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In this, the second of four guest posts, Procurement Leaders invites BSR's Tara Norton to look at the role of category managers in the process of gearing procurement towards a more sustainable, value-oriented decisions.
Acclaimed physicist Isidor Isaac Rabi was reported to have said that his path to becoming a scientist and Nobel laureate began with his mother. Every day after school, instead of asking what he had learned that day in school, she would inquire, “Did you ask a good question today?”
These are wise words, and as category managers begin their paths to better (and more sustainable) procurement, they should take this philosophy to heart: The first—and arguably most overlooked—opportunity to improve procurement decisions is to take the time to understand and challenge what the business needs. As a category manager, this may seem obvious to you, but I invite you to step back, take a deep breath, and consider asking different questions.
The first question you might ask is, “Who is my internal client?” (see far left, below image). One department may make the request, but it is likely that multiple departments will interact with the product and have different points of view on what is really needed.
Consider U.S. retailer Best Buy, which examined cost-savings opportunities for its in-store displays. The display lifecycle intersects a range of functions at Best Buy, from design and vendor management to store operations and disposal. Before coming up with solutions, they started by asking the various functions what they wanted, which led to a new understanding of the opportunities to change to more sustainable options, such as light-weighting of display components, use of recycled content, end of life recovery of electronic components, and Uue of environmentally preferable materials and techniques in transport packaging.
A second question you should consider is, “How can we rethink cost savings in this category?” Total cost of ownership is a recognized concept, and adopting this approach can lead to both sustainability and cost benefits.
Consider what Telenor did in the paint category: The category manager realized that the majority of Telenor's paint costs were related to the travel and labor associated with repainting buildings in places with harsh weather. He found that Telenor could reduce these costs by using a higher-quality, longer-lasting paint. Although there were higher up-front costs, the savings outweighed the initial expenses, and eventually, the business made the switch, resulting in both financial savings and lower environmental impact.
This leads us to the third question you should consider: “How can my business' sustainability objectives help deliver better value to internal clients?” Today, many businesses have articulated sustainability strategies and targets, and category managers would do well to examine how meeting sustainability goals can deliver better value.
Consider Diageo's approach to its agricultural supply chain, which takes into account the future prosperity of farmers. Diageo aims to increase local sourcing of raw materials that meet the company's quality standards and is increasingly looking for alternative raw materials that are more resilient and better adapted to local climates. By asking where to find materials that meet these requirements, the Guinness Ghana Breweries Limited (GGBL), which is one of Diageo's businesses, created Ruut Extra Premium Beer, whose main ingredient is cassava, one of Ghana's most abundant cash crops. This sourcing strategy supported local farmers and lowered the cost, making it more affordable for many Ghanaian customers.
Overall, there is much to be gained by seeking out new perspectives on what your business needs. There may not be a Nobel Prize in store for you, but by asking good questions, you will be more likely to make better procurement decisions.