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Procurement Led Supplier Innovation

Published: 3 years, 6 months ago

Author: Matt Bonwick


In today’s fast moving and complex global environment, the ability to innovate and deploy faster and more profitably than competitors is now a requisite for growth and success. Innovation is well understood as being critical to the core business objectives of improving cost efficiency and improving productivity. Recent research conducted by The Faculty found that for procurement, levering supplier relationships through supplier relationship management is the most common strategic priority to realise more innovation. 


Suppliers are bringing innovation to the table, as it is often core to winning new business, but it is not as comparatively successful in reaching implementation due to a lack of collaboration, capacity and capability.  Cost is a primary driver for the majority of procurement functions, and suppliers are not communicating innovation in the dollar terms required for it to be successful internally. Looking forward, procurement is well positioned to facilitate, but not to own, innovation as operations and other key senior business stakeholders are the most critical in the decision making process for innovation.

 

The following are a set of recommendations developed to assist procurement professionals in driving supplier innovation:


1. Procurement must facilitate cross-functional collaboration across the business but not sponsor or own innovation. Procurement is in a unique position to bring together stakeholder and business unit objectives.  Using this position, it can develop internal cross-functional partnerships and obtain senior sponsorship.


2. Integrate innovation process, projects and initiatives with existing procurement activities.  Seek to replicate the leaders who have defined and integrated the entire innovation process across existing procurement (and non-procurement) processes.


3. Enrich supplier relationship management practice by aligning it with the wider business innovation process and conducing regular supplier meetings. Building trust and confidence amongst both parties through demonstrated partnerships lays the foundation for future, and greater success.


4. Reduce the amount of Procurement ‘red tape’ that prohibits innovation.  By reducing red tape, quick access is available to the existing innovation that is currently lost in supplier and contract management.


5. Collaborate with internal legal and risk management teams to find ways to allow for innovation within contract terms, standard risk positions and commercial models.  By creating flexibility and understanding the parameters, procurement can collaborate more effectively with suppliers to action innovation recommendations.


For further information contact Matthew Bonwick, Consultant at The Faculty on 03 9650 6665.