According to experts speaking at the Ivalua Now 2022 conference, procurement is undergoing a major change right now. In order to reach decarbonisation targets, companies are moving away from competitiveness with suppliers and towards a more collaborative approach.
Delegates at the Paris conference, a premier event for procurement and supply chain leaders, heard how leading brands are developing an external ecosystem of suppliers. This means collaborating and connecting with suppliers to deliver sustainability goals, and offering support and training where needed.
One influential figure speaking at the event was John Marchner, the senior vice president of powertrain and fossil-free materials at Volvo. Speaking on a panel, Marchner explained how Volvo began working on supply chain collaboration around five years ago. He said:
“We were creating a dedicated department that we call responsible purchasing, and the purpose with that was to put sustainability high on the agenda for our organisation and also for our suppliers.
“With that incentive, we have spent a lot of time when it comes to training and making the supply chain aware.”
Moët Hennessy’s CPO Dominique Lebigot added that the role of internal stakeholders is crucial in driving carbon footprint reduction and connecting with suppliers. He said:
“I strongly believe that this is going to be one of the main drivers for the procurement job going forward, because we are clearly moving from the traditional supplier relationship management approach [to] what I call supplier ecosystem management.
“Clearly the challenge in the future will be to move from supplier competition to supplier collaboration, making our suppliers collaborate with each other, which means creative collective intelligence between suppliers. That’s the job of purchasing, to drive that.”
Working together on decarbonisation
Rather than having suppliers compete with each other, the vision for the future of procurement is to work together to decarbonise the supply chain.
Volvo, for example, used to allow tier one suppliers to source their own materials. But under its new collaborative model, the luxury vehicle giant now engages directly with raw material suppliers. It also supports mid-sized suppliers, with the aim of helping Volvo reach its sustainability goals.
Taking a collaborative approach to procurement is proven to work, and deliver benefits for all parties. In a recent McKinsey survey of over 100 large organisations, those that regularly worked closely with suppliers enjoyed lower operating costs, higher growth and greater profitability.
If firms can add carbon reduction to the list of benefits, the argument for ditching the traditional competitive model becomes very persuasive indeed.
There are of course barriers to overcome, such as a major shift in mind-set among both buyers and suppliers as the nature of their relationships changes. Intensive, cross-functional involvement is required on both sides, and projects can take time to bed in.
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