“Impact sourcing results in a more engaged and motivated workforce for companies, and enables them to increase their global competitiveness.” — The Rockefeller Foundation
You need the work done and there are countries that are disadvantaged, war-torn or underemployed that have motivated, educated workers who can perform the work you need. It truly is the correct choice. Why continue outsourcing to developed countries or countries in which the vast majority of people already have access to the middle class?
Did you know that outsourcing to India is the number one reason it now has a thriving middle class? Are you aware that through outsourcing an entire generation was lifted out of poverty in both China and India? Do you know that when you outsource to a country, it can change the trajectory of people’s lives? In a 2003 speech, Anne Krueger, First Deputy Managing Director of the IMF stated that the impacts of globalization have benefited both India and China by lifting millions of people out of poverty since 1980 and putting tens of millions of people firmly into the middle class. In addition, China has seen their extreme poverty rate fall from 84 percent to about 10 percent largely because of trade, reports the Economist.
In previous blogs, SIG has covered the basic concept of sustainability, including an overview of its various dimensions. In this post, I will touch on the role that sourcing professionals can have in meeting corporate sustainability goals.
Why should sourcing have a role?
Sourcing is uniquely positioned to contribute to meeting a corporation's sustainability goals because sourcing typically has expertise in:
Creating alignment to corporate goals
Building frameworks to measure success
Researching market conditions and supplier capabilities
Conducting strategic negotiations
Designing innovative methods for value creation
Ranking the priorities of stakeholders with supplier offerings
Identifying risk and mitigating responsibly
The reduction in costs after implementing a sustainability program can exceed the costs of implementation – in other words, you’re spending money up front but in the long run, you save more than you spend. For example, if an organization were to target the spend category of corporate services and facilities management (FM), capital may be invested in working with a supplier to install a new system that reduces energy consumption at the company's North American headquarters, but in the long run, the reduction in energy costs saves the company money – which of course, can then be reinvested.
In this example, procurement and sourcing are uniquely positioned to make this happen. Most likely Sourcing negotiated the original FM contract, understands the innovative capabilities of suppliers, has heard many recent pitches on new products, and is adept at performing the analysis that proves an investment can have a significant return in hard costs, and even soft costs.
Mary Zampino, Senior Director of Global Sourcing Intelligence
In my time working in the sourcing sphere I have become passionate about ethical sourcing. Mexico, where I have lived for nearly eight years, is where many companies source cheap, nearshore labor and is a resource for bilingual, cost-saving talent. I have witnessed unethical sourcing practices in my time here and I am always looking to educate myself and others on the benefits of ethical sourcing. As companies chase better costs to remain viable, the possibility of building a supply chain with poor ethical practices increases. Ensuring ethical sourcing practices in your supply chain can be labor intensive but the benefits are immense.
According to the Chartered Institute of Purchasing & Supply (CIPS), ethical sourcing is the process of ensuring the products being sourced are obtained in a responsible and sustainable way, that the workers involved in making them are safe and treated fairly and that environmental and social impacts are taken into consideration during the sourcing process. Ethical sourcing also means the procurement process respects international standards against criminal conduct and human rights abuses and responds to these issues immediately if identified.
The relationship between buyers and providers can be a tricky one, especially when operating across multiple continents. Speaking during a podcast interview with Dawn Tiura, Sean Delaney, Vice President of Sales for cloud platform Determine, draws on his experience as both a buyer and provider to share best practices for relationships that are sustainable and strategic.
WORK ON YOUR SOFT SKILLS
Technical expertise is valuable, but your ability to establish a rapport with customers is important for sustainable relationships. “Candor is important because there's a large degree of personal credibility that buyers are putting on the line when selecting a vendor," says Delaney. "That needs to be understood as a seller and we need to make sure that we don't break that trust. That's our role.”
2018 is already shaping up to be a busy year for SIG and we don't anticipate slowing down. In fact, we're accelerating!
SIG INNOVATION ACCELERATOR
SIG recently announced the launch of the SIG Innovation Accelerator (SIA), which offers a portfolio of services to help develop and improve the innovation pipeline for Source through Supply Chain (SSC) and related functions.
The SIA was created to help SIG’s buy-side companies--and ultimately other Fortune 500/Global 1000 companies--capitalize on their combined knowledge, experiences and buying power to facilitate innovation and improve profits while simultaneously reducing risk for both buy-side companies and product providers.
Becoming an SIA Colleague is the first way for a provider to participate in and benefit from SIA’s services. Benefits of becoming an SIA Colleague include:
Eligibility to nominate a product for review and consideration for SIA’s Acceleration Program
Opportunities for product focus groups with procurement executives to get feedback on product and marketing/sales strategies
Discounts for online certification programs or courses offered by SIG University
A Leadership Council comprised of approximately 24 CPOs and select other executives from SIG’s buy-side member companies will lead SIA's initiatives. All of SIG’s buy-side members are eligible to participate in various SIA activities and benefit from its services. SIA is managed and staffed by SIG and Creatze, which is led by SIG’s founder and former CEO Barry Wiegler.
Situated in the southernmost part of the Brazilian state of Minas Gerais, nestled among green rolling hills, coffee plantations and dairy farms is the small town of Santa Rita do Sapucaí. A cursory glance shows Santa Rita as a charming town full of farms and churches but in reality, this picturesque little city has so much more to offer. In recent years, it has become known as “Vale da Eletrônica” or Electronics Valley because it is home to the highly respected technical school, Escola Técnica de Eletrônica Francisco Moreira da Costa and is also known as a hub for technological applications, from carpool and table service apps to toothbrushes with sensors that connect to children’s games. And Santa Rita isn’t the only city in Brazil ramping up their efforts.
Plagued by years of upheaval economically, Brazil is making a comeback and relying on the IT sector to help make their triumphant return. A $200 million joint investment with chipmaker Qualcomm, was welcomed in March by the federal government to build a semiconductor factory in the state of São Paulo where other major tech companies such as Samsung and Lenovo already have operations. Their hope for the investment is that this will be the first step for Brazil in becoming a noteworthy player in the manufacturing of high density semiconductors that are used in 4G and in the future, 5G devices, as well as IoT applications. The investment from Qualcomm is expected to bring in about 1,200 new jobs which only makes a tiny dent in solving Brazil’s unemployment rates—at 11% there is still a long way to go, but it’s a step in the right direction.
In the Mexican coastal town of Puerto Vallarta, where the weather is hot and the tequila flows like wine, a new trend is emerging from an old Mexican delicacy...chocolate. The town is host to a chocolate museum, chocolate tour and fancy tequila/chocolate-paired tasting. Last week I had the opportunity to attend to one of these tastings where I learned about the different types of tequila and how the chocolates amplify their flavors when properly paired.
This unique experience also came with a crash course on the history of Mexican cocoa, the main ingredient used to make chocolate. Cocoa was once only consumed by ancient Mexican royalty. According to my tequila sommelier and a report by the World Agroforestry Centre, the Olmecs – an ancient tribe in Mexico – were thought to be the first people to consume chocolate. These indigenous people crushed the beans, added water, spices and chilies and drank the delicious elixir.
Ironically, last week an article came across my desk about cocoa. What were the odds that in the same week that I learned about the origins and use of this delicious nut, I’d also circumstantially run across an article about its production? I found the correlation too good to be true until I read the article and discovered the unfortunate state of cocoa production. Sadly, this article did not come with tequila, but the bitter reality of a lack of ethics in the cocoa industry’s supply chain.
As supply chain practitioners know, it is critical to know where and how your products are being sourced, but the farther you are geographically from the beginning of the supply chain, the harder it is to control…and in countries where labor laws are lax, it becomes even more tragic. This gets tricky with products that can only be produced in very specific environments. Cocoa is one such product that can only be grown 10 degrees north or south of the equator with the majority of its production in West Africa, the Ivory Coast and Ghana.
Hailey Corr, Junior Editor and Marketing Associate, Outsource and SIG
It was Made in America Showcase Week recently, according to the current administration (funny that it also coincided with Russia Week on Stephen Colbert). Anyone, wherever they live, likes to see local people employed. Whether it is an American who likes to see products marked with “Made in America,” a Canadian who swells with pride for “Made in Canada” or a British person seeing “Made in the UK.” The fact of the matter is that very few people are willing to pay more for those items. According to a recent Reuters/Ipsos poll, 70 percent of Americans think it is “very important” or “somewhat important” to buy U.S.-made products.
Despite that sentiment, 37 percent said they would refuse to pay more for U.S. made goods versus imports. Twenty-six percent said they would only pay up to 5 percent more to buy American and 21 percent capped the premium price at 10 percent.
In addition, it is the lowest of wage earners who like “Made in America” and yet they are the least likely to be able to pay the premium. The reality is that most of us feel a patriotism to our own country and kinfolk, yet we are actually beholden to our wallets. The same lower wage earners who say they prefer made in America, and per the Reuters article said, “Indeed, the biggest U.S. retailer is well aware of the priority buyers place on price above all else.” A spokesman for Wal-Mart Stores Inc. said customers are telling them that “…where products are made is most important second only to price.”
Disruption. Until recently that word meant something negative. It was a nuisance…a disturbance…an interruption…it meant trouble. In fact, if you look at synonyms for disruption, every one of them paints it negatively. But lately when you hear the word “disruption,” it generally means change—and even positive change. Disruptive technologies are in essence solutions that are changing the future of work. They are challenging the status quo.
I was recently reading an article about Amazon potentially purchasing Slack. (Ironically one of my colleagues sent it over in a “Slack” which we use for internal communications at SIG.) As my colleagues and I reminisced about our first use of Amazon, it made me realize what a pioneer they were in disruptive technologies. The term may not have been widely known, but they certainly paved the way for it to be put into ubiquitous use.
I can’t really remember when or how Amazon disrupted my life…but it did. Somewhere along the way I went from being skeptical about purchasing things online to almost exclusively shopping with Amazon—and Prime no less because I want the immediacy of it. Don’t get me wrong—there are certain items I will never purchase on the Internet, but if I am going to shop online, I ALWAYS check Amazon first.
Let’s discuss accretive manufacturing. What? Haven’t heard that term yet? That’s because accretive manufacturing is just a fancier name for 3D printing. You may never hear it referred to as accretive manufacturing, but mark my words…the supply chain industry is about to be disrupted to an unrecognizable extent by it. In 2016, Honda released a single-seat “micro-commuter” vehicle with the body and majority of the panels having been 3D printed. In the meantime, Boeing expects to shave $2 to $3 million off each 787 Dreamliner's manufacturing costs by 2018, thanks in part to 3D-printed titanium. So if Boeing can now 3D print parts to an airplane and auto manufacturers are now 3D printing dashboards—and even entire vehicles—how long do you think it will be until we require almost no inventory because we can 3D print on demand any item we desire?
At home if I break a spatula, I can now 3D print a replacement. Granted, I am only printing with plastic and lack the tools to print an exact replica, but when it only takes an hour to print with specifications that are available for free online at a cost of only 15 cents (plus a little electricity)…isn’t it worth considering? Even Amazon Prime same day delivery (not available where I live) can’t beat that timeline and price.