Spend Matters welcomes this guest article by Becky Partida, research specialist, supply chain management at APQC.
Consumers and governmental agencies alike have been pushing harder for organizations to consider the environmental impact of their practices. As such, many organizations have taken an interest in making their supply chains more environmentally friendly. Data collected as part of APQC’s Open Standards Benchmarking in procurement indicates that, of the organizations surveyed, 65% have initiated green procurement policies. Nearly 17% of responding organizations indicate that they plan to initiate green procurement policies in the next 2 years, and 18% indicate that they have no plans to initiate green procurement policies at all.
Are organizations without green procurement policies missing out on something? What effect do green procurement strategies have on supply chain performance? To answer these questions, APQC divided organizations within its Open Standards Benchmarking data into 2 groups:
- Those that had initiated green procurement policies and
- Those that had not initiated these policies or intended to initiate them in the future
The data shows that organizations with green procurement policies have more efficient order processing and higher numbers of purchase order line items processed.
At the median, organizations with green procurement policies report that the cycle time needed to place a purchase order is 8 hours (as shown in the figure below). Organizations without green procurement policies report a cycle time of a little over 9 hours, or more than one business day.
As the figure below shows, organizations with green procurement policies also have substantially higher numbers of purchase order line items processed per “order materials and services” full-time equivalent employee (FTE). At the median, organizations with green procurement policies process over 1,400 more purchase order line items per FTE than organizations without these policies.
Although APQC’s data shows organizations with green procurement policies perform better than those that do not, it does not indicate that these policies are the sole cause of purchase order efficiency. It is possible that organizations that have already achieved some degree of efficiency may be better positioned to consider the environmental impact of their procurement policies.
When considering whether to initiate a green procurement effort, organizations should carefully consider all the possibilities associated with establishing these policies: from the potential environmental and ethical benefits to the increased efficiency of purchase order processing. They should also take into account their market and overall strategy to determine whether the potential benefits of green procurement balance out the time and effort needed to create policies focused on environmental impact.