The latest insights in e-procurement
Footprint Forum Thought Leaders & Innovators Conference 24 May 2012
Transcript of presentation by Ed Bevan, Communications Director ~ epsys How technology can fit into sustainable procurement and deliver significant benefits…
Epsys is an e-trading system provider that works with organisations that provide foodservices – every sector – from Hotels to Prisons, Kindergartens to Care Homes…
But how exactly does an e-trading system fit in with sustainability?
If you already know how e-trading works and the depth of information such online systems hold, you may already appreciate how their use (and outputs) are so key to my message today. If you don’t, then I hope all will be revealed!
More of that in a moment….
A few weeks ago I attended the Sustainable Purchasing and Supply Summit. And I suspect many of you may have been there too, so, if you’ve heard Andrew Croucher’s words of wisdom before – sorry, but they are worth repeating… Andrew’s “Director – Business Solutions” at The Chartered Institute of Purchasing and Supply and he came up with some frightening numbers and observations. He said,
“The world’s natural resources are depleting before our very eyes. It’s incredible to think that if everybody on the planet consumed like an average European, we would already be in a position where the equivalent of three earths would be needed to enable us to live. Now, I hope we don’t have anyone from the US here – because – if everybody lived like an average North American, five earths would be needed……”
He went on:
“The world’s population will increase from the current seven billion up to almost 15 billion by 2100, putting ever more pressure on the Earth’s finite resources. People involved with procurement and supply professionals have a huge role to play in supporting sustainability through the adoption of responsible purchasing practices.”
My bit today seeks to explain how technology, and specifically e-trading technology, can help foodservice organisations do their bit!
You know, we didn’t set out to develop an e-trading platform with waste and sustainability issues in mind. But over the past few years, and with the sustainability agenda gathering real pace, we found ourselves in a position where our clients were all adopting sustainable policies – to widely varying degrees. It’s not our place to determine what a responsible approach to food and associated procurement is …. since each organisation we work with has very different drivers and goals. Their interpretation of the core sustainable metrics – and how each aspect of what we call the “the sustainability mix” fits with their particular policy …- is for them to decide…. not us. Let’s be clear here – we are dealing with a bit of string and we’ve no idea how long it is! Things change we are alaways working at the “possible” becoming a “reality”. Take the old chestnut of “Food Miles” (the distance products travel to your kitchen door). But is that from the wholesales or the grower!
What about “Local Sourcing of Fresh Produce” – where organisations want to support local growers and suppliers – But again what is “Local???” …. 5 miles? 10 miles? Somewhere in the UK? Everyone’s policy is different. And then there’s “Environmental impact” – which we define as “Optimising the use of people and natural resources …” Which tomato is best? The one grown under natural conditions in Tenerife (but flown over) or the one grown in a heated greenhouse in Kent during November and December?
Our sustainability mix list goes on including:
• “Use of Seasonal Produce” • “Using Renewable Sources of Product” (an easy reference is Marine Stewardship Council) • “Supporting local and Global Communities” (reference Fairtrade/Rainforest Alliance) • “Animal welfare issues” come into the mix for many clients (i.e. Free Range/Freedom Food )
Even “Food Culture” (i.e. Kosher and Halal) what’s the requirement for these specialist supply chains?
And then Packaging…
“Packaging Waste reduction” the WRAP Imitative refers (reference operators’ engagement with Product decanting/minimal packaging/use of biodegradable or compostable packaging products)
“Food Waste” (the issues surrounding of over-production/ ethical waste disposal and recycling and even doggie bags!) It’s all in the sustainability mix..
It’s very unlikely any organisation would (or could) embrace all the aspects I’ve just set out…. And there are lots more besides… But most organisations now have a real desire to support their procurement and supply functions – both at centre and out in the field, to enable teams and individuals to improve sustainable practice in their uniquw supply chains.
I’m sure that procurement activity targets, focusing on defined categories or choosing products that achieve a particular level of social or environmental performance will become the norm in the not too distant future.
Anyhow – back to technology… How can it help organisations realise their responsible buying activity targets – whatever they may be? It’s all about data and information.
Consider what’s involved in deploying and maintaining a true e-trading platform in the food service sector. Very simply put…
• You start by defining your centrally negotiated and approved product category lists and prices. • You present that information to users online via a single secure portal, uniquely created for each client organisation • Operators construct their orders… • The orders are sent electronically to suppliers • The supplier delivers • The operator approves the delivery for condition, quality and number • The invoice is raised and sent electronically – then automatically checked, line by line, against the order …for price and volume discrepancies • The invoice file (and accrual file) is imported into the finance system for payment.
Essentially, …That’s the procure to pay cycle..
Now, setting aside the obvious economies linked to the “stopping waste before it happens” argument – …which is a “given” as far as e-trading is concerned in respect of paper trail, postage and man hours – what else can be achieved? The answer’s “plenty”.
I’m going to give you a range of examples – some are real and available now (and relatively easy to achieve), others rely on suppliers to provide quite detailed information (which is not always readily available right now) ….others will be possible in the not too distant future. Generically, e-trading systems were designed to trade more effectively with multiple suppliers and provide the means to seamlessly link such transactional activity to finance and management systems through electronic means. But, … and here’s the thing, in the context of foodservice and sustainability, as well as providing metrics and dashboards that facilitate closer management of the financial and commercial aspects of food service delivery in real time, added value outputs can also be made available.
So, as well as improving business process in the widest sense, systems can be configured to provide organisations with outputs which may be used to capture and measure aspects of their sustainability performance and thus provide a basis for onward management and improvement.
Let’s look at a couple of examples and go back to:
There’s no doubt that improvement here is about optimising the use of logistics – and thereby reducing the carbon footprint associated with the delivery of goods. Scenario! An outlet has 15 deliveries a week from 8 Suppliers the distances from the suppliers’ depots are known. Easy! The system calculates the food miles and thus provides a visible measurement that can be reduced through improved ordering and storage …And by the way….. why does frozen food really need to be delivered frequently? At the correct temperature, Frozen food can be held safely for months – but in our experience it is regularly ordered multiple times per week. There are, of course, local storage issues to take into consideration but most operations could lose at least one delivery a week.
Inbound food waste
This is about “Stopping waste before it happens”Accurate prediction of your supply requirements is obviously key to eliminating inbound waste. ….and Technology can help operators confidently place an appropriate order. If a system enables menu and recipe driven ordering and links to stock records then this enables accurate predictions of product requirements and eliminates all the “guess work” leading to over-ordering , over-production and therefore less waste – that is all waste, both food waste and packaging waste…. Not only good for the planet but absolutely key to achieving the best commercial outcomes.
The measurement of what is considered “Local” comes from understanding a product’s provenance and attributes and then being able to profie the goods purchased by an outlet. The resultant profile can then be measured against a set criteria. (and As I’ve said the criteria will change from client to client). Most Suppliers are very good at providing traceability/provenance information and systems can be set up to identify to the user what are considered to be “locally sourced products” within the electronic catalogues presented on screen. It’s then easy to calculate the extent to which “locally sourced products” are actually featuring within the purchasing profile of an outlet. The reports can be made available centrally, regionally and/or locally to measure the delivery of a particular policy within an individual outlet or an estate of outlets…. Now the BIG one…
Product attributes! At a central level many organisations already support a range of product based sustainability initiatives in a genuine effort to “do their bit” and to meet the challenges that a good progressive Sustainability Policy creates. Using supplier provided data flags – which could include accreditation flags like Marine Stewardship Council, Red Tractor, Soil Association, Fairtrade, Rainforest Alliance, etc…) systems can identify aligned products so that operators can make informed choices in line with the policy of their company. The overall effect, can be controlled by product blocking ( which means making non approved products invisible to the user) and measured through reporting out of the system.
It can get complicated though.
Some larger organisations may have a different stance on sustainability for each sector of their business, and controlling product ranges by business sector, supplier and product commodity within a business which may have many customer vfacing guises is a big challenge. The best technology now provides the means to manage range, pricing and product accreditation flags from a single supplier catalogue. Through the clever management and central manipulation of this single catalogue, Procurement teams can present unique prices files and ranges to individual outlets which reflect both the sustainable and commercial objectives for that particular outlet. So – one base file and the potential for 100s of different approved profiles (and prices) all aligned with any central corporate objective, presented at outlet level.
At the moment we are working with wholesalers and manufacturers to add packaging detail to products within a supplier’s catalogue. As this initiative gathers momentum, it will allow accurate reporting of packaging consumption, by outlet and across an organisation. Obviously when this information comes on stream it will allow buyers to work more closely with their supply chain to reduce input packaging and therefore output packaging waste in a focused manner with the system accurately measuring what is taking place. Which bring me to my last point…
Outbound waste streams
We are making available the ability to record waste management route detail. Where does the waste produced by an outlet end up (?) and what is the volume or weight of waste produced? The collection advice provided by the Waste Contractor should provides this detail either at the point of collection or via a retrospective report. This allows Clients to identify, by outlet, the impact of their waste policies and construct the most effective disposal routes, which can then be subsequently maintained and monitored.
So, to conclude, technology, and specifically a well-developed e-trading platform, can positively contribute to making an organisation’s sustainable objectives a reality.
Wherever the “good words” are – corporate governance statements, …. business principles,…. or existing sustainable procurement policies – for us it’s about collaborating closely with our clients, and critically their supply chains, to bring about the necessary changes to their business processes that will facilitate their achieving their unique sustainable visions.