Purchasing Process

Topics: Procurement, Supply chain management, Gleneagles Hotel Pages: 21 (6766 words) Published: August 2, 2013
1.0 Introduction
Climate change is a world wide problem which affects the environment. In a developing world, resources from the earth are at risk of being depleted to an extent that it is non-existent. It is therefore important that individuals as well as organizations consider the threats of a changing climate and by doing so, disruption could be avoided, and goods and services to the public could be delivered in an effective and efficient manner. There are numerous South African and Global laws and policies applied in South Africa pertaining to what government requires businesses to adhere to, to combat climate change effects, sustainability of the environment and pollution control among others (Environmental Affairs, 2013).

This report aims to discuss, illustrate and critically evaluate the impact of climate change on the purchasing process of a business in the private sector. It is based on a Private company and limited information about the company is available for the use of this analysis. A discussion of climate change and the role that companies play in contributing to this global issue will also be included. Particular focus will be placed on Diageo Plc. There will be an analysis of the purchasing process of the company, with challenges being identified and the appropriate recommendations suggested.

Diageo Plc was chosen for this analysis based on it being the top company in the beverage sector (Diageo, 2013). The company had also won the prestigious ‘Britain’s most Admired Company’ Award for 2012 (Diageo, 2013). The award criterion comprised of the following: Quality of management, financial soundness, Quality of goods and services, development of talent, Value as an investment, Capacity to innovate, Quality of marketing, Community and environmental responsibility and Use of corporate assets (Diageo, 2013). Diageo is in the business of creating premium alcohol brands such as Johnnie Walker, Bushmills, Amstel and Smirnoff among others. It is a global company that has products in more than 180 countries in the world (Diageo, 2013). The purchasing process of this company will be further put under analysis as it aims to achieve optimum performance in its supply chain and simultaneously pursuing to further improve on its environmental sustainability as a company. 2.0 Climate Change

Climate change is the long term change in weather conditions, such as changes in temperature, wind patterns and rainfall (Agrafioti, 2013). This leads to global warming which is caused by the increase of certain gases, especially carbon dioxide due to human activities (Agrafioti, 2013). This is a global problem which affects the environment, individuals as well as companies.

Business and industrial operations are significant sources of air pollutants. The combustion of fossil fuels creation of electricity, industrial processes and transportation are among the major causes of climate change (BC Air Quality, 2013). The environmental effects of climate change will have a direct impact on the economic development of many countries, as well as bearing the risk of lowering the GDP which in turn will have a major impact on business development (World Bank Group, 2013).

Climate change is the basis of future resource driven conflicts, tension over energy supplies and economic damage (Frank, 2012). It affects the operations of a company by increasing costs for utilizing emission control systems, increased prices of good and services due to increased transportation costs etc, as well as the demand for goods being dependant on the company’s reputation for following legislation based on the affects of climate change (Investopedia, 2013).

The effects of climate change inevitably affects the procurement process of all companies due to the fact that they have to comply with the various legislations that are required by government pertaining to environmental laws such as National Environmental Management Act 107...

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Diageo, 2011. Annual report 2011. [Online]. Available: http://annualreport2011.diageoreports.com/business-description/premium-drinks.aspx. [29 March 2013]
Diageo, 2012
Diageo, 2013. ‘Suppliers’. [Online]. Available: http://www.diageo.com/en-sc/csr/valuechain/Pages/suppliers.aspx . [27 March 2013].
Dr Ino Agrafioti (2013) Defining Climate Change [online], available: http://www.ensaa.eu/index.php/climate-change/97-defining-climate-change.html [7 March 2013]
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Gosnell, D. 2012. Partnering with suppliers.[Online]. Available: http://www.diageo.com/en-sc/csr/valuechain/Suppliers/Pages/Partneringwithsuppliers.aspx . [27 March 2013]
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Figure 2: Multi- supplier, multi-plant, multi-type and multi-level distribution centres, multi-item and multi-period logistic model (Alemany et al, 2009)
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