September 19, 2007

Top 10 Tips For Greening The Supply Chain

With companies eager to adapt to a new era of customer needs, regulations and competitive realities, green sourcing has become tantamount to ensuring that goods and services maintain high environmental standards while maximizing revenue potential, according to Ariba, which has released a list of ten tips designed to help global organizations jump start their efforts and deliver results.

The real green sourcing test will be when companies face decisions that pit good environmentalism against pure financial self-interest, Supply Chain Digest reports. The jury is still out, for example, as to whether consumers will really pay more for products touted as environmentally friendly -? or at least, how much more they will be willing to spend.The question becomes even dicier, SC Digest writes, in a business-to-business relationship. If a supplier offers a more environmentally-friendly product that costs more than the standard product, what framework will companies use to make that call?
Want an example of how the B2B world is different than B2C when it comes to green? The Wall Street Journal last week reported that some GE Ecomagination customers are telling Jeffrey Immelt to get off the bandwagon and “Just shut up and sell us stuff.”The bottom line is that it’s absolutely critical for companies to fully understand this “green premium.”
Here are Ariba’s top 10 tips for greening the supply chain:
1. Know where you stand: Understanding your organization’s spend, supply chain and consumption patterns is the first step because you can’t affect what you can’t see. A simple assessment of your organization’s “green” status of a more detailed carbon footprint study will provide you with the information you need to determine how well your supply chain is positioned for the changes on the horizon.

2. Have a plan: Once you know where you stand, create a set of goals and, even more important, metrics that can be used to track progress against these goals.

3. Have a single point of accountability: Many organizations have appointed “chief sustainability officers” to oversee their green efforts. The appropriateness of this specific position will depend on your organization and industry, but the key is to have a single point of accountability empowered to effect change.

4. Market your progress internally and externally: Half the battle is getting the word out and bringing people on board. Be sure to communicate to all levels why green efforts are being undertaken, what will be measured and how the company is going to get there.

5. Incorporate “green” into your existing sourcing and procurement processes: Sourcing and procurement have always been about more than just price. Be sure to include green criteria in your requests for proposals (RFPs) and create clear metrics for measuring them as part of supplier performance management.

6. Communicate your goals and standards to your supplier community: By setting clear expectations of your supply base during the sourcing process and proactively monitoring compliance/progress, you can quickly improve your sustainability performance. Outline what suppliers will be expected to provide and how they will be measured to ensure that they are delivering and putting in place the processes and procedures to drive compliance.

7. Stay up-to-date with global regulations: Environmental regulations such as the Restriction of Hazardous Substances (RoHS) directive in the European Union will increasingly affect how your supply chain functions regardless of your location. You need a method for keeping up with changes in this rapidly evolving area to avoid costly mistakes in your supply chain.

8. Keep up with new materials, technologies and processes: Significant work is being done to develop new approaches that can cost-effectively address the challenges and opportunities that green initiatives present. Stay up-to-date in your industry, participate in trade groups and do whatever it takes to maintain your competitive advantage and not be left behind.

9. Do the “easy stuff” first: You don’t need to overhaul your supply chain to see gains from sustainability efforts. Instead, identify “quick wins” such as simple improvements in energy efficiency that can both deliver bottom-line results and kick-start your green initiative.

10. Get everyone involved: As with any broad initiative, it is nearly impossible for just one functional area to have an impact on the entire organization through its efforts alone. To be effective, get Engineering, Design, Sales, Finance, Operations and everyone else involved.

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