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.

[1] www.recyclechain.com

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