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2008 apics conference_stanly_thelen_ sep 14

Nov 28, 2014

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Business

Presentation at the 2008 International APICS Conference in Kansas City, by Michael Stanly and Bruce Thelen.

  • 1. The Dollars and Sense ofSocially Responsible Purchasing Assessment, Strategic Prioritization, and Case Study

2. SummaryAs procurement managers we often struggle to do the right thing while at the same time do the rightthing to reduce costs. But, through socially-responsible procurement (SRP) we are afforded that veryopportunity. Furthermore, our customers, investors, and the communities in which we work aredemanding it. The Institute for Supply Management defines socially responsible procurement (SRP) as "aframework of measurable corporate policies and procedures and resulting behavior designed to benefitthe workplace and, by extensions, the individual, the organization, and the community."This is a hot-button issue with investor activists, communities, employees, and special interest groups thatmust not be ignored. More importantly, its the right thing to do. Besides, effective application of SRP willsave a company money through their procurement efforts.Pursuing this objective requires focused efforts along the dimensions of community involvement; diversityand inclusion; environmental protection; ethics and financial stewardship; human rights respect; and,health and safety.Among our basic beliefs of socially responsible procurement are that it can confer a very real competitiveadvantage to your company; aspirations must be set high because customers and investors expectationsare high; and, the time to get started is now, as your customers and investors are expecting it.Importantly, to demonstrate that its the right thing to do financially, some consideration of cost, benefit,and risk relationships must be taken into account. Doing so will definitely make SRP the right thing to dofrom everyones perspective.Research materials from the Committee on Social Responsibility of the Institute for Supply Managementwhose 2007-08 Chairis from IBMplayed a key role in the supporting content of this assessment guide. 3. The Dollars and Sense of SRPGetting Started Questions Issues to Avoid Principles Getting StartedConstructs Cost : Benefit RisksDiagnostic Strategic Options Prioritization Assessment PlanInfrastructure Organization and RolesCase Study: The IBM story 4. What are CPOs asking about socially- responsible procurement (SRP)?Getting StartedMost CPOs have a common set of questions and desire a common set of deliverables around socially-responsible procurementCore questionsDiagnostic deliverables Just what are SRP practices? Compilation of managements SRP How do we know whats right for ourobjectives business on socially-responsible procurement (SRP) initiatives? Catalog of SRP options What are credible strategic objectives in Map of SRP initiatives to overall SRP for a company such as ours, and what strategy are the elements of such an infrastructure? Preliminary workplan for What are the cost : benefit considerations for implementation phase our business? Decision on implementation of rapid How do we manage individual SRP efforts?assessment recommendations 5. What are stakeholders views of SRP?Many companies lack true agreement as to SRPs role Getting Started in the business CONCEPTUALThere are typically manyperceptions . . . Improve the Increasecommunitysafety. . . and anopportunity In flu llIncludemay exist toeth encedwide icanew ideas clarify and set Goocis lion san SRP ectMarketstrategy suitedProt mentt to the ro nadvantageCos - enviain cont tcompanys men needs Prevent abusesPr ghtsot ri ec t 6. Do we have problems we are trying to cure, or at least avoid? Getting Started There are six dimensions of SRP Prior infractions Lack of trust by community stakeholders and key Need for sustainabilitypublics Lack of environmental responsibility Pressure from advocacy groups or the mediaEnvironment Inattention to opportunities for disassembly, reuse or Community Trade union issues recycling Compliance with OSHA or other legal or regulatory Prior human rights abusesrequirements Lack of provisions for the instrumental value of People hurt or killed creating the necessary conditions of human well-being Dangerous conditions Potential exposure of human rights compromises Safety andHuman Rights Health High insurance and medical costs Boycotts due to sourcing activities Past unethical actions Lack of diversity in supplier base Potential exposure of unethical actions Lack of diversity within organization Compliance with Sarbanes-Oxley (SOX) or other Lack of diversity throughout the supply chainEthics and Financial legal or regulatory requirementsDiversity Past discriminatory practices with suppliers,Stewardship Substandard financial responsibility employees or others 7. Why are such remedial actionsimportant?Getting StartedChecklist Helps ensure that actions are lawful Ensures that all individuals are treated with dignity and Reduces risk respect Lowers total cost of operations Avoids complicity in human or employment rights abuses Facilitates strong public relations Helps recruit and retain customers Allows for equal opportunity and non-discriminatory treatment Guides managerial actions and commitments; Guides Prohibits the existence of child labor and forced laboremployee actions; Guides supplier actions Improves supplier competitiveness Fulfills legal responsibilities to ensure the health and safety of employees, customers, suppliers and Improves trust in both internal and external (suppliers, communicates in which we work customers, and others) relationships Ensures requirements to protect the environment 8. What is the single most importantissue to your company? Environment and being green Human rights around the world Diversity and minority businessdevelopment Community involvement Health and safety of workers andcustomers Ethics and financial stewardship 9. Principles of socially-responsibleprocurement (SRP)Getting StartedEnvironment Ethics and Financial StewardshipEncourage your own organization and others to be proactive in Be aware of ISMs Principles and Standards of Ethical Supply Management Conduct.examining opportunities to be environmentally responsible withinAbide by your organizations code of conduct.their supply chains either "upstream" or "downstream."Become knowledgeable of, and follow, applicable financial standards andEncourage the environmental responsibility of your suppliers. requirements.Encourage the development and diffusion of environmentallyApply sound financial practices and ensure transparency in financial dealings.friendly practices and products throughout your organization.Actively promote and practice responsible financial behavior throughout the supplychain. EnvironmentCommunityDiversityProvide support and add value to your communities and thoseProactively promote procurement from, and theof your supply chain.development of, socially diverse suppliers.Human RightsEncourage members of your supply chain to add value in their Encourage diversity within your own organization.communities. Community Proactively promote diverse employment practices throughout the supply chain.Health and SafetyPromote a safe environment for each employee in yourorganization and supply chain. (Each organization is responsiblefor defining "safe" within its organization.) Human RightsSupport the continuous development and diffusion of safetyTreat people with dignity and respect.practices throughout your organization and the supply chain.Support and respect the protection of international human rightswithin the organizations sphere of influence.Encourage your organization and its supply chains to avoidcomplicity in human or employment rights abuses. Source: Committee on Social Responsibility of the Institute for Supply Management; IBM 10. The Dollars and Sense of SRPGetting Started Questions Issues to Avoid PrinciplesConstructs Cost : Benefit RisksConstructsDiagnostic Strategic Options Prioritization Assessment PlanInfrastructure Organization and RolesCase Study: The IBM story 11. What is the business case for SRP?In economic and socio-economic terms, benefits outweigh the costs and risksConstructs CostsBenefits RisksInternal BenefitsExternal Benefits Innovation from new sources of supply such as new minority Trust and support of community groups and key public figuressuppliers or new origin countries(facilitating physical plant expansion or local tax benefits) Increased opportunities for disassembly, reuse, and recycling Enhanced reputation with suppliers and customers Consistent treatment of suppliers and customers Improve union relationships Improved fiscal management Positively influence the community Allow for equal opportunity and non-discriminatory treatment Earn respect from suppliers, customers, employees and Reduce insurance costs other stakeholders Prevention of injuries Improve public image Enhance market share, business volume and revenue Counteract negative press Become a favored supplier Reduce legal costs Improve morale of employees Reduce risk uncertainties Improve reputation to attract and retain customers and Lead supply chain partners by example; Influence supplier employeesactions Strengthen the organizations culture of trust 12. What is the business case for SRP?In economic and socio-economic terms, benefits outweigh the costs and risksConstructsCosts BenefitsRisksCost of ActionCost of Inaction Maintenance and updates of policy, codes, benchmarking, and Lost market shareother documentation Loss of suppliers, customers, and investors Program manager Negative publicity Legal counsel Compromised employee and community morale Membership fees Increased legal, insurance or other costs Training and certification Boycott of business Communications Lost opportunity to pursue governmental or certain other Hotline or help linenew business Evaluations and audits Negative attention by advocacy groups Donations and matching donations programs Negative coverage in the media Sponsorship funding for events Negative public relations events Salar