Compiled by Sarah Murray
Green Supply Chains
Are Chemicals Corroding Your Supply Chain?
Mark Wysong, author of The Nontoxic CEO: Protecting Your People, Planet and Profits through Better Chemical Management, notes that American industry spends tens of billions of dollars each year complying with government-mandated environmental health and safety (EHS) regulations. But Wysong believes that procurement organizations typically are ill-equipped to handle the challenges of managing a company's full chemical spend while also helping to ensure EHS compliance.
"It's true that purchasing organizations are set up to deal with supply-side solutions," Wysong says. "But those tend to focus on the largest chemical vendors, volumes and financial impacts. If a large company has 40,000 chemical products enterprise-wide, a supply-side solution would only be set up to look at 10 percent to 20 percent of the largest volume chemicals, say."
Meanwhile, enterprises frequently have many thousands of potentially dangerous and costly smaller chemical volumes and purchases. "We're talking about individual chemical purchases that might average from $100 to $5,000 on an individual transaction and an individual site," Wysong continues. "Those transactions don't tend to be handled through central purchasing. They don't carry enough weight to assign a purchasing manager at headquarters to deal with them."
The Problem with P-cards
Some companies have approached the chemical conundrum by mandating purchases at the local level through a purchasing card. But while these p-card transactions can lower the transaction costs of acquiring the products, they can also contribute to the broader chemical management problem.
"What it actually does is create hundreds and thousands of 'purchasing managers' who may be unknowingly adding to toxicity [and] product redundancy, and who certainly aren't getting enough aggregated volume to get price discounts," Wysong explains. "Central purchasing can't really 'see' what all these thousands of purchasing points are buying. You end up with thousands of products that are intended to do similar functions within a company, but the products are not really that similar."
But the problem is equally great from a spend management standpoint. "We find that 20 percent of the chemical products — which constitutes thousands of products from thousands of vendors — in the aggregate, represent tens of millions and hundreds of millions of dollars for some companies," Wysong says. "Better control can bring literally millions of dollars to the bottom line."
Supplier Enablement Seen Still a Top Challenge for Procurement Organizations
Supplier enablement is one of the top three challenges for procurement professionals looking to transform their procurement organizations, gain better visibility into their supplier enablement processes and supplier relationships, and increase spend under management, according to a recent report from technology consultancy Aberdeen Group.
The benchmark report, "Supplier Enablement: Connecting with Suppliers to Build Lasting Relationships," concludes that while enterprises are focused on the financial impact of enabling suppliers and how to increase the volume of automated/electronic transactions, a critical component is the broader utilization of supplier information. Nearly half of the surveyed organizations indicated that their top strategy for supplier enablement is to utilize a supplier information management system.
"Connecting suppliers to an enterprise's supply chain, known as 'enabling,' can help to ensure that companies meet customer demand by procuring categories at the right speed…for the right cost," noted Andrew Bartolini, director of global supply management research at Aberdeen Group. "Best-in-class enterprises demonstrate that supplier enablement can positively impact the business when the right technologies and practices are employed."
Does IT Matter?