How a Robust Supplier Qualification Program Impacts your (Triple) Bottom Line
Co-Author: Jenny Peterson Sustainability Consultant at The GMP Collective
You just found out that one of your suppliers of cannabis flower failed their state mandated test for a pesticide. This equates to a loss of 200 pounds of biomass your operation was planning to process for its tincture, edible, and vape pen line. You are already struggling to deliver the amount of product your top dispensaries are requesting. Now what? What are your next steps? How much of your precious time will it take to correct this solution? Is there even a solution? Before the panic sets in – let's pause to talk about the impact that a strong, reliable Supplier Qualification program can have on your Bottom Line.
Introducing the Triple Bottom Line
Most people know what the standard definition of the bottom line is… a company’s earnings, profit, net income, or earnings per share. The triple bottom line is a growing concept, first discussed in 1994 when author and entrepreneur John Elkington introduced the concept in his book, Cannibals with Forks. Today, many organizations have learned that success is defined by much more than their profit and loss statements. Enter the triple bottom line, which looks beyond the financial aspects of performance to include a business’s contributions to environmental health, social well-being, and a just economy. It may also be easier to remember the triple bottom line as the 3P’s – People, Planet, and Prosperity. For more reading on the triple bottom line see Elkington’s book, a great primer from the University of Wisconsin’s Sustainability Management Program or simply harness the power of Google.
But what about my suppliers?
As any business evolves and grows, it becomes more reliant on external factors to deliver your goods and services to an established level of satisfaction. A supplier qualification program addresses two fundamental questions: (1) which suppliers meet a set of measurable criteria to begin doing business with you and (2) which suppliers are able to continue to do business with you. Let’s look back at the failed pesticide issue we began with. Is this failure the first time in over 100 reliable batches of flower over many months from this particular supplier? Okay, maybe that’s not such a big deal. Or, is this the 2nd time in the last 30 days, and just another issue of many you have encountered over the last year of doing business with them? If so, have you asked yourself if this is really worth managing with their lack of reliability?
Another way to ask the question – How do you protect your brand and have confidence in the quality and consistency of your raw materials? As one of the key components of any Quality Management System, your supplier qualification program reduces the risk of failures with your suppliers, preventing easily avoidable failures and delays in your operation. The program identifies risks that may require heightened supplier oversight. Through this collection and monitoring of data, your organization is able to make informed decisions. The goal here is not to simply make a pass/fail system for suppliers but to be proactive in identifying risks, and driving continuous improvement which trickles into your operation.
At The GMP Collective (GMPC), we provide all our cannabis clients that implement Quality Management Systems and Good Manufacturing Practices (GMPs) programs a customized Supplier Qualification Program. In short, it employs a three-tiered framework to rank and monitor suppliers by risk. For example, suppliers with an established training program rank higher than those that do not have an established program, or those who have had issues in the past.
Bringing it all together: Sustainability, Triple Bottom Line, and Supplier Qualification
In the realm of supplier qualification, it is easy to use the triple bottom line framework when considering what suppliers to partner with. After all, the sustainability of your organization is directly affected by the reputation, reliability, and awareness of your suppliers' impacts on social and environmental matters. For starters, during the qualification process of a supplier, you can ask some simple questions regarding the supplier’s active involvement in sustainable practices. Their ability to demonstrate this could include efforts to reduce packaging waste or managing a proactive environmental monitoring program.
(1) The Elkington Report: Zen and the Triple Bottom Line
At The GMP Collective, we are committed to driving cannabis industry standardization which includes sustainability. Since obtaining his Master’s of Science from Northern Arizona University’s School of Earth and Sustainability where he researched Arctic climate change, President and Founder David Vaillencourt has applied his commitment to combatting client change through the cannabis industry standardization by leading several working groups and subcommittees within ASTM International’s Committee D37 on Cannabis. ASTM International is one a few globally recognized standards development organizations, and is an active supporter of the United Nation’s Sustainable Development Goals (SDGs). As Committee D37 and the cannabis industry at large evolves, it will be critical to show commitment to sustainability through the UN’s SDGs.
The United Nations Sustainable Development Goals (SDGs)
The United Nations’ 2030 Sustainable Development Goals, or SDGs, were developed in 2014. These goals aim to “end poverty and hunger everywhere; to combat inequalities within and among countries; to build peaceful, just and inclusive societies; to protect human rights and promote gender equality and the empowerment of women and girls; and to ensure the lasting protection of the planet and its natural resources. We resolve also to create conditions for sustainable, inclusive and sustained economic growth, shared prosperity and decent work for all, taking into account different levels of national development and capacities.” Goal #12 is Ensuring sustainable consumption and production patterns. Specifically, a Supplier Qualification Program is well suited to address two of the eleven targets within the goal (ref image of 12.6 and 12.7).
(2) United Nations 2030 SDG #12: Ensure sustainable consumption and production patterns
The Business of Sustainability
So, who holds the key to influence supplier qualifications? Purchasing – we’re looking at you! CPOs, or Chief Purchasing Officers, “are in a position to influence the thinking and orientation of the internal customer about the need for specifying green goods and services and qualifying acceptable equity suppliers” (Hershauer et al., 2011, p. 186). Regardless of whether or not your organization has a CPO, the purchasing department still holds the key to impacting your triple bottom line.
Hershauer et al. (2011, p. 329) also state in their book, The Business of Sustainability, that “Businesses must closely monitor and manage their manufacturing processes and those of their suppliers and partners to ensure compliance with regulatory compliance requirements and voluntary sustainability commitments. New operating models may be required as companies respond to a regulatory landscape that poses increased risk and complexity in manufacturing and product design.”
Next Steps
Take a look at your internal Supplier Qualification program. Could it use some work? When was the last time that you re-evaluated your suppliers to ensure their compliance with standard GMPs, or sustainability as a whole? If you are lacking a Supplier Qualification program, now is an excellent time to create one with the inclusion of sustainability. Reach out to us at The GMP Collective if you would like an introductory discussion on how a supplier qualification program can benefit your triple bottom line.
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