Procurement is an "often overlooked area of hidden corporate value" as Rod Robinson, the Founder & CEO at ConnXus, Inc. puts it – so is its potential to change the world! In a world that is rapidly changing and evolving, procurement plays a vital role in almost every sphere and its best practices have a far-reaching impact than ever imagined.
A deeper look at the way procurement impacts our world and the many functions, can give tremendous insight on its potential to change the world.
Any sourcing and procurement professional who has had a look at the statistics will vouch for the fact that by including a broader set of suppliers in a supplier portfolio, you can increase the potential for innovation, efficiency and value. Inclusive procurement creates supply chains with positive economic, social, and environmental impact too.
For e.g., 'supplier diversity' is a well-established procurement practice in the USA. Research from the US indicates that companies which focus heavily on supplier diversity generate a 133% greater return on their buying operations. These findings alone provide a compelling case to consider the advantage of supplier diversity.
Procurement and the small business
We live in the age of start-ups and it is no secret that start-ups are disrupting multi-billion dollar industries. Governments and corporate have today realized that small and medium size enterprises (SMEs) can play a major role in closing the huge economic divide. According to the SME Finance Forum, they are crucial for growth and job creation, accounting for nearly 86% of employment opportunities in developing countries.
In countries like South Africa and the USA, a certain percentage of designated government procurement contracts or total spending is reserved or 'set aside' for a targeted category of bidders that meet the preferential qualification criteria, such as SME status.
Innovation and job creation
As innovation leads to growth, procurement professionals need to be on the lookout to identify spend categories to introduce new innovative suppliers into the supply chain. Awarding a contract to an innovative, rapidly growing company would have much greater impact on local job growth than simply sticking with the status quo.
Social and environment impact
'Sustainable procurement' is all about taking social and environmental factors into consideration alongside financial factors in making purchasing decisions. It involves looking beyond the traditional economic parameters and making decisions based on the whole life cost, the associated risks, measures of success and implications for society and the environment. This also means rising above commercial considerations to include labour rights, adverse environmental impact, gender equality and poverty eradication, through the procurement process.
Companies that have done it right
In 2000, Mayank Shah, an entrepreneur running a range of small businesses in Delhi involving in part the procurement of raw material for leading OEMs, came to London from India. He came to the UK to complete an MBA, and that led him to undertake a PhD on how immigrant ethnic-minority business entrepreneurs can be helped to grow through 'supplier diversity'. Mayank was excited at the prospect of giving these businesses a helping hand. In 2006, after a period of intensive research, he launched MSDUK (Minority Supplier Development UK Ltd), which has rapidly become a network of more than 40 purchasing organisations, 500-plus buyers and an extended community of over 3000 ethnic-minority-owned businesses, generating over £70 million worth of business transactions in just 10 years. They work together to share knowledge and build relationships to help them achieve growth. "My driving force," he says, "was not to make money, but make an impact for the greater good."
Made In A Free World (MIAFW) is an organization that has built the FRDM (forced labor risk determination & mitigation) software that locates and addresses the risk of slavery and child labour. This innovative software solution enables procurement and supply chain professionals to play a key role in creating a world free of illegal child and slave labor.
EcoVadis works towards a better world by making it easier for companies to monitor and measure environmental practices of suppliers. This helps procurement professionals build more environmentally-friendly supply chains.
Any procurement activity, be it at a global, national, regional or local level, initiates an economic, social and environmental reaction. It also reignites entrepreneurial spirit, brings innovation, sustains and creates jobs and helps the growth of local and national economy.
Thus it is clear that an "Inclusive Procurement" approach can be a catalyst when it comes to creating jobs, supporting SMEs, engaging the underrepresented business communities and reducing socio-economic inequalities, thereby changing the world.