procurement workshop FMANZ Summit Villa Maria -- May G e t Y o u r G r e e n S u p p l i e r s o n B o a r d..

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1 procurement workshop FMANZ Summit Villa Maria -- May 2015 G e t y o u r G r e e n S u p p l i e r s o n B o a r d And stop calling it a family holiday!!.. G e t Y o u r G r e e n S u p p l i e r s o n B o a r d.. Strategies for FM procurement Innovative & Green Suppliers Please leave your name & You will receive our info package & survey Check: CIPS meetings & the Internet Check: FMANZ Master class & AUT - MBA

2 Get Your Green Suppliers on Board procurement workshop FMANZ Summit Villa Maria - May 2015 with Anne Staal This publication uses work of others for educational and research purposes - please check the references. Strategies for FM procurement Innovative & Green Suppliers Please leave your name & Check: CIPS meetings & the Internet You will receive our info package & survey Check: FMANZ Master class & AUT - MBA

3 Procurement = easy!? Buy or Make wheel

4 A Dutchie in New Zealand 4 Industry experience (15 years) Large (international) organizations include positions of supply chain manager, B2B account manager, procurement manager, project manager and consultant. Senior lecturer (6 years) At the Hanze University - School of Facility Management (with 1000 students). Teach change management, marketing & procurement to (under)graduates. Supervise final bachelor theses. Teaching to a wide range of students in different settings. Teach FMANZ master classes at AUT. Applied research (3 years) Started PhD in NOV13. Specialize in management of innovation & procurement. Research context is construction & sustainability. Thesis ready: AUG / DEC 16. Background BEng, MA, DMS, MBA Dutch; married, 2 kids. We live on the Shore near the beach

5 This workshop 5 Trends in procurement & innovation Others using green & innovative suppliers Three discussions & takeaways: how can we manage? LATER: more info & brief survey

6 Change is Constant Heraclitus 6 No man steps in the same river twice: it s not the same river & he s not the same man.

7 We do not live in changing times 7 but move into a new era in history Professor Jan Rotmans - Erasmus University at the ASITO Facility Management Conference March 2015

8 sustainable business network NZ: But what exactly is GREEN? 8 That depends on what you want & what the market thinks is possible! Money Hill (1915) Environment People Culture generate profit while improving societal & environment conditions

9 Giddings: Environment, Economy & Society fitting them into sustainable development (2012) From (conflicting) overlapping perspectives slowly moving towards a nested model 9 from to

10 Deutsche Bank Research - Measures of Wellbeing (2006) There s more than money 10 What Gross Domestic Product (GDP) does & does not measure

11 Hargroves & Smith (2005) McKinsey report (2013) Waves of innovations (1) 11

12 Gartner: Annual Technology Report (2014) of Innovations (2) 12

13 EllenMacArthur Foundation: Report on European Circular Economy (2013) Circular model & cost saving potentials example 13 (p.a.) Computers & office machinery NZ 150 mio? Furniture NZ 500 mio?

14 Green drives (will drive) business & innovation 14 it will take some time (WBCSD => 2050)?2050?

15 Treacy & Wiersema: Discipline of Market Leaders (1997) BUT: Customer strategies green? 15 Example next slide

16 Website: goleansixsigma.com (2015) YES: LEAN equals GREEN example 16

17 Improvements AND Innovations 17

18 Procuring: Simpson ice traders vs fridges 18 it will take some time (WBCSD => 2050) 2015: portable ice maker 1 minute video

19 Zooming in: NZ 19 IT projects 39% Source: Informed procurement decision-making a guide for government agencies (2014)

20 Johnsen: Purchasing & Supply Chain Management (2014) ZOOMING IN: Current FM procurement 20 Procurement often & still cost-driven Global sourcing is best-practice, often at low-cost Outsourcing 50 90% of turnover Services more important than goods BUT: Risks associated with global sourcing have impact on sustainability & profits Total costs & life-cycle perspectives Procurement becomes a key player

21 NZCIC, 2006; Hinton 2013; Van Weele 2010; FMANZ Masterclasses; Programmed, 2014 ZOOMING IN: Current FM procurement 21 FM procurement 2 billion NZD? Still technical focus & business continuity Not yet hospitality & value-driven? More or Less outsourcing? FM users want: Delivery instead of Lowest price? Often lot of suppliers; tough contract mgmt No whole-of-life costs; short-term outcomes Multi-service contract vs specialist supplier? Suppliers bear risk & liability Service levels at target cost; averse relationships Improving Service Levels & Service Delivery

22 FM Times are Changing 22

23 What can we learn from others on: Innovation & Green procurement? 23 (1) (2) 100 Hungarian SMEs (3 & 4) Public green procurement

24 1 Big-firms went GREEN 24

25 Hughes & Weiss: Kraft Food - Getting closer to key suppliers (2007, cited in Johnsen 2014) 1 Big-firm behaviour prevents suppliers from delivering more value 25

26 DISCUSSION 1 what Big-Firms do 26 6 minutes with your neighbour(s) please use the format 1) Rank the group s TOP 3 barriers (3 min) 2) Discuss underlying reasons (3 min)

27 2 Why green procurement (a) 109 Hungarian SMEs WHY: Attitude % of responses Avoidance of negative effects (Avoidance) 13% Compliance to expectations (Compliance) 58% Achievement of positive goals (Positive) 28% 27 WHY: Motivation Scale 1-5 Regulation & Law 4.2 Cost saving targets 4.0 Customer demand 4.0 Top management support 3.9 Procurement value 3.9 These SME are probably front-runners Vörösmarty: SME research at Budapest University. IPSERA (2015)

28 2 What these 109 SMEs did (b) 109 Hungarian SMEs Require product content restrictions 2. Supplier evaluation with environmental requirements for purchased items 3. Supplier evaluation with environmental requirements for packaging 4. Supplier must disclose the environmental attributes of product content 5. Supplier evaluation with environmental requirements for the suppliers operations 6. Supplier must have ISO Product lifecycle analysis is part of supplier evaluation 8. Suppliers must commit to waste-reduction goals 9. Environmental assessment of suppliers' processes 10. Setting environmental standards for suppliers 11. Cooperation with the suppliers to develop environmentally better products 12. Educate suppliers about environmental issues (In decreasing order) Vörösmarty: SME research at Budapest University. IPSERA (2015)

29 2 DISCUSSION what those SMEs did 29 6 minutes with your neighbour(s) please use the format 1) Rank the group s TOP 3 topics (3 min) 2) Discuss how to realise this TOP 3 (3 min)

30 3 Different & more relationships? 30 Public Procurement It depends on Money & Risk Stakeholders needed for low-energy buildings (Source: WBCSD) MBIE (2012)

31 3 GREEN procurement strategies (a) 31 Public Procurement (strategic) (acquisition) (profit) The Kraljics matrix does the same, but changes the X and Y axes. MBIE (2012)

32 3 GREEN procurement strategies (b) 32 MBIE (2012)

33 Van Weele: Purchasing & Supply Chain Management (2010) 3 Ways of procuring services (c) 33 Public Procurement Output Specification (what supplier sells) Input specification (what supplier needs) Throughput specification (what supplier does) Outcome specification (what YOU want in the end) Focus on the functionality or the performance of the service. Focus on resources & capabilities of the supplier to produce the service. Focus on supplier processes needed to produce the service. Focus on the economic value for the customer to be generated by the service.

34 3 DISCUSSION on specifications 6 minutes with your neighbour(s) please use the format 34 1) Relate the group discussion to critical (strategic) suppliers or services i.e. with high risk & big money. 2) Rank the specification strategies (3 min) 3) Discuss to what extent the group is satisfied with results from such strategies (3 min)

35 Van Weele: Purchasing & Supply Chain Management (2010) 4 Innovative suppliers in UK (a) 35 We need : Long-term focus: trees do not grow faster Combining continuous improvement & radical innovations Early FM-involvement to increase potential to change More parties involved?

36 Rigby: OECD conference on Public Procurement (2013) 4 Innovative suppliers in UK (b) 36 Innovation pays off (in survey of 725 suppliers for public procurement) : 60 % of suppliers got more business contract because of an innovation. AND this figure raises to 72% with more friendly public procurement.

37 Rigby: OECD conference on Public Procurement (2013) 4 Innovative suppliers in UK (c) 37

38 4 Innovative suppliers in UK (d) 38 55% 85% Rigby: OECD conference on Public Procurement innovative procurement (2013)

39 4 DISCUSSION innovative suppliers 6 minutes with your neighbour(s) please use the format 39 1) Rank the TOP 4 of the groups organisations (3 min) 2) Discuss what should change or remain the same (3 min)

40 Johnsen: Purchasing & Supply Chain Management (2014) Value stream mapping: procurement savings 40

41 Simple or Complex keep an open dialogue 41 ADS: 21 st Century Supply Chains - relationship management tools (2012)

42 Structured problem solving 42 (within contract & development management)

43 NZBCSD: Sustainable Procurement in Government (2010) Talking money & examples 43

44 Some reasons for doing nothing Short-term interest & other priorities 2. Market failure we cannot find suppliers 3. Too high in uncertainty & risks 4. We d rather be a steady follower with better results 5. No best-practices available 6. I will retire next year 7. No resources no business case 8. We are satisfied with the status-quo

45 Wrapping up 45 1 Big firms 2 Hungarian SMEs 3 Specifications 4 Innovation

46 Thank you 46 You will receive - slides & collected information. - a brief survey on: o Today s topic o I&G suppliers Check the AUT - FMANZ Master classes Check the new AUT - MBA procurement paper Check the Sustainable Business Network Or check the CIPS educational offering in NZ