Source: Shuttershock

Business’ balancing act for meeting bottom-lines.

Sitting in a seminar, hosted by SIS (Swedish Standards Institute), I was treated to a presentation by Ulrika Malmin, Manager Sustainability & Energy for Nordic Choice Hotels.

She shared with us, throughout the presentation, riveting statistics, tips for implementing top-to-bottom sustainability initiatives and some entertaining stories.

(After making plates smaller on their breakfast buffet) The hotels with smaller plates reduced their food waste with 19.5 %. When implemented on all our hotels that sums up to 613 tons annually, or 1 166 tons carbon dioxide and approximately 31 billion Norwegian kroner (Nordic Choice Hotels).

One of the stories she shared was about when Nordic Choice Hotels tried out a, pilot-sustainability, experiment at one of their branch hotels. After implementing a number of successful strategies to reduce the overall environmental impact of Nordic Choice’s operations, they decided to try and make a significant change.

Knowing the impact that the meat industry, particularly read meat, has on the environment, they decided to try removing bacon as a selection on their coveted-breakfast buffet.

Source: Nordic Choice Hotels

Someone in the audience shouted out, “How did that work out?”

Malmin replied,

“Well, 3 days after the experiment began, the experiment ended. Bacon: that’s people’s bottom line. Change the size of plates, reduce the use of water and electricity in the hotel, but you cannot take away peoples bacon.”

The room broke out in laughter, as everyone commiserated in their guilty love for bacon.

But Malmin hit on a very interesting point that made me think about the operations and strategies implemented every day in global supply chains, carried out by procurement professionals.

In all parts of life, personal and business, we as human beings always have a bottom-line.

Whether it’s a quota for a sales professional, an amount of spiciness allowed on your indian food, a budget to stay under for advertising costs, a color of shirt that just doesn’t fit with your complexion, or a spend volume when purchasing raw materials.

We all have our bottom-line. And, to meet our bottom-line we must have a certain criteria, expectations and needs. Otherwise, we would never attain our goals.

So, what is a procurement professionals’ bottom-line?

Furthermore, how do they reach their goals?

Reducing TCO.

In regards to supply chain management and procurement functionalities, reducing TCO is always in the interest of procurement professionals in regards to internal company pressures.

“The total cost of ownership of the supply delivery system is the sum of all the costs associated with every activity of the supply stream. The main insight that TCO offers to the supply chain manager is the understanding that the acquisition cost is often a very small portion of the total cost of ownership” (NCSU.edu).

This kind of knowledge can put the role of purchasing into perspective for individuals who aren’t up to speed with the work of procurement professionals.

It is a constant balancing act of meeting cost and spend limits, but also providing on quality; all in the effort to increase the top-line value of the company’s overall revenue.

But that’s just the thing: What if the quality doesn’t fit the price or vice versa?

There is no one quick-fix answer to that question, but utilizing the combination of improved analytics, dynamic purchasing strategies, and a desire to collaborate within the supply chain, with flexibility, is a good place to start. (supplychaintechnologies.com)

Managing Risk.

If there were one bottom-line expectation put on procurement professionals by their respective companies, and themselves, it would have to be practicing risk management.

Risk management and the time-management of how much effort should be spent on managing, investigating and addressing supply chain risks are completely dependent on the project, collaboration and relationship within the procurement process (innovation-procurement.org).

However, one thing we can be sure about when it comes to risk management:

No risk management, no procurement.

Organizations and the very fibers that hold their ships together from sinking are based around managing risk. Procurement is, of course, only one portion of company-wide risk management, but it is one function that must have risk management implemented in centrality.

Procurement risk management must cover the scope of technological risks, organizational and societal risks, market risks, financial risks, and turbulence risk, which is a common phrase used to describe unforeseen supply chain risks.

With strong strategies, collaborative relationships, work tools (big data analytics) and competent teams, most procurement professionals are able to meet their bottom-line when it comes to risk management.

“Supplier risk management is focused on the coordinated efforts of compliance, performance, risk measurement and risk resilience across the entire supply base” (mypurchasingcenter.com)

External factors are more present in meeting procurement risk management goals. The actions of a single defective supplier in collaboration, purchasing or sourcing operation can, essentially, change the trajectory of a company’s procurement success.

For this reason, risk management is a function that is constantly being aided by 3rd party data, consultancy and other procurement-based work tools to meet company expectations.

Customer wants. Company demands.

The movement of sustainable supply chains and supply chain transparency is definitely a movement created, and escalated by the exponential explosion of technological advancements in the last 20 years.

Source: Youtube

Now, supply chain sustainability has become a bottom-line of procurement professionals in order to meet customer’s demands.

Large global corporations stand behind these shifting tides to fulfill what it is that their customers want. They put in place marketing campaigns, stay active on media channels and allow their customers a peak into their operational and strategic supply chain activities in ways that they’ve never done before.

This customer want has brought about a company need. The real pressure lies on the shoulders of procurement professionals, operationalizing these strategies that large global corporations have promised to their customer. This begs the question;

Is procurement’s bottom-line to fulfill the demands for sustainable business practices that the consumer demands, or to function by building brand attractiveness fulfilling corporate demands?

There’s nothing like a good cliffhanger question to start a discussion.

Hope we fulfilled your expectations.

Until next week.