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Balancing Act: Aligning Procurement Strategy with Overall Business Objectives

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Aligning procurement strategy with overall business objectives has become a cornerstone for achieving sustainable growth and competitiveness.

This ensures that procurement activities not only contribute to cost savings but also support broader business goals, such as risk management, innovation, and operational efficiency.

 

The Imperative of Strategic Alignment

The alignment of procurement with the overarching goals of an organization is crucial.

In 2024, procurement departments face the challenge of contributing to tasks like supply chain risk management, cost avoidance, and Environmental, Social, and Governance (ESG) initiatives.

Procurement strategies must be tailored to support the goals set by executive leadership and reflect the key objectives outlined in the organization’s annual statements.

This involves setting SMART (Specific, Measurable, Achievable, Relevant, and Time-Bound) objectives and ensuring that these objectives are specific and measurable over time, covering areas such as supply chain risk management, cost savings, business process improvements, and ESG goals.

This approach demonstrates the procurement department’s value to the organization and ensures the procurement function is in sync with the larger business strategy.

 

Harnessing Digital Transformation

Digitalization has become a pivotal factor in modern procurement strategies.

Digital procurement solutions, such as digital-tendering, heat maps, and e-catalogs, are transforming the way procurement departments handle non-critical items like C-Parts and tail spend.

These tools aid in reducing complexity, improving transparency, and enhancing the efficiency of procurement processes. For example, using digital tendering solutions can simplify the tender process, enabling procurement departments to handle a larger volume of items efficiently, leading to significant cost savings.

Similarly, digital tools like e-sourcing platforms and Robotic Process Automation (RPA) can accelerate sourcing and purchasing processes, thereby increasing the pace of procurement operations.

 

Aligning with Business Goals

Procurement must align not only with enterprise-level strategies but also with specific functional strategies such as finance, IT, and people strategies. This involves understanding the current business phase, whether it’s growth or consolidation, and aligning procurement activities to support these phases.

For instance, aligning with the IT strategy is crucial, especially during times of technological transformation in the procurement function.

Similarly, understanding the organization’s people strategy can help in planning the expansion of the procurement team in alignment with the overall business objectives.

 

The Multi-Faceted Benefits of Strategic Procurement

Strategic procurement goes beyond cost-cutting; it’s about creating value across the supply chain.

By implementing strategic procurement, businesses can achieve cost savings, improved supplier relationships, enhanced risk management, increased efficiency, innovation, and value creation, and focus on sustainability.

This multifaceted approach enables businesses to operate more effectively in complex environments, optimizing their operations and staying agile.

 

Risk Management and Innovation

Risk management and fostering innovation are critical aspects of strategic procurement.

Developing strong relationships with suppliers and involving them early in the product development process can mitigate risks such as supply chain disruptions and foster innovation by tapping into suppliers’ expertise.

This collaborative approach not only minimizes operational disruptions but also ensures timely delivery of goods or services while maintaining high-quality standards.

Strategic procurement positions organizations to stay ahead of the competition by effectively managing risks and encouraging creativity and knowledge sharing between all parties involved.

 

Implementing Strategic Procurement

Implementing strategic procurement involves assessing current processes, setting clear objectives, developing a comprehensive sourcing strategy, building strong supplier relationships, leveraging technology, and tracking performance metrics.

These steps ensure that procurement strategies are effectively aligned with business goals, leading to improved operational efficiency and long-term success.

 

Aligning procurement strategy with overall business objectives is not just a matter of operational necessity; it’s a strategic imperative that can drive significant business success.

 By embracing a holistic approach to procurement, organizations can navigate the complexities of today’s business environment, achieving cost savings, fostering innovation, and ensuring sustainable growth.

 

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Mastering Procurement in 2024: A Quarter-by-Quarter Strategic Roadmap for Success

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An effective procurement strategy is more than just a way to cut costs; it’s a crucial driver of value and innovation.

As we step into a new year, let’s explore a comprehensive, quarter-by-quarter strategic roadmap that procurement professionals can leverage to elevate their operations, align with organizational goals, and stay ahead in an ever-changing market.

 

Q1: January – March: Foundation and Planning

  1. Assessment and Goal Setting (January)
    • Perform a granular analysis of last year’s procurement data, focusing on spending patterns, supplier performance, and compliance issues.
    • Collaborate with key departments to understand their procurement needs and challenges.
    • Set Specific, Measurable, Achievable, Relevant, and Time-bound (SMART) goals that may include cost savings, process efficiency, and supplier diversity.
  2. Strategy Development (February)
    • Develop strategies tailored to different categories of procurement, considering both direct and indirect spending.
    • Incorporate risk management strategies, focusing on supply chain resilience and adaptability.
    • Plan for the integration of advanced tools like SAP Ariba, focusing on how they can enhance procurement operations.
  3. Implementation Planning (March)
    • Create detailed project plans, identifying milestones and key deliverables.
    • Develop training programs and materials for the procurement team and other involved stakeholders.
    • Establish a communication plan to keep all stakeholders informed and engaged throughout the implementation process.

Q2: April – June: Implementation and Optimization

  1. Process Implementation (April)
    • Start with a pilot program to test new processes in a controlled environment.
    • Establish feedback mechanisms to gather insights and make necessary adjustments.
    • Ensure compliance with both internal policies and external regulatory requirements.
  2. Supplier Relationship Management (May)
    • Develop a supplier segmentation strategy to identify key suppliers and manage them accordingly.
    • Initiate regular business reviews with key suppliers to discuss performance, opportunities, and challenges.
    • Look for opportunities to consolidate suppliers and negotiate better terms or bulk discounts.
  3. Performance Tracking and Optimization (June)
    • Utilize dashboards and reporting tools within SAP Ariba for real-time monitoring.
    • Conduct quarterly reviews to assess progress against goals and make adjustments as needed.
    • Foster a culture of continuous improvement, encouraging team members to suggest and implement enhancements.

Q3: July – September: Expansion and Innovation

  1. Market Analysis and Expansion (July)
    • Conduct thorough research to identify emerging trends and new market opportunities.
    • Evaluate the potential risks and benefits of expanding into new markets or product categories.
    • Plan for the integration of new suppliers, ensuring they meet the organization’s quality and compliance standards.
  2. Innovation in Procurement (August)
    • Explore emerging technologies such as IoT, robotics, and AI, assessing their potential impact on procurement processes.
    • Encourage the team to participate in industry workshops and seminars to stay abreast of the latest trends.
    • Pilot innovative procurement practices on a small scale before wider implementation.
  3. Strategic Sourcing Initiatives (September)
    • Reassess sourcing strategies to ensure they align with current market conditions and business objectives.
    • Develop partnerships with suppliers to foster innovation and improve supply chain sustainability.
    • Implement category management to optimize the procurement of goods and services across different categories.

Q4: October – December: Review and Future Planning

  1. Performance Review (October)
    • Analyze key performance indicators in detail, comparing them against industry benchmarks and historical data.
    • Solicit feedback from internal customers and suppliers to gain a 360-degree view of procurement performance.
    • Identify key learnings and areas of improvement to inform future strategies.
  2. Budget Planning and Forecasting (November)
    • Collaborate with finance and other departments to align procurement budgeting with overall business objectives.
    • Use predictive analytics to forecast future spending trends and procurement needs.
    • Plan for contingencies, ensuring flexibility in the face of market changes or unexpected challenges.
  3. Setting Goals for the Next Year (December)
    • Develop goals that not only focus on cost savings but also on value creation, sustainability, and innovation.
    • Plan for technology upgrades or implementations in the coming year.
    • Align procurement goals with the broader strategic objectives of the organization.

Comprehensive Checklist of Action Items:

  • Perform detailed procurement data analysis.
  • Set SMART procurement goals.
  • Develop category-specific strategies.
  • Plan and implement advanced procurement tools.
  • Conduct pilot programs for new processes.
  • Establish strong supplier relationships and management strategies.
  • Utilize SAP Ariba™ for performance tracking.
  • Engage in continuous process optimization.
  • Conduct market analysis for expansion.
  • Pilot innovative procurement practices.
  • Implement strategic sourcing and category management.
  • Conduct detailed performance reviews.
  • Align procurement budgeting with business objectives.
  • Set goals for technology upgrades and innovation.
  • Foster a culture of continuous improvement and learning.

 

By following this detailed roadmap and checklist, procurement teams can ensure a strategic, efficient, and value-driven approach throughout the year, ultimately contributing to the overall success and growth of the organization.

Competitive Sourcing in Procurement

By Procurement No Comments

Effective sourcing in procurement is no longer a luxury—it’s a necessity.

For finance and procurement executives, understanding the intricacies of sourcing is crucial in ensuring a stable supply chain, mitigating risks, and ultimately achieving a competitive edge.

But what exactly is sourcing in procurement, and how does it unlock value for businesses?

Understanding Sourcing in Procurement

Sourcing is the process of finding the most suitable suppliers of goods and services for a company. It’s about balancing cost, profit margins, and competitiveness. The right supplier must offer a good enough price so that the acquiring business can make a profit margin by trading or using the product in their production process, all while considering the actions of competitors.

Although often used interchangeably, sourcing and procurement are distinct but related concepts. Sourcing involves finding, vetting, and onboarding suppliers, whereas procurement deals with the steady flow of goods through the supply chain.

The Importance of a Sourcing Strategy

In order to attain a stable supply chain, it’s important to develop a proper sourcing strategy. A sourcing strategy serves several purposes:

  1. Consolidating purchasing power: A strategic approach to sourcing allows a business to negotiate for lower unit prices through bulk purchases. This can result in higher profit margins or lower selling prices, thereby increasing the competitiveness of a company’s products.
  2. Risk mitigation: By conducting research on prospective suppliers, a company can avoid suppliers who are not a strategic fit, perhaps in terms of capacity, culture, or regulatory compliance. This can protect the company from possible disruptions arising from a supplier’s non-performance.
  3. Scouring the market for opportunities: Strategic sourcing is an ongoing process of searching the market for new opportunities. New suppliers with superior product quality, more competitive prices, or even new production technology may emerge. The role of the sourcing team is to establish contact, gather intelligence, and lay the groundwork for future contracts, helping the business stay competitive in the long term.

The Sourcing Process: A Step-by-Step Guide

The sourcing process can be broken down into seven key steps:

  1. Analysis of Internal Needs: This involves determining the goods and services the company needs to acquire, as well as how much of each item is required based on past requirements and activity growth projections.
  2. Researching the Market: The organization should research the market to find potential suppliers and their offerings. This includes considering logistical costs and the risks that arise from working with each of them.
  3. Developing the Sourcing Strategy: The company comes up with a method of determining which supplier to work with, ensuring both reasonable costs and supply chain stability.
  4. Requests for Proposals and Quotes: Once potential suppliers have been identified, the company will invite them to send in their bids to supply goods or deliver a service. These proposals need to be detailed enough for the sourcing team to assess the supplier’s capacity to deliver.
  5. Negotiating Contracts: After receiving proposals, the company will shortlist suppliers they want to work with based on an objective criterion. This often involves negotiations for adjustment of certain terms.
  6. Onboarding and Integration of the Suppliers: Once a contract is signed, the supplier undergoes a formal onboarding process, which involves setting up communication lines.
  7. Assessment of Results: Sourcing is an ongoing process, and for current suppliers, the company has to monitor their performance against predetermined standards continually. This is a critical part of supplier relationship management.

Sourcing Strategies to Consider

There are several types of sourcing strategies, including near-sourcing, insourcing, global sourcing, sub-contracting, captive service operations, manufacturing, vertical integration, and joint ventures. Each comes with its own set of benefits and challenges.

For instance, near-sourcing can save on cost and time in transportation but may require a higher initial investment. Conversely, offshoring can offer cost savings but often incurs additional time and costs in transportation.

The Power of Technology in Sourcing

The use of technology can help streamline sourcing activities. From gathering information about suppliers and sending requests for proposals to performance benchmarking and assessment, digital tools have revolutionized the sourcing and procurement process.

According to a Gartner survey, 85% of businesses have already implemented, or plan to implement, digital procurement solutions in the next two years.

 

With a proper understanding of sourcing in procurement and the use of strategic sourcing practices, finance and procurement executives can unlock significant value for their organizations.

By adopting efficient sourcing strategies and leveraging the power of technology, businesses can streamline their procurement processes, reduce costs, increase competitiveness, and ultimately drive growth.

 

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5 Frustrations Procurement Professionals Will Understand

Five Frustrations Procurement Professionals Will Understand

By Procurement No Comments

Every profession comes with its frustrations, but procurement comes with its own very specific set. If you’ve been in the business for more than a minute, you’ve probably wanted to put your head through your desk on more than one occasion thanks to these special procurement nightmares.

Are You Ghosting Us?

We’ve all had it happen—after weeks of back and forth, we message a supplier an important question that will impact, well, everything else. And we wait. And wait. Days pass. Weeks. Centuries… Okay, maybe that’s a bit dramatic, but when we are relying on this one piece of feedback in particular, it can certainly feel this way. If you don’t have the answer to our question, let us know. It’s okay. Just please, please don’t put us through the special hell of ignoring us completely while we search for a solution or an answer.

How Big Are Your Shoes?

Did you promise us the moon? Well, buddy, you’ve got big shoes to fill. Unfortunately, lots of other departments (cough, cough suppliers, marketers, we’re looking at you) have their toes in their arch supports. It’s frustrating when the people we rely on to fulfill our job duties overpromise and underdeliver. It leaves us backed up and with a whole lot of explaining to do.

T Minus 10 Minutes

We get it—sometimes genius strikes at the midnight hour (and often when we are furthest away from pad and paper), but changing plans mega late in the game is really difficult in procurement. If we’ve spent months planning for everything you need to execute your brilliant plan, changing everything last minute makes us shudder. Oftentimes, it simply cannot be done on timescale that suits everyone, and we’re the ones who end up taking the flak. Give us plans and give us time and we will give you the world, though.

The Ol’ Switcheroo

We’re planners. Have we mentioned that enough? We like plans. More importantly, we like sticking to plans. So, marketers and sales folks, believe us when we say that we are looking for this one particular item, especially if we say that’s all we’re looking for. Extra especially if we’ve already said it once. Give it up on the upsell and the cross-promotion, and we’ll thank you for it. Respect our already limited time and we’ll pay it back in spades with loyalty and not-too-many emails. At least the former, as long as you keep your prices reasonable and your delivery on time.

Dripping in Gold

Speaking of upsells, do we look like we’re made of money? We can’t break the bank on every new request, every outlandish marketing idea, every new and ingenius product idea. We have to save for a rainy day and prioritize our cash flow toward the best and most efficient option. You can stop calling us names—we’re not literally always looking for the cheapest option, even if it seems that way sometimes. We’re not trying to make your life harder. We’re trying to make our dollars take us as far as we can and sometimes that means saying things like, “No, I get that it’s a more ergonomic option, but we cannot approve another (sigh) standing desk at this time.”

Did this list make you want to cry into your keyboard? You can find relief at the Premikati Marketplace where procurement is easy (and way less frustrating).

Best Practices to Open the Silo Between Accounts Payable and Procurement

3 Best Practices to Open the Silo Between Accounts Payable and Procurement

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Summary: Accounts payable and procurement work hand in hand, although many departments remain uninformed about the goals, metrics, decisions, and communications of the other. Businesses can breach data silos among the two departments by implementing Intelligent Spend Management solutions, utilizing technology and automation to its fullest, generating shared goals among the two departments, and generating a culture of effective sharing and communication. Creating flow between AP and procurement reduces risk, opens usable capital, increases business agility, and supports better supplier relationship management.

Why Is Alignment Between AP And Procurement Important?

Accounts payable and procurement can be seen like the left and right hands of an organization. Unfortunately, in many businesses, neither hand knows what the other is doing—even if they both report to the same person—which results in unnecessary fumbling, inefficiency, and lost profits. In an ideal scenario, finance, procurement, and supply chain all need to work closely together, sharing data and common goals for the greater good.

Procurement and accounts payable are an obvious place to begin when breaking down information silos because procurement is tasked with buying goods and services while accounts payable is responsible for paying for those same goods and services. Procurement and payment need to be combined under one reasonable, cohesive procure-to-pay (P2P) strategy in order for both “hands” to bring the best value to an organization.

A cohesive P2P strategy offers the following benefits to businesses:

  • Positive working capital and achievable early payment discounts generated through realistic timelines between both departments
  • Sourcing that involves more depth and insight than procurement can achieve on its own
  • Better spend analytics based on data for more accurate cash flow predictions
  • Better supplier relationship management via sharing and communicating goals, updates, and information about interactions
  • Contract negotiation with suppliers that offers greater flexibility

Intelligent Spend Management: A Strong Plus

Intelligent Spend Management enables businesses to manage every source of spending across every category while aggregating spend data under a single, unified view.

SAP Ariba, the basis for our Premikati Marketplace, is a strong proponent and deliverer of Intelligent Spend Management solutions. Focus and agility are byproducts of “[understanding and using] data, transforming it from information into intelligence, and intelligence into value.” Intelligent Spend Management allows businesses to mitigate risks, collaborate effectively, automate their source-to-pay processes, and engage in rapid acceleration—toward fast-changing customer desires and new business models and revenue streams alike.

As it applies to AP and procurement, Intelligent Spend Management helps teams communicate and prioritize better, uncover hidden spend, and collaborate more effectively with suppliers and business partners.

Actionable Ways to Open the Silo Between Accounts Payable and Procurement

In order for a business to begin the process of integrating accounts payable and procurement in such a way to mitigate risks and unneeded spending, it must begin with a plan. The following are starting points for businesses to create a path toward open, effective procedures between AP and procurement:

Agree on Common Goals

It doesn’t how hard either side is working if they are each working toward conflicting goals. Both departments should agree on common metrics and goals that both work toward throughout the month and subsequently report to relevant executives. Cash flow goals should be shared and purchasing decisions made in accordance with these goals. One shared goal which can be acted upon immediately is to create and utilize a combined, up-to-date vendor master list that is devoid of duplicates and is clear about who maintains what responsibilities in regards to the list.

Use Technology To Its Fullest

Technology is the cornerstone of adaptable, agile businesses in the modern day. Not only can technology help mitigate risk through automated processes which reduce errors and fraud, it can also be a key factor in breaking down communication barriers between departments which previously maintained their own separate records and metrics. If both AP and procurement maintain data through technological means, then that data can be more effectively combined and utilized to make better business decisions and predictions.

One immediate way to opt in to technology to support effective processes between procurement and accounts payable is via adopting and Intelligent Spend Management system. Because data will be able to be viewed from a centralized dashboard, insights and intelligence quickly follow. Having this form of system in place can also guide other processes between departments such as which key metrics to prioritize.

Other disruptive technologies may also be of use during AP / procurement crossovers. SAP Ariba, basis of the Premikati Marketplace, utilizes the high-tech trifecta of AI, machine learning, and blockchain. These sorts of technologies can assist with safe record-keeping, automation, and predictive analytics.

Create A Culture of Sharing

Information hoarding is an ineffective approach in today’s business culture. Instead, opt for a sharing culture that understands boundaries—sharing at length, but efficiently.  In conjunction with creating shared goals, each department should also share information related to their key metrics and goals, their progress, and offer solutions surrounding how the two departments can work together for overall success.

AP and procurement should share relevant information regarding invoices—such as unpaid, late invoices—and recent interactions with suppliers. Similarly, any vendor info which has changed should be made promptly available to employees in both departments, perhaps through the combined vendor list. In terms of efficiency, an action businesses can take right away is to set aside a time for sharing and questions between the two departments. If questions can be saved for the end of the workday, then constant interruptions are less likely to throw off the flow of each side’s work, yet needed questions can be answered to better inform decision-making and priorities, offering fast adaptability on a day-to-day scale.

An Intelligent Spend Management system is one way to combine effective, efficient sharing culture with technology for easily-accessible data for all.

Feel free to share your best practices or pain points below…we love to hear comments from those in the field!

top 3 procurement strategies for SMBs

Top Three Procurement Strategies for SMBs

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For SMBs, procurement can be the largest area of spending, often representing 50 percent of sales revenue. For companies looking to send value to the bottom line rather than take it away, optimizing the procurement workflow can help.

In many cases, SMBs tend to focus more on overall operations rather than more specific processes. However, targeting areas like procurement for process improvement can help accomplish goals that go beyond dollars and cents – it can also improve productivity throughout the organization, leading to greater efficiency from end-to-end.

Build bottom-line value with these procurement strategies

To help you chart a new, more profitable course forward, here are our top strategies in procurement for SMBs:

1.  Choose your supplier partnerships more strategically

If you have several buyers who tend to purchase from a range of different vendors, think about consolidating that spending into a smaller pool. Purchasing from fewer suppliers will help to streamline resources from many angles as it will reduce time you spend on sourcing and help you avoid excessive delivery fees.

Additionally, the more buying power you have with a specific vendor, the better the relationship may become over time, and it may be possible to negotiate bulk discounts based on the volume of business you do with them – a mutually beneficial situation that you could work to your advantage.

2.  Optimize procurement processes

Within smaller business operations, there is often less attention paid to purchasing from department to department. There may not be dedicated personnel or a finance department to oversee PO’s, so purchasing is done ad hoc without much regard to the availability of funds, pacing, or cost of sale implications.

In the enterprise, these functions are consolidated, and often evaluated and substantiated by technology and data, providing buyers with oversight and the tools they need to make informed decisions. Without this valuable financial data, a company runs the risk of overextending themselves by over-purchasing or overspending on the items they need.

Implementing a system to govern and consolidate all spending decisions is critical to achieving this goal, but if done manually, with spreadsheets and through other methods, error does occur, and an inordinate amount of time is spent in managing the process. An appropriate technology solution should be applied, as it will provide immediate value, reduce error, and allow employees to focus on higher-value tasks.

3.  Apply the latest procurement technology and tools

Today, SMBs have the advantage of being able to access enterprise-grade procurement technology and tools, giving them the same financial and strategic advantages as major industry players.

Procurement technology has many advantages, including:

  • Cloud-based systems are easy to manage and always available, assuring real-time insight into procurement activities.
  • The analytics delivered by procurement technology provides stakeholders with the ability to make data-driven decisions and optimize costs, improve processes, and streamline reporting workflows.
  • An e-procurement strategy removes silos within the organization, enabling collaboration between departments and consolidating efforts, resulting in cost reduction and process improvement.
  • Automation delivers great value to SMBs as repetitive tasks are accomplished efficiently and accurately, eliminating errors and improving the quality and voracity of internal data. Many SMBs spend an inordinate amount of time backtracking to find mistakes and often overlook small errors that add up over time. Automating these baseline processes improves accuracy and allows employees to devote their time to advancing business goals.
  • Another great advantage to applying an e-procurement strategy is the ability to predict trends in spending. Analytics deliver a clear picture of spending patterns and help the organization prepare for what’s to come based on actual data rather than just conjecture and instinct. Companies can be better prepared for the future and will be able to provide leadership with more accurate projections on the road ahead.
  • E-procurement also enables better risk management as it reduces overspending, redundancy, and costly errors in administration.
  • Compliance, whether related to company policy or regulatory mandates, is easily managed with e-procurement. If this is a priority for your business, an e-procurement solution will support your needs.

Premikati Marketplace: Procurement Solutions for SMBs

Premikati Marketplace runs on the SAP Ariba™ Buying and Invoicing platform. Developed specifically with SMBs in mind, it provides a way for small-to-medium sized companies to take advantage of enterprise-grade procurement strategies that will help them grow and scale.

To learn more about what Premikati Marketplace can do for your organization, visit www.premikati.com/marketplace or call us directly to get started.

Top 6 Ways to Engage Sustainable Sourcing for SMBs

Top 6 Ways to Engage Sustainable Sourcing for SMBs

By Procurement No Comments

Summary: Sustainable sourcing has become a consumer and investor expectation which impacts businesses not only morally and ethically, but alters customer loyalty, price point, risk level, and more. Because SMBs make up the vast majority of global businesses, the combined global impact of ethical choices can alter the course of history as long as businesses take steps toward responsible procurement environmentally, socially, and economically.

Sustainable sourcing is at the forefront of planning efforts for many businesses as climate change and consumer expectations offer a clearer and clearer call to action. As SAP Ariba Live and the coordinating Sustainability Summitfast approach, businesses of all sizes prepare to learn how to further augment and optimize their approach to sustainability in the supply chain.

There are benefits to businesses outside of morality and ethics as it pertains to responsible procurement and sustainable sourcing.

On the financial front, sustainable product sales have risen nearly 20% since 2014 and sustainable fast-moving consumer goods (FMCG) have a CAGR of 3.5%, almost four times that of conventional products. Another point for the bottom line—Millennials and Gen Z are more inclined to buy sustainable and ethical products devoid of harmful chemicals and which support social responsibility, with 73% and 72% respectively willing to pay additional costs for products that meet these requirements, according to Nielsen. Additional customer loyalty and increased prices can make a major difference to an SMB’s growth. And it’s not just consumers who expect transparency and sustainability—investors are increasingly on the lookout for responsible practices within the companies they choose to support.

Government initiatives are another reason to pursue sustainable sourcing, because many places around the globe offer incentives for responsible action. Similarly, avoidance of legal trouble and hefty fines is a byproduct of ethical decision-making in the procurement process. Because many unsavory practices hide in complex supply chains, opting for transparent sourcing platforms can help SMBs avoid unexpected compliance issues.

SAP Ariba, through their Procure With a Purpose campaign, supports the full list of UN Sustainable Development Goals (SDGs) which include basic rights and expectations such as access to clean water and food, elimination of poverty, gender equality, education, and responsible consumption and production. In order to achieve these goals and many others along similar lines, SAP Ariba focuses on three pillars of sustainability: social, economic, and environmental—all of which can guide the process for SMBs who seek to practice sustainable sourcing.

Society

Social sustainability refers to human and workplace rights, while social ethicality often refers to supplier diversity and similar measures. According to the speaker at the 2019 Sustainability Summit, Givewith CEO Paul Polizzotto:

“Society is demanding businesses change the way they operate by acting more sustainably and with greater transparency – all while generating a positive impact on the world. There’s an incredible opportunity for procurement teams to amplify their organization’s impact, not only by prioritizing ethical suppliers butby sourcing from suppliers who add social impact sales incentives into these transactions to drive even greater change.”

  1. Transparency, not slavery

With more than 40 million slaves worldwide, it is important to expect transparency from all members of a supply chain, all the way to the original source. Transparency is the enemy of unsavory practices such as slave labor and is an important first step in any sustainable supply chain. SMBs can require risk assessments and reports on working conditions, even through trusted third parties, in order to reduce the chance that slave labor is part of any step in the creation of their products.

  1. Engage diversity

By working with historically underutilized businesses (HUBs) and minority-owned businesses, SMBs are able to opt for ethical business decisions that help the world economy as a whole.

Economy

Approximately 50% of the world’s population lives on less than $2 per day. By supporting sustainable practices in businesses who pay workers a living wage, SMBs can impact poverty worldwide.

  1. Support economic growth in underserved communities

By choosing procurement processes which support indigenous workers and other underserved communities, wealth is spread and business grows symbiotically in tandem with one another. Single origin products can help ensure fair exchange of funds for exports from indigenous regions, but this is only one method to engage this practice.

  1. Verify risk levels for fair labor practices

Because poverty is an issue that spans the globe, SMBs can use a risk management platform to help ensure they do not support forced labor or child labor and to verify that all workers receive a decent, sustainable, living wage for the time they put in—and that the hours expected of them are similarly sane. The Ariba Network and platforms built upon it such as the Premikati Marketplaceintegrate supplier risk management software to avoid pitfalls such as this.

Environment

We often hear of large enterprises which take on environmental issues. For example, L’Oreal and McDonalds have opted to nix deforestation from their commodity supply chains. Similarly, Danone—maker of Evian water—has been developing a new, more sustainable and recyclable makeup for plastic bottles to help eliminate the pollution crisis. However, SMBs can have a substantial impact on the environment by simply choosing to work only with sustainable suppliers.

  1. Cut out toxins

Choose suppliers who elect not to use toxic and ozone-depleting substances in order to reduce pollution as well as hazards to workers and even consumers. As demand wanes, suppliers will be forced to change their processes—and those who were ethical and responsible from the outset are rewarded.

  1. Say “no” to waste

In a world overrun by pollution on land and at sea, sustainability as it pertains to wasteis a must. Ways SMBs can apply this to their own sustainable procurement process include choosing suppliers who:

  • Limit unnecessary packaging materials
  • Create recyclable products
  • Utilize recycled products in the creation of their own products
  • Create reusable products
  • Offer products which can be repaired rather than thrown away
  • Use environmentally-friendly, renewable materials in production such as bamboo

Considering SMBs with less than 500 employees account for 99.7%of employers in the US, the power held by businesses of this size is formidable. By functioning in unison, SMBs have immense sway over the state of both business and the world we live in. It is through this majority power share that GPO platforms such as ourPremikati Marketplace—powered by SAP Ariba—offer a truly actionable opportunity for SMBs to engage sustainable sourcing practices and become stewards of our future, all the while saving time and money.

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