supply chain are other attributes that may be relevant.  As you may recall, your organization sent an assessment to the top suppliers that represent 80% of the spend.  Is that the correct criteria to use?  Does a dollar spent for sub-item equate to the same dollar spent on another sub-item?  Obviously, if one dollar purchases something from China for assembly in the USA and the same dollar purchases something else in the USA, then, based on the discussion of transportation, the items are not the same.  But, beyond that concept, there is more.  For example:

 

• Are the plastic knobs made from recyclable plastic;
• What is the weight of items being shipped;
• Are metals parts sourced from reclaims metals or mined ore;
• What is the proportion of your final product, by cost, that is green;
• What is the proportion of your final product, by weight, that is green;
• What is the proportion of your final product, by added value, that is green?

 

Each question listed above is a legitimate question to ask.  Any single question may fail your organization for being considered green.  If we move from the initial view that your organization’s production efforts are at least 60% green to ask about weight, you may score a 35%.  By value-add an 80%.  By re-use of materials a 10%.  Is it correct to ask all of these questions?  Is it right to take a simple mathematic average of these different scores and consider that score as your green score?  What happens if oe of your suppliers actually contributes a negative score?

 

Right now, in today’s current environment, the answer is an unequivocal, ‘It depends.’  As stated as something avoided in this blog edition, the issue of what is green, or green enough, is a moving target.  There is not adequate definition and when asked, the answer will vary from group to group.  In a defensive way, it is suggested that your organization collect as many parameters as it can to determine various green scores.  They will all likely be needed.  However, such takes effort and corporate will power that is not always present.  So, ultimately, some answer is better than no answer.  Further, depending on the location of your plants, your organization may already becoming compliant to some definition of green. 

 

At the time of the writing of this blog edition, the concept, in a general sense, of going green has gone from a fringe concept extolled by hippies and environmentalists to being mainstream.  More so, the concept of Green Procurement, Purchase or a Green Supply Chain, are nascent.  They are in their infancy.  No consensus has been built on the popular trend of green let alone a subset such as purchasing and procurement – no matter how fundamentally import they are to whole.  This is why the next blog edition is about the definition of green. 

www.recyclechain.com

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Additional Insight into the Green Supply Chain

6. January 2010 by admin.

In the past two editions of this Green Procurement blog, the tactical issues of Green Purchasing and the strategic issues of Green Procurement have been highlighted and interrelated.  Not discussed at length is the concept of the Green Supply Chain.  As a purchasing professional you already are aware of the term ‘supply chain.’  The problem is that there are, too often times, different interpretations of the term.

 

From experience, I have seen many intelligent, educated, articulate and otherwise knowledgeable people use the term supply chain to basically mean the company’s supply base.  That is, to mean the company’s suppliers.  No chain.  No interlinking of different organizations adding value in different ways.  Just the plain rote concept of your organization’s direct suppliers.  By know, you are aware that the author does not define a supply chain to be the same as your base of suppliers.  It is much more and is something that, in some ways, may not be definable.

 

My first real introduction to the concept of a supply chain came from workshop at the Santa F Institute in the mid-1990s.  The Santa Fe Institute is a non-profit research and education center whose efforts focus on complex adaptive systems.  The workshop included people from the Institute as well as professionals from various multi-national corporations.  In this workshop, I was introduced to such terms as ‘bullwhip’ and ‘demand signals.’  The idea of looking past your immediate supply base into the cascading count of suppliers and how the demand signal was managed from interaction-to-interaction was discussed and theorized as to how to improve.  It was a fascinating discussion and it truly jaded my opinion of what is meant by the term: supply chain.  For the purposes of this blog, we will go with the above concept.  A supply chain is the interlinked network of organizations that buy and sell value-added good or services to each other to provide final products to an end user [e.g., the consumer].

 

Given this definition of supply chain.  What makes it Green?  More so, what make one supply chain green and another not when the two supply chains may have many of the same organizations involved.  Does it matter?

 

In the very next edition of this blog, the concept of ‘Green’ is explored.  What does it mean to be green?  Who sets the standard?  At this time of this writing, the answer is a variable.  To be ‘green’ is just not well defined.  Then, how, can there be this concept of a Green Supply Chain?  For the purposes of this blog edition, the concept of green will be limited to an organization acting, in some manner, to be an environmental steward.  In other words, each organization gets an “A” for effort and not necessarily for results.

 

The supply chain of interest is your organization’s supply chain.  For now, supply chain is limited to those that supply your organization and not your organization’s role in the greater supply chain.  In fact, in may be best, for example purposes, just to assume that the supply chain, your sample company, is a consumer-facing company making some product with many inputs such as a battery and solar-powered AM/FM radio.  To further the example, the Bill of Materials for your radio is comprised of:

 

• Speaker [sourced from Mexico];
• Solar cell [sourced from China];
• Wiring [sourced in the USA];
• Antenna [sourced in the USA];
• Analog read out [sourced from India];
• Plastic knobs [sourced from the EU];
• Plastic shells [sourced from South Korea];
• Printed circuit board [sourced from China];
• Internal Dial Sub-Assembly [sourced from Russia].

There are other various parts that are all sourced in-country at your sub-assembly plant in Mexico.  At that site, the pieces are all brought together and made into three final sub-assemblies: 

• Power sub-assembly;
• Tuning sub-assembly;
• Electronics sub-assembly.

The final assembly of your company’s radio is done at a small plant in south Texas near Houston.  There the three sub-assemblies are brought together and encased in the plastic shells. 

Your company’s market are outdoor enthusiasts including hunters and campers.  Over 60% of you company sales are from the United States and Canada.  Another 30% comes from European countries and the remaining 10% come from various other countries including Australia.  Your company does not sell directly to the consumer.  Instead it sells to retailers but you support your retailers with some customer assistance via an Internet site and a telephone help line. 

 

See the Second Part of the Blog Next Week

 

Green Procurement at www.recyclechain.com

 

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Additional Insight into Green Procurement [Strategic]

19. December 2009 by admin.

In the last blog edition, the point that tactical activities are often the result of strategic decision that was made.  Further, that some strategic decisions will be impacted by the reality of tactical implementation on a day-in-day-out basis.  Think if the interplay between strategy and tactics as a spiral who, as the journey is made, hits a certain point in which realignment of strategy and tactics are made.  A realignment at the end of each cycle.  That cycle can be based on annual, quarterly or other basis, but should be seen as required.

  

Multiple elements need to be considered for starting your Green Procurement journey.  First, of course, is the decision to start the journey.  There must be a recognized need to do this.  Usually, it will come in the form of a requirement by your organization’s customers.  Change creates cost and cost means money.  No enterprise is likely to opt for higher cots, even if it is the right thing to do, unless it has to do so.  That means government intervention, or more likely, customer driven requirements.

  

Once the decision to start the journey to effective Green Procurement is made a goal has to be identified.  Goal setting will be covered in another blog edition in the future.  For now, consider the goal of achieving effective Green Procurement to actually mean multiple goals with multiple measure for each goal.  As a procurement professional, you know already that each goal your group has is really multiple goals that are often traded off.  Going green is no different. 

  

After your goals are identified and agreed to by your organization’s management, you will have to establish a baseline that corresponds to those goals.  Establishing a baseline assessment and conducting will not be easy.  It will take time and commitment.  How to approach this key area of starting your Green Procurement journey will be covered in a future blog edition.  For now, assume that you have formed a team of people and conducted an assessment of purchasing activities and found gaps between your current state and your desired future state – your goals.  You now have to derive the path forward to move your organization to those goals, some short term and some long term, and that is the beginning of your strategy.  It is definitional and part of the Procurement picture.  As stated previously, the tactical elements should be considered more of the Purchasing activity.

  Your organization now derives the steps to close the identified gaps.  Each major step identified is a strategy.  The fact that you have implemented an assessment to derive your gaps analysis is, in itself, part of a strategy for improvement.  The assessment is the tactical implementation of that improvement strategy.  Likely candidates for your gap closure are: 

• Training personnel;
• Contract Coverage;
• Supplier Assessments;
• Amount of ‘Green’ goods purchased;
• Amount of scrap reclaimed;
• Amount of waste re-used.

Each organization will have different goals and different gaps to close and different strategies to close those gaps.  The above listed items are common gaps to anticipate.  Each of these will be briefly discussed and explored to identify the interplay between strategies for Green Procurement and how that relates to the tactics involved in Green Purchasing.  It cannot be stressed enough, the above list is only a partial and incomplete list.  Every organization will be different with different needs.

  

Training Personnel.  In closing the gap on knowledge your organization may develop one overarching strategy – to close the gap of knowledge, but also multiple detailed strategies depending on circumstances.  For example, you may have Buyers, Senior Buyers, Commodity Managers and Purchasing Staff in your organization.  Do these individuals require different knowledge and skill sets to successfully implement your organization’s green plan?  Arguably, the answer is, ‘Yes.’  Are the skills sets and knowledge cumulative or are they different?  At a Staff level, there may be only high level maintenance of the system.  At the other levels, a more hands on approach is likely required.  Does the Buyer need to know the laws and theory about going green or does the Buyer just need a set of questions?  The answer to that question is really the differentiator between Strategy and Tactics.  If the Buyer only needs to know certain questions to ask suppliers, then they are working at a tactical level.  The decision to make it that was is a strategic decision.

  

Contract Coverage.  Similarly, the decision as to whether or not your organization will value and then implement and then track the number of contracts that contain green contractual requirements, clauses, is a strategic decision.  The actual implementation of those terms is largely tactical.  Someone to write the clauses.  Someone to negotiate the clauses.  Someone to track the information and report on it.  Behind the development of the clauses and the more successful implementation of Contract Coverage is Training.  You can now begin to see that how the tactical issues are implemented will, in fact, drive strategy.  It is an iterative process.

  

Supplier Assessments.  As above, the goal first must be to go green followed by increasing the level of green, as your organization defines it, and applying measure.  A Supplier Assessment is a tool.  It is strictly a tactical item.  The decision to implement one and how it is implemented is strategic.  Strategy is partly driven by the goal.  What is the gap to close.  Is it 10% of the supplier base that needs an assessment or 90%?  The choice will tell you how many companies get the assessment, perhaps how long the assessment should be and who on your team implements.  The gaps found in the answer to those questions become part of the feedback loop into strategy.

  

Green Goods Purchased.  Just as with Supplier Assessments, setting a goal on the level of green goods purchased requires some for of definition, assessment, reporting and training.  Each of the strategic gaps your organization defines will have the same basic elements. Of goal, tool and training.  For this area, your organization needs to define a ‘green good.’  In fact, your organization may also need to assess if all Services are considered ‘green’ or not and apply a definition for goods, services, equipment and all areas of purchase.  For now, the consideration your organization has on good is the level of ‘green.’  What is the definition and therefore what is the goal. 

  

Scrap and Spoilage.  Production companies have scrap from their production lines.  There are some esoteric differences between the terms of ‘scrap’ and ‘spoilage’ in which scrap are left over remnants from the manufacturing process and spoilage is the failed production units.  For ease of conversation, we will just consider any material not sold as a Finished Good as scrap.  Does this area fall under Procurement?  Perhaps it does not but perhaps it does.  There is a great deal of tradeoff in this area between Production and Procurement that will the subject of a future blog edition.  For now, we will assume some portion Scrap falls under your organization’s responsibility and that responsibility requires your organization to efficiently get rid of scrap.  What do you do?  How do you do it?  What are your measures?  Again, there is an issue of goals, definition, tools and training.  That pattern repeats again and gain.

  Waste Streams.  Not included with the concept of Scrap are waste streams.  These could be anything from left over food scraps from the company cafeteria to chemicals that have been used in production that are no longer suitable for production.  Your company’s EHS staff is assuredly concerned with the proper disposal of waste streams.  However, is your organization?  What is the approach?  How good a job is your organization doing?  Is the current method of ‘proper’ disposal actually considered green or is it just legal?  Learning, coaching, setting expectations will lead your organization, and the EHS department as well, to higher performance.  The development of a cohesive strategy with an internal partner, development of tools, etc. are required.  The purpose of this blog edition has been to highlight the interrelationship between strategic element of Green Procurement and the tactical elements of Green Purchasing and to provide a few basic examples of how thin interrelationship should work.  More information on the various topics will be discussed in future blog editions.  The next blog edition will touch on the larger issue of the Green Supply Chain.  Procurement is the organization and Purchasing the act.  The Supply chain, let along a green one, is a theoretical construct.

www.recyclechain.com

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Additional Insight into Green Purchasing [Tactical]

15. November 2009 by admin.

As a purchasing professional you already know that much of you organization’s spend is, or should be, under contract.  That is, your group is likely split between more junior contributors, such as Buyers, and more senior contributors, such as Commodity Managers, and the spend managed by the two types of contributors is also often the split between spend under contract and not under contract.  The more senior people are often tasked with the implementation of contracts with strategic suppliers where the junior people support those contracts with funding vehicles, purchase orders, or otherwise act to purchase those things not under contract.  The ‘Tail Spend.’

As a purchasing professional, you are likely well acquainted with Spend Analysis.  For those of you who are not yet, the topic will be briefly covered.  As the name implies, Spend Analysis is the assessment of your organization’s spend.  More specifically, where is that spend occurring by functional area, by supplier or by commodity area [e.g., MRO versus Travel].  Is overall spending increasing or decreasing while unit prices or decreasing [or increasing]?  In short, Spend Analysis is a routine, regular, periodic sanity check as to where your people should spend there time.  Normally, the overall spend will be segregated accordingly to Pareto’s Law in which, most often, 20% of the suppliers will have 80% of the organization’s spend.  When graphed, the remaining portion of spend trails asymptotically to almost nothing and looks like a tail.  That’s right, the converse of Pareto’s Law is that 20% of your spend is likely spread across 80% of your suppliers.  These are the suppliers that do not necessarily warrant much activity or contracts and do not, often, rise above the line for strategic consideration.  These suppliers are often left to the junior contributors, the Buyers, for short negotiations and order placement.  High churn activities.  The tail spend is also some of the easiest green to go get.

As you know, with the high volume tail spend, we are not likely to have items being purchased that are technically sophisticated.  Instead, the spend is more likely to be addressing MRO [Maintenance, Repair and Operating] needs or for Administrative cost such as office requirements.  Within the MRO and Administrative areas there are a number of quick items one can implement for greening the company.  First, note that both areas really have to do with people and the facility [housing of the people].  Second, note that many of the elements from one organization’s MRO and Administrative needs are, likely, to be very close to any other organization’s MRO and Administrative needs.  Sure, there will be differences and some of the differences will be very salient.  In sum, though, MRO and Administrative purchases are common among most organizations. 

MRO.  Many of your organization’s facility costs will be borne in MRO.  However, as an experienced purchasing professional, you may still not be aware of all the different thing that are purchased for facility and site services.  If you are not fully versed in this area, you should look to take a ‘tour of duty’ with your site services personnel to better understand their responsibilities and the physical issues with which they deal.  For site related activities, think about your own home.  You need to clean your house [purchase of chemical cleaning agents].  You need to repair your house [perhaps to replace shingles after a storm].  You will need to clear debris in the form of lawn maintenance or, potentially, snow removal [purchase of labor and removal of clippings, etc.].  You will need to heat and cool your house [purchase of fuel and energy as well as the maintenance of machinery].  You will also need water [purchase of water and the potential treatment of water before, and possibly after, use].  As a work facility, you may also have other issues not witnessed by the average homeowner such as water run off from your facility.  Nonetheless, you can see the corollary to home ownership and have the implied import of what is required to support this area.

For example, to undertake the ‘simple’ task of lawn maintenance one would need:

• Labor;
• Machinery [such as lawn mowers, trimmers, etc.];
• Consumable elements [such as gas, oil, blades, etc.];
• Removal of use of the clipping [i.e., grass, branches, etc.].

From a purchasing organization’s point of view, to undertake one common ask, you may have multiple purchase orders with multiple suppliers.  Obviously, most organizations subcontract the entire effort to outside firms, but for illustration purposes, assume your organization purchases each element.

In the area of Administrative costs you can again use a corollary of a home office.  You purchase paper, a computer, a printer a phone, pens, pencils, staplers, etc.  At the office, these items are usually provided to everyone and most people do not think beyond that.  Their needs are met.  As a purchasing professional, you know your organization either procures these items are has a system, such as a pCard, for allowing others to procure on your behalf.  These items are all inputs and like the MRO example above, they result in an output.  For this discussion, the output is trash.  Whether it is shredded documents or documents that need to be shredded or just trash, there is also a cost, and an environmental issue, on getting rid of the materials

In both instances, the materials used are very well known to most of us.  Many readers will cut their own lawns or perhaps cut lawns for extra money as a kid.  In running a mower, you know that you need fuel for it and that means a container for the fuel.  A gas can.  You know you will need oil for moving parts or for the engine itself.  You know that you will need a replacement air filter.   What do you do with your old oil and air filters?  Do you just throw them out or do you have a disposal plan?  Likewise, when your home printer no longer works and you act to replace it.  What do you do with the old printer? 

As stated before, the act of Purchasing is Tactical and represents some easy to implement ideas for improving your organization’s environmental score.  By demonstrating a couple of common items for MRO and Administrative purchases, we can show these green alternatives.  First, realize that some baseline must be established to see how your organization can progress.  You may find your organization is doing well already.  However, for the moment, assume you are only starting on your organization’s journey to environmental stewardship.

In the example of lawn cutting, we have a few factors to consider.  Those are:

• Use of fossil fuels;
• Disposal of consumables [oil and air filters];
• Labor;
• Disposal of grass clippings and the like.

The use of Labor is arguably not a green issue.  Others may argue that it is a green issue.  For example, can more labor reduce the other issues?  If so, can this be put into the purchase decision.  The easy to implement items for this example are really the oil and air filters and assuring proper disposal of them and the disposal of grass clippings.  For example, does your organization require that the oil be disposed of according to local laws and does it seek to validate that information?  Can your organization work to assure the oil is recycled as opposed to simply thrown away?  The same with the air filters.  For the grass clippings, does this biodegradable material represent an opportunity?  Is it taken to a landfill or is it used for mulch or for compost?

With your organization’s Administrative costs, does your organization specify recycled paper?  If so, is it 100% or something less?  Does your organization allow for the removal of trash to a landfill or require an alternative solution that is more environmentally responsible?

On a tactical level, your Buyers can begin to have early green wins by being educated on the subjects for which they buy and by being empowered.  Ask yourself, do your Buyers know that when the purchase copier paper that they can purchase the environmental choice over the alternative if the cost is the same?  Is there direction?

As stated before, the tactical issues are driven from strategy and the strategy is often modified due to the reality of the available tactics.  It is a spiral of activity that will lead your organization.  In future editions of this blog, in addition to other purchasing areas, we will revisit in greater detail options within MRO and Administrative purchases.  In the next edition, we will briefly cover the Strategic portion of Green Procurement.

 

www.recyclechain.com

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Green Procurement versus Purchasing and a Green Supply Chain

6. November 2009 by admin.

As highlighted in the last edition of the Green Procurement Blog, the framework was established showing the Purchasing is really a verb that, per the functions of a purchasing organization, identifies tactical activities such as the issuance of a purchase order. The framework also established that the term Procurement really implies the organization or result of the activities of Purchasing. Procurement is truly a higher level concept and therefore a concept that implies strategy.

The need for this framework is really meant to better deal with what it means to ‘go green.’ At the time of the writing of this blog edition, there is no real consensus on what Green Purchasing or Green Procurement actually means. If one were to conduct some basic research on those two terms, one would see a wide variety of concepts and efforts. Some of the concepts and efforts can also be questioned as to if they are truly ‘green’ or not [more on that in a future edition of this blog]. By identifying the fact that there are tactical issues and activities as well as strategic issues and activities to the act of buying green, then we can establish the differences of actions and issues and better reconcile them into a holistic approach. Without a holistic approach to the concept of green buying we will not be able to find the best known methods for success.

That is part of the overall goal of this blog and website. To establish the best known methods for developing a professional approach to Green Procurement and Green Purchasing.

Tactical issues. Every organization has tactical and strategic issues with which to deal. We can all identify some of these issues readily. For a typical buying organization tactical activities may include dealing with or issuing: RFIs, RFQs, RFPs, Purchase Orders, Purchase Requisitions, SOWs, Specifications, Receiving, Inventory Management, Reporting, etc. For an organization that is improving its environmental impact, there are some obvious elements to implement. First, there should be an overall goal, or goals, be which the effort can be measured. This goal should also be followed up with Standard Operating Procedures [SOPs] and Standard Work Instructions [SWIs]. While organizational goals, SOPs and SWIs are arguably strategic in that they impact the whole organization we are considering them be a foundation for tactical activity. These tools are the tools by which direction is given to the individual in their daily work.

In that daily work, there are also some easy-to-achieve elements for improving the organization’s green score. These elements will be listed to build out a body of knowledge, but, for most professionals, these easy-to-implement concepts are likely already in place. Such concepts include: use of recycled paper only, recycling printer cartridges, reduction of copies, use of eDocuments as opposed to printed documents [e.g., RFx, etc.], use of compact fluorescent bulbs, turning off lights and other readily implemented activities.

In this short list, you may already be wondering why some such activities are listed as Green Purchasing activities. You would be right to question this. As an organization, your group really has two roles:

i.) Providing service to your internal customers;
ii.) As an internal customer to others [e.g., Site Services].

In short, you group as two sets of responsibility. First, you must adapt environmental stewardship as part of your organization’s DNA. You must walk the talk by reducing your consumption, by turning off lights, by adopting those principles you would otherwise be advocating for your whole enterprise. The second element is your group as a Service Provider to internal customers. This is the real intent of your learning to improve Green Purchasing and the in depth topic of the next blog edition.

Think of your Buyers as the front line in your initiative to go green. They are the more junior people who hourly decision will impact the cadence and viability of your green program. They are also the future generation of your senior people. Inculcate your junior people today with green knowledge and develop them into Subject Matter Experts over the long term. To develop your junior people is another aspect of your green strategy for developing your Green Procurement function. As one can see, tactic ties to strategy and back to tactic.

Bringing together the act of Green Purchasing to the goal of Green Procurement requires an iterative approach. At the strategic level, your organization will need to set high expectations for success but provide for development of the organization to reach those expectations. The goal is to be successful, or best in class, but that goal is supported by a strategy that requires learning, the development of skills, the development of new tools, the development of new criteria.

Even after your group has ‘gone green’ and developed its strategy and implemented tactical level tools and reporting, one could argue that your group will still not be well suited for the future. Sure, you may have best known approaches and really smart contributors to make it all come together, but the remaining issue is a definitional one. The issue that remains, in this nascent period of time in which Green Procurement is still truly being defined, is the issue of the Green Supply Chain.

In sum, a simple mathematical formula will suffice: A + B ≠ C. Moreover, Green Purchasing + Green Procurement do not equal a Green Supply Chain. Why? How could this be true? As will be demonstrated in future blog editions, tactics will lead to better practices. Strategy will lead to more tactics that are more aligned and efficient. However, the rudimentary element of your buying organization is that: it buys. Most buying organizations speak to the concept of a supply chain but they do not actively work to manage that supply chain. There is a built-in disincentive for suppliers to allow that. For a Green Supply Chain, much additional work, both tactical and strategic, will be necessary.

www.recyclechain.com

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Green Procurement Introduction

31. October 2009 by admin.

In 2008 the world entered into a new era. Most of us felt it. Many us of identified it. Many of us also thought it went away. The ‘it’ was the inflationary spiral of commodities such as food and fuel. As gas topped near $150 per barrel there were huge strains in the global economy. The importance of alternative fuels, less consumption, more fuel-efficient cars, solar energy and the like, in short, Green Technology, was evident to most every person.

Since the summer of 2008, the world economy has migrated from the concerns of high commodity values to the more basic question of keeping jobs, cash flow and the supply base intact due to the economic downturn that started in the fall of 2008. Popular concern, and will power, for Green Technology went down the drain with positive GDP growth. Everyone has been concerned about making it through the ‘Great Recession’ and not about what happens after the recession ends.

It is not a known fact, but a highly likely event, that the world will again, very soon, see high gas prices and other commodity prices. As procurement professionals, we all need to entertain and understand that we may be facing the same challenges in future months as we did in 2008. More so, the challenges to provide assurance of supply for our organizations will, this time, come out of the crucible of the recession and the bankruptcies, mergers and other events that have reshaped our respective supply chains. In fact, if one looks around to see the world from 2008 one would note that the price of petroleum fell and rose but the price of gold has basically stayed the same – at all time highs. The prices of copper and silver decreased, but the price of many foods remain the same from 2008 or have already moved higher. In short, the world as we have known it, is being redefined. The end result of this reshaping is not fully contemplated here, but one overriding concept shines through – the need for Green Procurement and Green Purchasing. The need for each of us to develop our green supply chains.

Why distinguish between Green Procurement and Green Purchasing? Purchasing, or procurement, has been around for a very long time, arguably hundreds of years, so why make a distinction? For me, there are two reasons to make the distinction. First, at the time of this writing, there is really no consolidated view of Green Procurement. Basic research indicates that different firms all over the world approach this concept differently and with different standards and vigor. As such, and for the purpose of helping to establish a dialogue as to what ‘green’ means, I believe there should be a distinction in Purchasing versus Procurement.

Purchasing, for the purpose of this blog, will really refer to the verb ‘to purchase.’ Purchasing truly is the activities associated with the purchase of an item and the transfer of title from one party to the other party. It is tactical in nature. The issuance of a Purchase Order, receiving against the Purchase Order, bargaining with the Supplier are examples of the act of buying. By contrast, Procurement, is more of the result of the verb. For example, we have the verb ‘govern’ meaning to govern or to rule by authority. Then we have the word ‘government’ which is the establishment use for the act of governing. Similarly, Procurement, to this author, is the establishment that conducts Purchasing. It also connotes a strategic element to it whereas Purchasing is limited to tactical measures.

In the arena of Green Procurement and Green Purchasing, one can now begin to make valuable distinctions. First, what is your organization going to do on a daily basis to promote green actions and activities? That is Green Purchasing. Second, how is your organization going to develop its supply base for environmental sustainability? What criteria will it use to correctly work to assure that environmental sustainability? These are questions of strategy and of Procurement. Without some form of distinction between the short term [tactical] and long term [strategic], it would be very difficult to appropriately explain how one can go green.

Having now established a basic framework for this blog, please come back to review the next steps in which we get into the concepts of Green Purchasing and Green Procurement in greater detail and develop the concept of the Green Supply Chain.

www.recyclechain.com

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