The Environmental Sustainability Puzzle in Purchasing Can Be Solved by Adding CO2-Values to the Technology Dimension in Multi-dimensional Dynamic Sourcings

In addition to the technology development at suppliers, purchasing has the task to find and completely internalize new products and product attributes presented by suppliers. Here, digitalization allows for a practical and simultaneously rapid measurement and evaluation process of technical characteristics and added innovation value. Digitally, the technology dimension can be integrated into the supplier sourcing decision in addition to the price by capturing a product’s utility value, which is expressed in the form of total cost of product ownership. Therefore, calculating utility values is a key aspect in also measuring sustainability values, particularly CO2 values of purchased products. This book chapter demonstrates why product innovation by suppliers and within this, sustainability attributes must be a component in the scope of purchasing. After addressing several pitfalls in innovation management with suppliers, a model is developed on how utility values of product characteristic combinations can be translated into a preference curve of the buying firm, taking into consideration reservation prices and target utility values such as maximum CO2 values. As a next step, supplier offers are translated into product characteristic utility-price combinations presented in a feasibility curve. The preference curve and feasibility curve are compared with the customer target price as well as with the target utility values. This creates a solution space for dynamic sourcing based on supplier innovations and sustainability values such as CO2. In other words, CO2 values should not be artificially translated into money, but can be added to the technology dimension allowing for multi-dimensional and dynamic sourcing.