Consider 'butterfly effect', buyers urged

posted by Katie Jacobs
26 July 2017

Procurement professionals must consider the impact of their decisions “end-to-end” and on society, according to a professor of supply chain strategy.

Richard Wilding, professor of supply chain strategy at Cranfield School of Management, told SM that procurement professionals needed to consider the bigger picture at all times. 

“Procurement people might think about supplier costs, but not supply chain costs,” he said. “They are not thinking about the end-to-end. How does this deal impact on the risk profile of the supply chain, overall costs and inventory profile, for example?”

Wilding also urged procurement managers to think about the wider social and environmental impacts of their business decisions. 

He used the example of a sporting goods manufacturer that used to employ about 130,000 people in factories in Asia. Due to a procurement decision, the manufacturing was nearshored to a highly automated factory in Europe, which employs only 1,000 people.

“These are procurement decisions rather than board level ones,” he said. “I could be making a procurement decision, but what is the impact it could be having on society? Some of those decisions have major impacts.”

He advised professionals to think about the implications of any procurement choices in three areas: the impact on broader global society, profitability and environment. “Those areas all need to be weighed up,” he said.

Wilding said he believed the impact on society more widely was the most often overlooked, but that decisions could have far-reaching negative consequences. “A seemingly small decision being made in an office in Milton Keynes could sow the seeds for civil unrest in another part of the world, due to lots of people losing their jobs and migrating,” he said. “It’s the butterfly effect.”

Consideration of the three areas should be built into decision-making, he added. “It’s something that needs to be built into the culture of a business,” he said. “That needs to be something that comes from the top.”

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