Following on from their discussion on logistics in the March/April issue of Procurement Pro, Carolyn Park, Vice President of Group Supply Chain at RS Group and Mick Elliott, Contributing Editor, Procurement Pro turn to RS Group’s engagement with suppliers on ethical trading and environmental initiatives.
“We have absolutely been driving forward over the past two to three years in terms of the expectations we have of suppliers,” says Park.
She cites the company’s ethical trading strategy where RS is working with its suppliers to drive carbon reductions across the value chain, including sourcing, designing, manufacturing, and shipping products more sustainably.
The company uses EcoVadis a global platform that provides business sustainability ratings, measuring performance in environment, labour and human rights, ethics, and sustainable procurement.
“We work with suppliers on science-based targets as well,” explains Park.
RS already has 65% of its suppliers signed up to its ethical trading. Of these, 58% are EcoVadis rated and 41% signed up to science-based targets.
Adds Park: “We use conversations with our external suppliers, internal suppliers, and supplier facing colleagues, to drive their resilience, and help them to understand some of the topics in terms of the resilience in the supply chain and what we would expect them to do and how we believe that drives future competitiveness.
“And we demonstrate how they can differentiate their brand through responsible sourcing.”
Encouragingly for RS and its suppliers, there are customers enthusiastic by this pursuit of ethical trading and keen for RS to push ahead.
“We are increasingly finding in any conversations with customers, and certainly any tenders we respond to, that ethical trading is a key component,” says Park.
Customers are looking for sustainability, including product transportation where RS is aiming to reduce Scope 3 transport emissions intensity by 35% per tonne of product sold by 2029/30. There is a similar target to enable 100% of packaging to be widely reusable or recyclable and made with at least 50% recycled content.
On the geopolitical front, trading with Russia is prohibited within RS.
“Every one of our transactions is screened to check for denied parties, so we have a very robust process behind the scenes. We know from talking to people in the industry and through conferences and other events we have been to, we get a lot of interest in terms of how we do that, so we know we are doing a good job and it’s something that customers expect from us more and more,” confirms Park.
Another string to RS Group’s bow is its Better World product range.
The Better World badge identifies products that have been made more sustainably, provide a sustainable solution, or support circularity; have at least one sustainability improvement, which is material to the product’s lifecycle and offer clear sustainability claims, supported by robust evidence, aligned to global best practice standards.
It is an initiative that has been enthusiastically embraced.
“We have currently got over 170 suppliers and 33,000 products in the range, and we are continuing to grow it steadily,” reveals Park.
RS data shows that the Better World products outperform other products and have particular value to RS’s high value corporate customers who also have ambitious sustainability, safety, and compliance requirements.
“It is almost becoming an expectation that they have of us now that we can support them with that,” says Park.
Designing green products can be more expensive for suppliers and Park concedes that cost is a big challenge, and that some customers might be less willing to pay what could be described as a ‘green premium’.
“Yes, it is a challenge but that balance of sustainability and cost is something we are constantly refining,” Park responds. “One of the things we do find in our business is that the drive for sustainability within the business often sits alongside our opportunity to take cost out.”
She gives an example: “We have a big drive to reduce our use of transport and move things onto the road or, in the case of Asia, move product by sea. This is driven by our sustainability agenda, but it also helps our cost agenda. The two go together.”
There are, however, always unexpected challenges or as Harold Macmillan, a former UK Prime Minister, once put it, “Events, dear boy, events.”
RS undertakes a whole range of modelling where it runs different scenarios to cover potential long-term challenges such as business growth exceeding expectations or real-time problems like a ship blocking the Suez Canal which need faster resolutions.
It is more difficult to respond once you’ve got a container that’s stuck for a period of time,” reflects Park.
“In that situation, for example, we would ship some emergency products out via air, we don’t really want to do it because of the cost and the environment. But we would do that and in the case of product we source from Asia, we always have safety stock in there as well. So our whole network is built on a level of safety stock that allows for some level of emergency. So the resilience is built in through that as well.”
Investments in supply chain enhancements and solutions are continuous at RS.
Park cites its drop ship capability, where it can shift bigger and heavier products directly from the supplier.
“But linked to that is what we call our non-stock capability. There is a certain percentage of our range we don’t stock.”
“So when we get an order from a customer, we actually create a purchase order on the supplier and then it comes into our network and then we onward supply, we’re looking at just improving our process for that at the moment and making it slicker.
“We are looking into using some AI style or machine learning analytics. It’s something called ‘causal analytics’ to help us identify which products we put in our local distribution centre. We have a method of working out what we stock locally based on sales and demand. But we’re also looking at cleverer ways of doing that to see if there’s a better algorithm to determine what we should put locally. That’s not signed off, but generically if we were to talk about use of AI machine learning, that’s definitely the case.
“We have been using some machine learning techniques within the business around our stocked and non-stocked products to determine at what point do we stock it versus running it as a non-stocked line. And typically, especially when we look at new product introduction, a lot of our new product introduction will start as a non-stock line and then, depending on the demand that we see coming through, for that we move it into stocked. But we also do the reverse kind of process at the tail end of the life of the product.”
This article originally appeared in the May/June issue of Procurement Pro
