Contemporary Issues in Purchasing

& Supply chain Management

Manana Peter
Lecturer-MUBS
 Content outline
• Introduction
• Green purchasing
• Sustainable procurement
• Outsourcing
• E-Procurement
 Sustainable Procurement
• A process whereby organisations meet their needs for goods, works,
services, utilities etc in a manner that achieves value for money on a whole
life basis in terms of generating profits not only to the organisation but also
to society and the economy while minimizing damage to the environment.
 Sustainable procurement cont’
Sustainable procurement is synonymous with numerous terms such as;
• Sustainable purchasing
• Sustainable sourcing
• Green purchasing
• Social Responsible buying etc
By whole life basis, it means that sustainable procurement should consider
the environmental, social and economic consequences of design;
• Non renewable material use
• Manufacture and production methods
• Logistics
• Service delivery
• Operation, maintenance, re –use , recycling, disposal
• And suppliers’ capability to address these issues in the supply chain.
 Triple Bottom Line (3ps)
Sustainable procurement therefore aims at achieving a balance between three
fundamental aspects namely;
• People (society); by ensuring that their supply chains are diverse, fair&
timely pay of suppliers, workers, good working conditions, etc.
• Profit (Economy); by ensuring corporate governance and ethical trading
• Planet (environment); by conserving the environment

• Supply chains today are expected to be both profitable and responsible.

Therefore, performance is no longer only measured in profits, but also in

impacts on social and environmental systems.

Benefits of sustainable procurement include; (do research and discuss)

 Green Purchasing
• It is part of sustainable procurement that focuses on the planet bit or
environmental conservation.

• It is concerned with how organisations acquire supplies, works or services

in a manner that minimizes harm to the environment through mechanisms
such as;
• reducing toxic and hazardous chemicals acquired and used in
production, and disposed after use of stuff procured
• increasing diversion from solid waste stream; and
• energy efficiency.
Green Purchasing 3Rs
Every business, no matter the industry, can benefit by participation in the 3Rs
defined as follows: 
• Reduce         to decrease waste and/or eliminate needless or inefficient use
of resources.  If the need for a resource is reduced or eliminated, as in the
related concepts of energy reduction and conservation, resources are
preserved and financial gains almost accompany the effort. 
• Reuse            to find similar or identical, new, and sometimes novel ways to
use the same resource instead of disposing of it.  Eliminated new or
replacement resources conserve and preserve and almost always come with
accompanying financial gains. 
• Recycle         to find other uses for waste materials including re-
manufacturing into other products. Recycling materials like cans, glass,
paper and cardboard recovers the valuable resources that would otherwise
be waste to make new products. For example, glass bottles and jars
collected by a recycling service will be cleaned, crushed and recycled into
new bottles and jars.  
The cost savings of green procurement include waste minimization,
elimination of collection, cartage, landfill usage, disposal, and the requisite
energy otherwise needed to accomplish these gains. 
 Obstacles to implementation of Green procurement
• Perception that green products are more costly than traditional products.

• Lack of knowledge of environmental aspects of procurement;

• Inadequate senior level political and management support;

• Lack of tools and information for understanding, implementing green

procurement; and
• Lack of training.
 Key steps& tools in implementation of Green Procurement
• Procurement preparation and planning, includes e.g.: development and use of
information resources (e.g., list of hazardous chemicals); and developing strategies
to avoid unnecessary consumption.
• Formulating green technical specifications, e.g.: energy consumption levels for
vehicles; recycled content level for office paper, construction materials;
• Appropriate uses of eco-labeling, e.g.: to evidence that a product meets required
technical specifications (but should not be mandatory).
• Life-cycle costing – integral part of green procurement e.g. Reflecting all phases,
including purchase and installation costs in use and operation, disposal.
• Energy consumption and management e.g. in energy efficiency in vehicles, power
consumption in equipment formulated e.g. in terms of; reduction of greenhouse
gas emissions.
• Recycling in public procurement, involves: Procurement of goods containing
recycled materials;
• Water efficiency – promote use of water in a way to protect and conserve it, e.g.
by: setting targets for water consumption; Indoor and outdoor water use; Water
aspects of green construction design.
 Electronic procurement
Definition
• Electronic procurement is the use of information and communication
technology in procurement.
• It mainly involves the use of internet which undoubtedly reduces costs.

E- procurement takes on various forms that include;

• E- sourcing; involves identification of new suppliers for a certain spend
category via the internet
• E- tendering; is a process of sending Requests for Information (RFI’s) and
Requests for Proposals (RFP’s) to suppliers and receiving their responses
using internet technology.
 Forms of Electronic Procurement cont’

• E- reverse auctioning; where a purchasing firm uses internet technology to

buy goods and services from known and unknown suppliers with focus
being on their prices.
• NB. Reverse auction-suppliers bid for buyer’s contract WHILE Forward
auction-Buyer bids for suppliers contract e.g religious auctions.
• Web based ERP &E- ordering; involve creation and approval of
requisitions, placing of purchase orders and receiving of direct and indirect
goods respectively and services ordered using a software system based on
internet technology.
 Benefits of electronic procurement
• Greater business efficiency

• Increased access to information

• Cost savings through paperless transactions, reduced lead time

• Enhanced flexibility in business operations

• Enables access to world class suppliers

• Facilitates 24 hr/7 day business transactions

• Enhanced customer service through increased responsiveness

• Enhances faster communication and information sharing

• Therefore generates a competitive advantage for firms.

 Challenges associated with use of Electronic
procurement
• Expensive in terms of acquiring software, hardware, internet

• Risks of obtaining fake information, con men

• Eliminates personal contact which affects the quality of relationship

• May lose confidential information due to malware, hacking etc

• Limited skills and knowledge which calls for training of staff thus resulting
into more costs
• Promotes discrimination in business especially of small medium
enterprises which cannot afford e- procurement etc
• May lead to staff turnover
 Out sourcing
Definition
• An arrangement whereby a contracting agency enters into a contract with
a supplier from outside that agency for the provision of goods and/or
services which typically have previously been provided internally - not
necessarily involving competitive bids (Griffin& Figgis ,1997)
• Examples of activities that are outsourced by firms include; catering,
auditing, accounting, ICT management, transportation, insurance,
recruitment, waste management, building and equipment maintenance,
cleaning and consultancy.
 Drivers/ benefits of Outsourcing
• Cost reduction

• Access to specialist resources (expertise, skills, knowledge and

technology)
• Reduction of fixed costs and capitalization

• Transfer of risk
• Desire/ enables to focus on core activities

• Provision of better service quality

• Greater flexibility
 Challenges of outsourcing
 Benefits are sometimes realized after a long period of time
 Determining core competencies can sometimes be tricky, and a wrong guess
deadly.
 Risk of choosing the wrong provider given that it is a service
 Service quality is hard to evaluate
 Possible of loss of control by the firm to the supplier as far as the
outsourced activity is concerned.
 There is a potential for losing key technology, skills, knowledge and
expertise of staff to the provider.
 Results into dependency on the provider
 Complacency of the provider over time
 Unwillingness of staff to relinquish responsibility
“The world has the habit of making room for
the man whose words and actions show that
he knows where he is going” Napoleon Hill
“All birds find shelter during a rain. But the
Eagle avoids rain by flying high above the
Cloud. Problems are common, but attitude
makes the difference” Abdul Kalam scientist
DREAMS ARE NOT THOSE WHICH COME WHILE
WE ARE SLEEPING, BUT DREAMS ARE THOSE
WHEN YOU DON’T SLEEP BEFORE FULFILLING
THEM” ABDUL KALAM