I recently read a short story in Environmental Leader and shared my thoughts on the increasingly widespread top-line impact of sustainable supply chain practices, beyond simply regulatory compliance requirements. This topic got me thinking about how our household has begun to make retail and food decisions based on the advertised traceability of various items. For example, I know we’re paying a significant premium for the Nordic Naturals fish oil supplements our kids take, but the company claims traceability for metals down to the lot level. It’s worth it to us.
In the case of Nordic Naturals, my calculation is that we’re paying a 250-300% price premium compared with other similar products in the market. That’s a massive premium, especially compared with certified seafood, most organic produce, pastured meats/poultry and the like. Yet the fact we’re willing to do it because it impacts our children says a lot for the eagerness of general consumers to pay margin-busting price premiums based on single supply chain elements in certain cases – in this case lot level testing and certification.
I believe that the emphasis will shift in the years ahead to justifying supplier management investments not just from a supply chain perspective (vendor file management from AP and general on-boarding areas), but also from a top-line one. When procurement and supply chain teams begin to measure their impact more on top-line margin contribution, market share and new product introduction success and less on bottom-line costs and compliance, we’ll know the supplier management market has reached the next level of maturity.