28 11 2022
There are 3 reasons to manage your spending in a closed loop
We are in the right moment to implement the United Nations Sustainable Development Goals. Among them, climate (SDG 13) and inequality reduction (SDG 10) are the most pressing issues, with clients constantly setting new goals and monitoring operational progress. to achieve the above goals.
In fact, the core problem is not only in internal operations, but also in the supply chain. For many organizations, this is the sector that accounts for the majority of greenhouse gas (GHG) emissions – sometimes 80%, even higher (e.g. the auto industry). And in some areas, it is also where the most risks lie, revolving around human rights and workers’ rights.
Business leaders are increasingly realizing that the purchasing department, and the supply chain that the purchasing department manages, are major priorities for making a responsible business. And with many companies spending millions, even billions of dollars on goods and services, the potential for optimization is clearly enormous. On the other hand, research from Accenture shows that companies that optimize how and where they spend can deliver four times more value than their competitors.
The opportunity is clearly very attractive. But how do you take advantage of it? How to understand and use the right levers in the supply chain? Closed Loop Spend Management (CLSM) is the answer. This is a pragmatic approach to base and rebuild procurement costs from the bottom up (rather than top down). And most importantly, CLSM can bring sustainability when put into practice at every point of the supply chain.
The question is how does CLSM work? Here are three CLSM principles that can help you learn more about the purchasing process.
1. Prioritize visibility in the supply chain
How can you control what you can’t see? At the core of CLSM is the idea of enhanced visibility across the entire supply chain. Use the right sourcing analytics tools to see your company’s current sustainability performance against its peers. From that base, you can test scenarios to see how the cost-savings measures you’re working on can affect results. Or you can intervene on a certain sustainability factor (e.g. greenhouse gas reductions) that could potentially save money as well.
2. Take a holistic view when it comes to value
For CLSM, value is not just about cost. Value can also cover the impact of greenhouse gas (GHG) emissions, or risk in the supply chain, or create a diversified supply base. And while price is an important lever in driving value, applying a sustainability lens to pricing can mean making a lot of money while at the same time ensuring the best possible outcomes. other goal. Real life example: a consumer goods company saved $0.4 on electricity along with a 12% reduction in carbon dioxide (CO2e) emissions using CLSM methods. It can be concluded that these results are not mutually exclusive!
Needless to say, Accenture itself is looking at the procurement process with a similar approach. We are on track to provide 100% renewable energy for our office equipment by 2023. This comes at no extra cost. Since 2007, we have saved more than 1 million tons of CO2 and more than 258 million USD in fuel budget.
3. Use data and technology wisely
Analytics tools can give you great ways to make your supply chain smooth. In addition, data and technology can help you in a variety of ways, either making processes more rigorous or providing real-time updates that can influence decisions. supplier selection.
For example, you can use AI-based supplier selection tools where GHG emissions performance is the primary criterion.
Once you’ve selected your suppliers, you can streamline or professionalize the partnership process by requesting Environmental, Social and Governance (ESG) data through the portal. That data can then be used to evaluate suppliers, encouraging them to set ambitious, sustainable goals.
And with the ever-changing nature of ESG, tools and technologies can generate real-time insights into suppliers, based on their latest CDP scores, or on up-to-date data. from ESG or other agencies.
All of the above principles contribute to better purchasing decisions, made with better visibility and a deeper understanding of leverages and the results they produce.
Source: According to Accenture
