Ask a hundred people this question and you’ll likely get over a hundred different answers, what’s more, they’d probably all be mostly right, on a finite level anyway. The thing about this is that people view this question in different ways and the reason they view the question in different ways is that they view the company or the functions within it in different ways.
One person might say that they are profitable because they make lots of sales and therefore the sales team are the most important function, another would say the same but that it’s the HR hiring function that is responsible, others that it’s product development or advertising keeping the engine charging full steam ahead and this could all be different perspectives or perceptions within the same organization.
I mostly want to address what affects external perceptions have on a business.
Public perception has been changing the course for businesses for some time already and will likely continue to do so as long as business involves people. Things like minimum wage, contracted hours, work environments, health and safety, maternity and paternity entitlements amongst countless others have already been drastically overhauled due to public perceptions. Whilst all of these things are now law, there are aspects of your business that affect public perceptions in ways you might not even know about.
Today people are very interested in environmental aspects, so they are not just scrutinizing your business but they are also keen to know about your supply chain. Do you source locally? What’s your carbon footprint? Do you source responsibly? This is where your procurement
function is so vitally important.
I recently discussed the difference between purchasing and procurement, if you missed it then a quick sum up is that purchasing is the physical act of buying goods and procurement is how you go about doing so.
Many of our resources are threatened, we all know about the obvious critical ones already, but there are many others just as likely to run out without the correct controls in place. Your procurement function should already be geared towards reducing the number of items you require, purely on a cost vs profitability, the less you need the less it costs the more money you can make. The things that you do need should be procured responsibly, ensure that your supplier isn’t running through resources at a high rate, transporting goods over long distances or not correctly disposing of by-products or waste.
One of the principles of responsible procurement is life-cycle costing, which is a technique that establishes the total costs of purchasing a product or service, from a “cradle to the grave” perspective, achieved by asking questions relating to each stage of its life cycle. Is the purchase
even necessary? What are the products made from? Under what conditions were they made? How far have they travelled? What are the packaging components? How will they be used? How will they be disposed of?
So what are the benefits of responsible procurement? We have cost savings, reputation management, increased access to capital, tax breaks and credits and it promotes innovation. It’s good for you, it’s good for business, it’s good for the planet and people in general, what else is there to say really?
Familiarize yoursef with better practices and find out How One-Time Cards Work