Procurement on YouTube: State of Green Business 2013: Supply Chain
In this week’s Procurement on YouTube post, we’re going to hear from GreenBiz and Trucost on sustainable supply chains. The conversation takes place between Joel Makower, Executive Editor of GreenBiz Group and Richard Mattison, CEO of Trucost. Trucost insn’t new to the supply management space. In 2011, Trucost and Rosslyn Analytics worked together to launch the first sustainable procurement app, and their partnership continues to this day.
One of the more interesting points that comes from this video is the idea of saving money at the expense of something else. We talk a lot about total cost of ownership, but the total cost of production is a different idea. As Mr. Mattison describes, we have learned to save costs by globalizing certain aspects of production in the supply chain to parts of the world with lower operating costs or lower environmental or human rights standards. By leaving trade-offs that go beyond our cost or acquisition or cost of ownership completely out of the decision making process, we narrow the perspective our stakeholders take with regard to that category.
In my opinion, some sustainability initiatives are marginalized for being overly focused on public relations type issues that have little to do with real operational objectives or risks. The most direct question is: is the supplier able to provide you with a lower cost because they are innovative or because they are willing to short their employees or the environment?
When we look at being part of a global supply chain, the impact of sustainability has more to do with geography or environment than shipping delays or costs. If our goal is to protect the resilience and security of our sources of supply, we need to look at the costs and risks being accepted by our suppliers. The greater the risk for them, the greater the risk for us should the cost equation change. Assuming that we can pay a supplier in another country to accept risk for us, is a short term strategy. Recognizing how much we might have to pay for the same product or service in the future is the first step in prioritizing the effort to secure a less risky source of supply.
If you have trouble playing the video below, you can view it directly on YouTube by clicking here.