Donald Klock, professor of supply chain management at Rutgers Business School, is a big believer in implementing proactive business processes in procurement. The rewards for a global company include lower costs, improved sustainability and heightened brand reputation. "People have to realize that the procurement group has the biggest risk, by dealing with suppliers all over the world," he says. "They have to have good business processes in place to minimize that." Klock is fond of quoting Warren Buffett: "It takes 20 years to build a reputation, and five minutes to lose it." A truly proactive strategy will include a rigorous supplier-certification program, coupled with the ability to react instantly to unanticipated problems.
Sustainability is fast becoming another critical concern in global supply-chain management, Klock says. Customers, non-governmental organizations and other groups are applying more and more pressure on businesses to be environmentally responsible. Colgate-Palmolive Co. has a 65-page document devoted solely to the issue of sustainability, he notes. And it's not just about sourcing; Colgate's policy stresses the themes of "planet, people and performance." For Colgate, the effort resulted in a 40-percent reduction in energy between 2002 and 2009, and a 22-percent drop in the company's greenhouse gas emissions.
By focusing on sustainability, companies can mine new business opportunities, according to Klock. He cites the case of Nestle, whose search for sources of organic coffee in Africa led to the company working directly with local farmers to meet that goal. In the process, Nestle helped its own brand to grow.
To view video in its entirety, click here
Timely, incisive articles delivered directly to your inbox.