Keys To Greener Supply Chains

April 7, 2008

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Companies are rushing to create green supply chains, basing purchasing decisions not only on the value that vendors deliver, but also on their compliance with green initiatives and other key corporate values.

Just as vendors have been required to be compliant with Sarbanes-Oxley regulations, they will soon need to achieve a certain level of compliance with environmental initiatives and other social responsibility imperatives, according to Jari Tavi, chief technology officer at Basware.

Gartner has predicted that by 2011, suppliers to global enterprises will need to prove their green credentials via an audited process to retain preferred supplier status.

Some big companies have already headed well down this road, with help from organizations like the Carbon Disclosure Project’s Supply Chain Leadership Collaboration.

Forty-one percent of companies that participated in a recent Aberdeen study have had green supply chain initiatives in place for 1-2 years, and thirty-nine percent have redesigned key parts of their supply chains to be green.

Still, according to a recent survey by Bearing Point almost two thirds of firms surveyed had taken no action to cut the environmental impact of their supply chain.

According to Basware, which provides purchase-to-pay solutions, there are several key steps to establishing green supply chains including:

Determining your organization’s purchasing strategy. Companies should first identify and prioritize the purchasing criteria that are most important to them.
Establishing good processes that are streamlined and flexible. This will enable companies to effectively implement the green policies that they are establishing. Companies can use a rules-based eProcurement system to incorporate certain criteria into the purchasing process – e.g., vendors must meet certain green standards.
Finding ways to cut down on paper. By automating your invoicing processes, you can dramatically decrease your use of paper and gain greater efficiency and environmental benefits. Invoices represent the largest number of legally required documents in a company, and for every invoice there are typically two to 10 times that amount of supporting documents, such as goods received, contracts, etc.
Making purchasing democratic. Any system you implement must be easy to use to encourage user adoption. It is also important to put purchasing systems in as many hands as possible so that it becomes an organization-wide initiative to support green suppliers and other favored vendors.
Recognizing and rewarding the true value in your supply chain. Price alone should no longer be the major factor in selecting a vendor. The value a vendor provides, such as quality and reliability, as well as adherence to corporate values, are key areas that companies should consider. Advanced eProcurement solutions enable companies to identify and manage the vendors that provide them with the most value, so they can increase business with these top-tier suppliers.
Considering other areas of compliance that you want to promote through supplier selection. This can include choosing vendors that follow your corporate values and promote social responsibility.
Selecting a solution that is robust, yet agile. A technology solution should be robust enough to provide the visibility and control that a company needs, yet flexible enough to adapt to evolving market needs or changing corporate priorities.
Thinking big, starting small. To develop a strong supply chain that reflects the beliefs of your company and provides ongoing value, focus on continuously improving your procurement processes. Many savvy organizations realize that by making small, measurable improvements they can quickly and cost-effectively achieve results on an ongoing basis as well as avoid long, costly re-engineering projects. Consider your financial value chain holistically and look for ways to implement green values throughout your Purchase-to-Pay operations.