Procurement operations are vital to building a resilient supply chain, and sourcing is critical to that success.
Disruptions, shortages and unforeseen circumstances like natural disasters and war are increasingly shaking the procurement process for companies around the world. Half of chief procurement officers say unknown risks in their supply chain are among their top threats. Neglecting ethical and environmental standards is a growing risk, too.
In order to avoid unforeseen challenges, organizations must have strategic practices in place throughout their procurement process. Many fail to do so because they don't know where to start or how to implement such practices.
Here’s how your organization can develop and adopt responsible sourcing practices — step by step.
Define policies. When we talk about accountability and domain, it is highly recommended that an organization has clear and effective policies throughout its supply chain. The policy should elaborate on tasks and assign responsibilities to each individual.
Having clearly defined policies ensures the procurement operations remain un-disrupted, and the team is ready to face any anomaly that might appear in the procurement process.
This also helps procurement teams to decide what is right and what is wrong in terms of ethical, social, and environmental concerns and enables them to make decisions without supervision.
Set clear goals. Setting the company's goals and aligning them to your daily operations ensures that your procurement team follows all the necessary steps required in responsibly sourcing the products. Therefore, the organization should have a well-defined procurement plan that can easily be implemented and achieved in daily operations.
While the goal shouldn't be too over or under-realistic, it should be able to help teams achieve the required results. Your goals might include compliance with environmental laws and targets, the removal of hazardous materials and waste in the supply chain, and the thorough vetting of suppliers for fair labor practices.
Set expectations with internal stakeholders. Internal stakeholders include people within an organization, such as employees and managers. Numerous organizations claim that keeping the expectations aligned with the internal stakeholders has proved to be successful. Clarity amongst the stakeholders throughout the procurement process has multiple benefits.
Clearly communicated goals and expectations contribute to cost reduction, faster processing time, accountability, and abiding by corporate social responsibility.
Educate suppliers. Suppliers play a critical role in every part of the product life cycle. If an organization does not have a binding and well-established relationship with suppliers, it is bound to disrupt the supply chain.
Educate your suppliers about your organization’s policies and goals so that they know about your priorities and try to deliver according to them. You should also elaborate on what your organization means by sustainability and ethical sourcing and make sure they agree to your policies by mentioning them in the supplier contract.
Monitor and measure. An organization must keep track of the entire supply chain process, including procurement. Experts suggest that for a reliable procurement strategy, it is highly recommended to keep an automated procurement process that is derived more from data rather than one's instinct.
Once the process is automated and well defined at each level of the procure-to-pay process, everything becomes streamlined. There is transparency in each step, and optimization strategies can be addressed entirely based on statistics and analytics through procurement software that boosts an overall responsible procurement process.
Technology can help you monitor your sourcing practices by providing you visibility on the traceability of materials and measuring how much of the material is used and what’s left. It can also help measure the toxicity rate of the waste and aid in ensuring that you do not waste raw materials.
Businesses must be aware of the potential consequences of their actions and take steps to mitigate any negative consequences. They must understand how their business activities and their suppliers' operations may influence people and the environment in order to source ethically.
Companies must examine several aspects of their operations (for example, labor standards, health and safety, and environmental impact), identify social and environmental hazards, and take efforts to mitigate those risks.
Defining policies, setting goals, communicating expectations, and educating suppliers can help you make sure that you are playing your part in adopting responsible sourcing practices for your procurement options.
Prasanna Rajendran is vice president at Kissflow.
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