Purchasing and Negotiation Training

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Editor’s note: to bring a two day customized seminar to your company or organization, send an email to mail@RobertMenard.com

Expressing the arguments in terms of global economics changes the perspective.  One school of thought contends that western economies, particularly the US, drain great amounts of energy and natural resources.  The US, with only 5% of the world’s population is castigated for its disproportionate consumption.  On closer inspection, the argument is shot full of holes.  

Economically, the US is the most productive nation on earth.  In 2008, the US Gross Domestic Product (GDP) of more that $13 trillion accounted for almost 30% of the world’s GDP of just over $42 Trillion.  The populations of China and India combined total about 2.48 billion people or more than eight times that of the US.  Yet their combined GDP (China #4 at $2.7 Trillion and India, #14 at less than $1 Trillion) is less than one fifth of the US alone.  When translated to GDP per capita (per person) China and India together average $1,500 per capita.  Dividing the US GDP of $13.2 Trillion by a 305 million population is about a stunning $43,000 per person, almost 30 times greater. 

Thus, it is no mystery why the US consumes more energy; it the most productive. Yet still, some raise the specious argument that the US consumes not only its own natural resources but those of many other countries.  Of course it does in order to produce goods and services that the rest of the world wants and/or needs.  The US ability to do business and economic infrastructure based on capitalism is a major reason the US continues to lead the world. 

 This economic picture is constantly changing.  In August 2010, China surpassed Japan to become the world’s number two economic power behind the US.  One estimate from the US Department of Energy projects that China will consume 28% of global energy by 2030, triple the amount it used in 1990.  The same study predicts that China will overtake the US in energy consumption by 2015 so indeed, we must have a mastery of global economics.  

The role of green purchasing in sustainability springs largely from it preeminence in reducing costs.  Political arguments can get in the way of that responsibility so we raise the argument here and deliberately translate it to economic terms so that we can focus on the issues and do what we do best.

 Green Purchasing and Sustainability is now available to order at half price to readers of this blog and members of the American Purchasing Society .  Click here to order for $89.50 before the 90 day or 100 copies offer (which ever is first) expires and the Amazon price of $179 applies. 

The first 100 buyers for the next 90 days get 50% off the $179 Amazon price and free shipping!  Click here to see what purchasing pos have to say about this work book and manual.  For chapter previews, click here 

This workbook and manual is packed with specific advice on how green purchasing saves money and creates sustainability.  In return for the half off discount, all we ask is your feedback to be emailed to mail@RobertMenard.com.

 Green Purchasing and Sustainability is required to earn the Certified Green Purchasing Professional designation through the American Purchasing Society beginning in fall 2011.

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Sustainability, in its largest sense, is the ability to endure.  The human race has an existential interest in sustainability as it applies to our host planet.  However, sustainability has many more specific definitions and applications in today’s business world, often depending upon agenda. 

There are at least three loosely organized factions whose definitions overlap as well as disagree to some extent.  They apply to business to varying degrees.

1. People, Planet, and Profitability – This over arching 3Ps definition applies to entire enterprise organizations and is sometimes called the Triple Bottom Line 
2. Social, Environmental, and Financial – This definition is favored by many public sector parties that refer to the Triple Base Line
3. Economical, Ethical, and Educational – Academic and research institutions define sustainability by these three Es that have some common characteristics to the other two definitions 

Sustainability is a work in progress; there is no coherent or reliable school of thought or controlling body.  The same cloud envelops its tandem companion “green purchasing”.  It might be surprising to learn that there is no uniform rating system to evaluate or rank an organization’s sustainability. Various systems exist and are under development for measuring sustainability of a company or product.  The construction, chemical, and paper industries, among others, have been engaged in the pursuit of sustainability for more than a decade but other industries are just entering the arena.  While some standards will certainly evolve, we need not wait to pursue what will be a reality for most of us in the purchasing profession.

Editor’s note:this is the eighth of eight chapter previews of the new workbook and manual, Green Purchasing and Sustainability, that will be available to order in July 2011.  To see all chapter previews, click here. 

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

We can expect that much of the commercial business world, as opposed to public, academic, and non-profit organizations, at least in the close-in years, will resist participating in the green revolution. They may not be comfortable with the motivations of the sustainability movement or may not be confident in their ability to manage the risks involved in green initiatives and in deed, lack the credentials, knowledge, and skills necessary to deal with the challenge. 

Still others will remain dubious as they (justifiably) do not see the technologies in place that proves the case for sustainability.  For instance, those on the cusp may prefer to wait until a customer demands a reduction in GHG emissions such as we mentioned with the Wal-Mart model for suppliers.  Some may not adopt sustainability until competitors demonstrate commitment or a law establishing a standard procedure mandates their commitment.  Nevertheless, the tide is approaching and the time is here. 

back cover, Green Purchasing and Sustainability

Amidst this conflagration, we may take refuge in some good news.  That is, for green purchasing pros, all of these arguments are extraneous and superfluous to our profession. Politics and personal beliefs do not drive the process.  We do not have to make the choices that lawyers must sometimes do in setting aside their values to represent clients.  For us, the choice of green purchasing is merely a matter of cost savings, our core competency.  These cost savings will yield huge sustainability gains as a direct result of our expertise.

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Editor’s note: this is the seventh of eight chapter previews of the new workbook and manual, Green Purchasing and Sustainability, that will be available to order in July 2011.  To see all chapter previews, click here. 

In this chapter we will unify everything we lave learned to create a comprehensive, practical, and user friendly plan that serves the interests of our company and the sustainability movement at large. 

Now that we have studied many ways that green purchasing can and should lead and manage sustainability initiatives enterprise wide, we are in a position to present the hard “How-To’s” of writing a green purchasing plan.  Before doing so, three essential prerequisites must be in place:

1. Vigorous management buy-in
2. Active, announced support, and
3. Enforcement authority 

Without these, the plan will be relegated to less than priority status or fail outright for lack of participation. 

 Whether green purchasing has direct or indirect control or influence over energy, the 3Rs construction & facilities, chemical/environmental, and CSR, it must also rise to the challenge of writing and leading implementation of the plan.  Talent that might otherwise be in a position to do so, such as Human Resources and Organizational Development, lack the background, knowledge, and skill sets needed to competently plan, manage and implement it.

 As we develop how to craft a green procurement plan, we will draw upon the specifics we have already mastered in previous chapters so as to create a template of how an organization may draft its own customized plan.  Where applicable, we will cite references for taking additional steps. 

 For purchasing pros that have been around a while such as baby boomers, many have been involved in writing policies and procedures for green purchasing, and perhaps ISO, and even best practices.  For others, volunteering to take on these growth and leadership opportunities will differentiate you from others who either fear a challenge or lack the knowledge beyond purchasing operations. 

 To this point, we have cited many mini-sustainability plans.  For instance, the 3Rs apply to all products from raw material to waste streams and energy conservation or avoidance of waste or loss have been detailed. 

The green procurement plan must be as practical and applicable as possible.  Since purchasing is a dollars and numbers driven profession, we will quantify elements of the plan to the greatest extent possible.  At the very least, we will draw attention to areas so that individuals will know to obtain further information resources.

A green procurement plan is really a sustainability plan for the entire enterprise because most of the gains will have cost savings attached.  It is a mixture of policies and procedures, training & instruction manual, and step by step “how to” assembly guide.  It draws upon organizational talent, content expertise, and management skills.  Since the plan’s greatest sustainability gains will come at the hands of green purchasing, we need to be the ones crafting this document and leading its implementation. About the only areas where green purchasing needs much assistance are CSR, to a greater degree, and Chemical/Environmental, to a lesser degree.

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Editor’s note: this is the sixth of eight chapter previews of the new workbook and manual, Green Purchasing and Sustainability, that will be available to order in July 2011.  To see all chapter previews, click here. 

This chapter preview is an exercise, one of the many that punctuate the learning throughout this singular publication.  For the answers, send an email to mail@RobertMenard.com 

EXERCISE            Corporate Social Responsibility 

1. Why might B2C companies be more aligned to CSR that are B2B companies? (pick the best two ) 
   • The B2C customer demographic favors         
   • The B2B customer demographic favors CSR
   • B2C companies don’t have many energy reduction options        
   • B2B companies concentrate on non CSR gains      
2. Which of these are considered CSR initiatives? (pick the best two )
   • Community tree planting program
   • Home insulation projects
   • Cost saving programs
   • Company outings
3. Which of these are organizations/publications concentrate on CSR? (pick as many as appropriate)
   • Corporate Knight
   • Purchasing Magazine
   • Fortune
   • Corporate Responsibility
4. For B2C companies, what might be by-CSR products that buyers should recognize? (pick the best  two)
   • The CSR could be greenwashing
   • CSR does not produce cost savings
   • CSR may be used to justify price increases
   • Cost savings are not CSR gains 

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Editor’s note:this is the fifth of eight chapter previews of the new workbook and manual, Green Purchasing and Sustainability, that will be available to order in July 2011.  To see all chapter previews, click here. 

Carbon Foot Print

 This is probably the most well known term in sustainability.  It is at once the most prized and reviled status, depending upon viewpoint. It is also difficult to distinguish truth from fiction; i.e. one can find carbon foot print calculators on multiple web sites and compute nearly as many different answers.  As with many other sustainability concepts that we have studied, there is no universal definition.  Furthermore, the many sciences and political combatants involved combine to generate so many divergent view points as to make “carbon footprint” an understandable yet vague term. 

There are many competing definitions that are both precise and accurate, but are so colored by the competing parties that they are useless in general application.  We also will not venture deeply into the murky world of “carbon offsets”, a subject of many greenwashing charges.  As has been the habit in many controversies in this online course, we homogenize the available research data to arrive at the best, most useful average interpretation. 

The table below was compiled from a variety of sources to compare carbon emissions generated by eight fuels.  The reader will recall a similar table in Chapter Two that compared Btu/$ for many of these same fuels.  This one shows the carbon-dioxide (CO₂ liberated for each equivalent unit of fuel used to create electric energy. The physics is complicated but the simplicity of the over all pattern is obvious.  Some fuels, shown here in descending order, have a greater carbon foot print than others.  The emissions are in grams instead of pounds of CO₂ equivalents per kWh because at 454 grams per pound, the values at the lower end of the scale would be infinitesimally small.  The order of magnitude is more important for our purposes than actual values.    

Harry Hough, PhD, founder of the American Purchasing Society

Editor’s note: Dr. Hough is a frequent contributor to this blog.  This story first appeared in Professional Purchasing, a publication of the American Purchasing Society.

If you wait until your single source supplier goes out of business before looking for a second source it is usually too late to prevent a costly problem. Today more than ever, be prepared to change suppliers if necessary. Both personal and business bankruptcies rise during economic downturns and this recession has proved no exception.

Even if you are lucky enough to quickly find a new supplier to deliver what you need, there is a likelihood that either the shipment will be delayed or you will pay more than what you were paying with the old supplier. It is also probable that there will be other problems, such as quality below what you need and have been receiving.

The new supplier may be able to deliver exactly what you want, when you want it, and at a reasonable price, but it may take time to get all the bugs worked out and to get the supplier to understand your unique requirements. You will need to be patient.

In-house corporate training

You can minimize being surprised by continually questioning supplier salespeople about the state of their business. Salespeople are naturally optimistic and prone to usually paint a rosy picture, but careful questioning may give you clues that call for digging deeper. For example, asking about lead time and the percent of unused capacity will usually let you know if the business is prospering. Short lead time and idle equipment may be a cause for concern. Booming companies will be looking for ways to add to capacity. If they are expanding their facilities there is a good probability that they are making money and will be around for a while.

Make sure you let your suppliers know that you want to be kept informed. Put a clause in your contract requiring thirty or sixty days or more notice before any closure.

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Editor’s note: this is the fourth of eight chapter previews of the new workbook and manual, Green Purchasing and Sustainability, that will be available to order in July 2011.  To see all chapter previews, click here. 

Concrete

 Concrete is a mixture of approximately 85% sand and gravel, 15% Portland cement, and water. Portland cement, for real and/or exaggerated reasons, is the most notorious of concrete’s ingredients in a sustainability context. 

Cement production creates a dual impact on sustainability in terms of GHG emissions.  Huge amounts of all fossil and other fuels are consumed to fire up the 3,000 degree F kilns needed to breakdown the limestone, the predominant raw material.  Limestone is principally a composed of Calcium (Ca) and Carbon-Oxide compounds, mostly CaCO₃.  When limestone is heated, it liberates CO₂ in the approximate proportion approximately one ton of CO₂ for every ton of cement created.  Thus, the cement industry looms large in the cross hairs of many so called environmentalist organizations. 

High on the hierarchy of ironies, CO₂, despite being identified by some, including the EPA, as an atmospheric pollutant, is a requirement for animal life on earth.  Vegetation ingests CO₂ as part of the photosynthesis process and gives off the waste product of oxygen.  The waste of the flora world is the breath of the fauna world and vice versa.  Both CO₂ and oxygen are needed for the earth to sustain.  However, the mandate of reducing GHG emissions is not likely to go away and thus must be incorporated into any sustainability program. 

As with global warming claims, there is no clear and convincing body of evidence on the effect that man made GHG do or do not have as alleged by the sides in this argument.  It is a fact, however, that the planet’s human population is growing exponentially.  As such, civilization will need more concrete and cement, the universal building material of all humanity. 

Energy intensive industries like electrical power generation, cement, steel, and others consume enormous amounts of fossil fuels like coal, coke, oil, and gas, etc.  These fuels are more Btu intensive per dollar than other fuels.  They are also more emission intensive so herein lay the balancing act. 

Some cement and power plants also burn waste of all kinds from scrap lumber, corrugated products, skis, nut shells, shredded tires, waste oils, and other combustibles including dehydrated sewerage.  Technology is ever improving to limit atmospheric contaminants in the form of GHG and particulate matter.  Many are reclaimed and treated. 

Produced at a rate of about 25 billion tons per year and growing, concrete requires a tremendous amount of energy to produce, transport, and maintain.  Cement production may create substantial GHG, but how does that work out over its life time?  Concrete is not fully recognized by the any existing standards for its durability.  Put in the language of sustainability, its Life Cycle Assessment has yet to be fully recognized.  

To make the point consider this one amazing statistic: A typical family car produces 11,760 lbs of CO₂ per year.  The concrete driveway it parks on, measuring approximately 24’ X 50’ produced 5,880 lbs of CO₂ the one time its cement was manufactured.  The car produces twice as much CO₂ every year.  And, over a 30 year life span of the driveway, the concrete’s contribution to GHG shrinks to less than 200 pounds per year, an amazing 60 times less that the car every year.

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Editor’s note: this is the third of eight chapter previews of the new workbook and manual, Green Purchasing and Sustainability, that will be available to order in July 2011.  To see all chapter previews, click here.

 This chapter preview is an exercise, one of the many that punctuate the learning throughout this singular publication.   For the answers, send an email to mail@RobertMenard.com 

EXERCISE on REUSE 

1. Which two are sustainability benefits of Xeriscaping ? (pick the best two)
   • It conserves water
   • It eliminates landfill space
   • It minimizes maintenance energy      
   • It does not require packaging
2.  How does gray water contribute to sustainability? (pick two) 
   • It conserves the existing water supply
   • It is a natural organic fertilizer
   • It reuses rain water
   • It is paperless
3.  How can fly ash used in concrete be considered sustainable? (pick two)
   • It cannot be considered sustainable
   • It reuses waste created by coal combustion
   • It substitutes for a proportion of Portland cement in concrete products
   •  It conserves water 
4. Which one cannot be reused? (pick one)
   • Universal grocery pallet
   • Re-writeable CDs
   • Ink on printed pages
   • Rain water

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