08.06.2017  |  Supply chain

Indspark: What is the role of Procurement in the Circular Economy?

There is more to Procurement than savings. What is your approach to your suppliers in the transition to a more Circular Economy? And how do you prepare your employees for the change?

Procurement plays a key role in the transition towards the Circular Economy and must look at how they can develop Circular Procurement.

One of the key challenges in developing a structured approach to Circular Procurement is: What is the role of procurement? I was inspired by an article from Forbes magazine "The five traits of world class procurement organizations" . Especially because I am seeing some of the same traits could fit very well into the development towards Circular Procurement.

Read my blog post: Circular Thinking in procurement for more knowledge on what circular procurement is all about.

There is more to procurement than savings, an expression I am hearing quite often.The world’s leading global companies are looking to the sourcing and procurement function to do a lot more than cut the price of supplies. So what can a procurement professional do different?

According to the article new benchmarking data from The Hackett Group suggests, that the discipline needs to broaden its role in the organization, well beyond the traditional job of negotiating with suppliers.

“When you limit the value of the procurement organization to spend savings, you put that organization at risk of being unable to increase that value over time,” said Chris Sawchuk, Hackett’s global managing director and Procurement Advisory Practice leader.

These characteristics reaffirm procurements value to the organization:

  • Trusted advisors, especially on supplier knowledge: They could act as trusted advisers to top management. Also in circular procurement there is a need to view it from a strategic point of view and guide management in terms of how to attract innovation, how the market can create the circular value and how new partners and suppliers can be developed to build the circular business case. Procurement can as well provide fresh insights into key supplier data. Companies can draw on the information to create predictive analytics, providing a deeper view of markets.
  • Involving suppliers in the innovation: Suppliers as well as procurement professionals should be involved in “the innovation life cycle,” from initial idea all the way to manufacturing and continuous improvement. Innovation is happening with or without the involvement of procurement. The key question is how procurement can build competences to enable the transition.
  • Procurement can also help manage and alleviate supply-chain risk. In many cases, procurement will have a sharper view of that area than any other part the organization. And companies with a formal risk-management program generate a 25% greater return on investment in procurement, Hackett said.

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