Traditionally, Procurement has focused on optimizing and reducing costs, but in a more unstable world it is also necessary to focus on stable supply chains and not least to be a sustainable and green organization. Here, Procurement has taken on a new important role, which makes different demands than before.

Roughly speaking, you can say that sustainable procurement is based on three pillars:

1. 1. • The first pillar is efficient procurement. It can, for example, be calculated based on TCO - here it is measured whether the purchase is cost-optimized based on the traditional objectives that the total cost must be as low as possible.
      • The second pillar is green procurement, where you can, for example, start from the Science Based Target in relation to lowering CO2 emissions based on environmental and climate considerations.
      • And finally the social dimension, where you can, for example, take the UN Global Compact as a starting point. This dimension is the CSR dimension where the company, among other things, ensure that the social conditions for its employees, that the subcontractors ensure proper conditions for their employees, that no child labor is used, etc.

The requirements for sustainability are diverse and the expectations come from many places:

• • The consumer: Today, consumers are much more aware of where things come from. As procurement is responsible for the supply chain and suppliers, sustainability awareness in procurement and being on top of it is more important than ever.
  • Society: Society expects you to act in an ethical and sustainable manner, otherwise your company's reputation may be damaged.
  • Investors: Investors are increasingly focused on green investments and ESG. You will be judged based on your strategy in the long run.
  • The employees: Employee retention and recruitment are more important than ever and employees are highly interested in working for companies they can be proud of and which behave in an ethical and sustainable manner. Many employees today are largely purpose driven.
  • Regulations and laws, e.g. is the government's strategy for green public procurement:

    "The public purchases must contribute to achieving the national goal of reducing the emission of greenhouse gases by 70 percent in 2030."

    Source: Oes.dk

     

This new role in the Procurement Department is important and requires new skills. It requires insight into models and legislation in both the public and private sectors. As this area is new territory where there are not yet common KPIs and standards, it is difficult to navigate. But one thing is certain, doing nothing is not the way forward. You have to jump out into this new area and "lay asphalt while driving". In addition, it is a good idea to see and learn from others, so sharing knowledge in this area is paramount.

First, you want to do the right thing, but it also comes from demands from your stakeholders like:

• • Consumer awareness, today consumers are much more aware of where things come from. Since procurement is responsible for the supply chain and the vendors, sustainability awareness in procurement and being on top of that is more important than ever.
  • Expectations from society, society expect that you act in an ethical and sustainable manner otherwise your company’s reputation can be damaged.
  • Investor focus, investors are more and more focused on green investments and ESG.
  • Employee retention and recruiting, employees are interested in working in companies they can be proud of, behaving in an ethical and sustainable way.
  • Regulations and laws.

If procurement excels on the sustainability agenda, then the department also gets more muscle power and relevance for the company to be represented on C-level.

LEAN was originally used to optimize the production processes in Toyota in the 1950s, but is today a recognized tool for optimizing all kinds of processes and value creation in companies, not least in procurement.

​The reason why LEAN is a good tool to use when working with the processes in the organization is that it is a recognized and thoroughly tested method apparatus that is at the same time easy to use. LEAN provides a good picture of where the organization is at present and what it takes to remove what does not create value in the processes.

​LEAN consists of five basic principles. See the figure below:

With the methods from LEAN thinking, you can analyze your way to best practice, and thus you get the opportunity to identify the non-value-creating processes - also called waste. When identifying waste, it is clear which factors hinder an optimized value chain. An optimized value chain is ultimately about being as cost-effective and thus as competitive as possible.

Eliminate waste = Become more cost effective = Become more competitive

Within LEAN, they operate with eight different types of waste. Some waste types are e.g. overproduction: and waiting time. Overproduction is, for example, when activities are carried out before they are actually needed, while waiting time can be, for example, an employee who waits between processes and therefore is not able to work efficiently in flow.

​Studies show that strategic buyers spend less than 40% of their time in their core areas. The rest of the time is spent on administration etc.

By utilizing the methods in LEAN thinking within procurement, it is possible to use the visibility identified in the supply chain for e.g. to lower inventories, optimize processes and make the best possible use of employee time, so that the time is instead spent on value-creating processes.

You have the opportunity to learn more about how your organization can work with LEAN to promote value-creating processes on a course with us in Strategic Procurement.

Procurement departments in most companies today are responsible for great value creation. The value emerges through many different initiatives and not just from the traditional saving part. These can be areas such as process optimization, better supplier collaboration, optimized specifications in production, cost avoidance, better payment conditions, etc.

Despite the value creation and the increased importance that Procurement represents for the organizations, Procurement often does not get much speaking time and is in most companies not even represented at C-level. This is often due to the fact that value creation is not made visible enough to management.

If Procurement wants speaking time at C-level, the good results must be made more visible, as success is most often created through the good results. A good way to do this is by creating a solid Dashboard that is aligned with the company's overall strategy. The dashboard must contain relevant KPIs for the company.

Example of Dashboard

This not only achieves savings and efficiencies, but also an understanding in the organization and management of the values ​​that are created and that benefit the entire organization.

​You now have the opportunity to learn more about how you can create your company's unique Dashboard on the course Strategic Procurement.

Here you will learn how to work professionally to make Procurements performance visible at C-level level. This is done through a process where the following exciting and relevant areas, among others is part of the course:

• • How to build a robust pipeline that creates solid results?
  • How can the results be measured?
  • Agreement with management on KPIs and how they are measured
  • Building a Procurement Dashboard
  • Monitoring and managing KPIs