It’s only recently that companies have realized the power that product and procurement teams have in solving the challenge of decarbonization. Early approaches have been to build small corporate sustainability teams dedicated to collecting and reporting data. However, their lack of departmental expertise and integration meant that there remained a disconnect between the problem and the solution. The next generation of approaches has been to embed those very experts within product and procurement teams to work alongside them in identifying, evaluating, and implementing opportunities to decarbonize – what some people call “co-creation”.
While this approach is a massive improvement, as is evident in the amount of action (some good, some counterproductive) we are seeing in the business world today, it still has some challenges preventing the explosion of decarbonization activities across our value chains. We’ve gathered the three biggest challenges that procurement teams are currently facing and how they can overcome them.
Changing suppliers is hard
Assuming you magically know the difference in impacts for a product sourced from two different suppliers (and this is not a trivial problem), switching them is sometimes a much bigger challenge. Some companies we have spoken with have been buying from the same supplier for decades. Especially in spaces where compliance and the approval of certain parts or materials play a crucial role, companies like to stay with the one process they have successfully set up and gotten certified. Still, with more disruptions, geopolitics, regulations, and a movement towards more sustainable production, locations, and suppliers, procurement professionals have no other option than to take on the challenge. When changing suppliers is not an option, developing deep collaborations around sustainability with the suppliers is the only alternative. It is hard and time-consuming, but efforts in the Automotive industry have proven that this approach works when there is a financial model behind the initiatives.
The deep tiers of supply chains are a mystery
While insights into tier 1 of the supply chain are hard to get for many procurement teams, the deeper tiers are a mystery for most companies. Take buying a printed wiring board (PCB) as an example. The biggest impact in its supply chain stems from the chip that is soldered onto the wiring board. While you might know some information about the PCB manufacturer, it is extremely hard to have any information about the chip maker. Here you need to get creative and use proxy information to estimate impacts to understand the main drivers and opportunities as a first step. Focused data collection programs supported by your tier 1 suppliers can help get more granularity and accuracy from deeper in the supply chain. Industry-wide programs for compliance are a good place to start for such information. When switching to suppliers that take accountability for sustainability within their supply chains is not an option, collaboration between design teams and your suppliers is the next step in implementing changes.
Lack of actionable data for non-experts
Procurement teams today lack easy access to actionable and accurate data. Knowing the average impact of steel per kilogram does not help if the sourcing action is for an assembly – procurement folks are not carbon accounting experts. Understanding variability across suppliers and geographies at the component level is crucial to evaluate if there is an opportunity for optimization in the first place. Going further, making tradeoffs requires understanding the implications of other buying criteria like quality, costs, risks, and compliance. Without this data, no decision can be made. For procurement teams to integrate sustainability into their processes naturally, carbon must become just another number on their spreadsheet, next to price, risk, and all the other categories procurement teams go through when choosing a supplier.
Actionable data and supplier-specific insights with Makersite
Makersite enables procurement professionals to solve two of these three problems – creating more transparency into deeper tiers and quantifying the impacts of changes to these supply chains across crucial buying criteria. Our product lifecycle intelligence platform maps a company’s product data against more than 140 external databases, producing a digital twin of the product and its supply chain – from cradle to grave. This way, procurement teams can not only see how their product performs across more than 40 categories, including environmental, cost, risk, and compliance categories but also how changes to the material and the supply chain would affect them. With our external databases, Makersite covers more than 35% of the world’s supply chains with a supplier-specific approach, and integrated data collection tools can be used for more targeted transparency.
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About the Author
Neil D’Souza is the CEO and founder of Makersite, a company that uses AI, data, and apps to power sustainable product and supply chain decisions at scale. Formerly CTO at Thinkstep AG, Neil started his career helping companies understand how what you make and where you buy have an impact on issues such as cost, compliance, risk, and sustainability. Working with over 200 companies across multiple sectors, Neil found that the approaches we are using would never scale to the problem at hand. He solved that scaling problem by creating Makersite in 2018.