Tag Archives: supplier innovation

Supplier-Enabled Innovation Is An Opportunity To Add Value

Businesses are tapping into the expertise of their supplier network to bring new products to market faster and streamline their processes.

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Where do new ideas come from? For many organisations, the answer is research and development. But imagine if the R&D department included not only your own people, but those from hundreds or even thousands of your suppliers too.

This is the promise of supplier-enabled innovation (SEI), which enables companies to tap into the expertise of their supplier network to develop new products and services or refine existing ones.

It’s not exactly a new idea, but according to David Rae, head of the Supplier-Enabled Innovation Center, it is an underutilised one. “If you have thousands of suppliers and a portion of them have R&D divisions focused on your sector, then you’d be mad not to tap into that resource,” he says.

Companies that combine their innovation efforts with those of their suppliers typically bring products to market faster, giving them a competitive advantage. The inevitable risks and costs of developing new products or services are also spread among a wide network of stakeholders. And due to their specific expertise, suppliers are often able to suggest product improvements that are unlikely to occur to internal teams.

It makes sense to partner with companies specialising in a particular area, says Omer Abdullah, co-founder and managing director of The Smart Cube, which provides procurement, analytics and research expertise. He uses the example of a packaging supplier to illustrate the point. “They’re the ones who have a vested interest in knowing what the latest packaging types are, what the latest packaging sizes are and what are consumers demanding,” he explains.

That’s certainly true in the case of Bayer, which works closely with suppliers such as Schott to find the best packaging for specific drugs. By collaborating early in the ampoule or vial selection process, with Schott contributing its expertise in how certain active ingredients interact with different types of containers, new medication can be brought to market in a quick and safe manner.

The procurement team are ideally placed to drive the innovation partnerships behind SEI, acting as the link between internal R&D, sales and marketing teams, and suppliers. Johnson & Johnson, for example, has focused on turning procurement into a team of “innovation scouts”, seeking out suppliers who understand emerging trends and plan their business accordingly.

This is one of the vital elements of SEI: if you can’t find innovative suppliers to work with, then the whole concept quickly falls apart. If you’re interested in using SEI to improve your R&D function, for example, “you need to take into account things like what percentage of their [the supplier’s] revenue they are putting towards R&D, their strategic goals and where they’re actually headed as a company”, says Mr Rae.

It can be tempting to focus on the current supply chain when selecting SEI partners, but this may not offer the kind of cutting-edge innovation that will really expand internal capabilities, says Simon McGuire, health systems leader for Philips UK and Ireland. “I believe a good procurement team will ensure any supplier activity is initiated with clear alignment and agreement on capability gaps and unmet customer needs, together with an ability to secure the required technology and skillsets from the marketplace,” he says.

An awareness of market trends and shifts, competitor moves and the company’s own patent pipeline is also a key part of an informed view of what suppliers might be able to offer. “For me the most essential element of a good supplier partnership that will deliver is the strong alignment of goals and visions, with clear definitions, responsibilities and objectives from the start,” says Mr McGuire.

Online platforms are a relatively common way of communicating innovation challenges to supplier networks. Philips, for example, has an open innovation portal called SPICE, which allows suppliers, companies and individual inventors to collaborate to both view Philips innovation challenges and suggest ideas of their own. But the success of these platforms depends upon suppliers receiving relevant, timely feedback on their ideas and transparency around the development of any proposals.

Indeed, the trust at the heart of any good partnership flows both ways. “Surprisingly, suppliers do not always take their innovation first to their largest or even their most profitable, highest-margin customers,” says Clive R. Heal, a procurement innovation expert who leads Voicinn, a group of global innovation keynote speakers, and founded and led the Roche Innovation Center of Excellence. “They target customers with whom they have the closest relationships and see the best longer-term growth opportunities.”

Both companies should also be clear about who will own the intellectual property (IP) for any new products or services before embarking on a partnership. For instance, would a licensing approach, with the company granted exclusive rights to use a particular technology or service for an agreed period, work best? Or is a joint IP model the better option? Many innovation partnerships fail to clear this hurdle due to competing interests, Mr Heal points out.

Regardless of which ownership approach is agreed, successful SEI initiatives nearly always follow a long-term approach to innovation, focusing on mutual benefits for both customer and supplier. In other words, a true partnership that runs counter to the “not invented here” syndrome still found in many businesses.

“Overcoming this is difficult,” says Mr Rae. “But with the disruption now happening – the platform business models cropping up, the growth in startups, the fact that innovation is taking place everywhere and not just in R&D labs – companies will have to change, otherwise they’re going to get disrupted too.”

This article, edited by Peter Archer, was taken from the Raconteur Future of Procurement report, as featured in The Times.  

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Is it Worth Fighting for Sustainable Procurement?

Why procurement professionals must drive supplier innovation in order to keep up the fight for a sustainable planet.

As a procurement professional it can sometimes be a little bit challenging to keep up the motivation to pursue a more sustainable planet. News headlines and science reports reflect a world which is developing in the wrong direction.

Oceans are becoming more acidic, with devastating results on coral and connected ecosystems. The air in major cities is full of high levels of dangerous particulates. Crop-growing regions for key commodities are shifting. Sea levels are rising.

At the end of the day, is there still hope for you, me and the planet? In this article I will put focus on some of the positive signs we can see. Let me be clear – it is still worth fighting for sustainable procurement, the planet and the generations to come.

Greater Transparency

Transparency is growing. It’s harder and harder to hide malfeasance. Carbon emissions are disclosed. Everyone is online everywhere, and we have easy access to information, and the ability to pictures of something that we dislike at any given time of the day. And if you fail, even as a company, the public will collectively judge and give the verdict.

Even in procurement we are working with tools, like the Ecovadis sustainability rating system, where the performance of the suppliers is evaluated. Not only for the sake of performance, but also because we want companies to change. To create impact driven approaches.

Regulators and Heroes Show the Way

It is obvious that the more transparent we get, the more the regulators act. More and more companies and public actors disclose their behaviour, and this leads to actions amongst regulators who create climate treaties, introduce carbon taxation, or hand down regulations to markets.

Investors have even started incorporating sustainability and ESG risk into their calculations on where to invest their money.

Heroes are among us. Alongside the great minds in science, many individual policy-makers, business leaders, farmers and consumers are making millions of decisions and taking small steps, every day, to reduce their impact or improve the planet.

The vast majority of people want to take care of their world, and science and the media are providing the tools and knowledge to help them do so. Lights are being turned off. Public transport systems are being built and used. Less food is being wasted. Each of us wants to be a hero.

Fostering Innovation and Collaboration

Innovation matters. Enormous investments are being made. These efforts, many of which are being driven by the best minds in academic and business labs, will without a doubt deliver solutions to many of our environmental challenges. It’s a question of when, not if.

Collaboration is happening. Competitors are talking to each other and to policy-makers around how to share best practices to reduce costs and improve efficiencies. Solutions to global sustainability problems are too big for any one country or company to solve.

Integrating Sustainable Supplier Innovation

We should not forget that a company’s ability to build close partnerships with innovative suppliers is directly correlated with the firms successful innovation performance. Companies which include their suppliers in the innovation process seem to financially outperform their peers that do not.

It is a fact that 90 per cent of companies do not include their suppliers in their innovation processes. 69.9 per cent of corporate revenue is directed towards externalised, supplier driven cost. Suppliers should be viewed as an extension of the company and, as such, they should be incentivised, coached, sanctioned and rewarded to help achieve corporate objectives.

The message is clear: we need to keep fighting for sustainable procurement, the planet, and the generations to come. We can make a start by integrating suppliers closer to the innovation processes.

Big Ideas in Procurement in Africa

Procurement in Africa receives a lot of press, not necessarily all of it positive. But as the profession develops, more ideas will be generated by its professionals.

Ahead of the Big Ideas Summit 2016 on April 21st, we are taking a look at the key issues facing procurement in the coming years. We have asked experts and influencers in our community to share their Big Ideas on the themes we will be discussing on the day.

Here, our experts and influencers share their thoughts on the Big Ideas impacting organisations and industries in procurement in Africa.

Elaine Porteous, Freelance business writer in Supply Chain and Procurement

Elaine PorteousHow can procurement foster innovation from its key suppliers? Is it a case of triangulation or strangulation?

My contention is that many of the creative suggestions and innovative ideas arrive and die in procurement. Why?

  • I’m too busy for this
  • Not my job
  • Don’t know who to pass it on to
  • What is the supplier trying to get from us?
  • What’s in it for me?

If we talk about supplier innovation, we are asking our key suppliers to help us with a problem that we need to solve. But who engages with the supplier to discuss his ideas? Procurement.

And then what? The cycle begins again. My Big Idea is that procurement leaders need to teach procurement people how to deal with supplier innovation.

Procurement - Where Innovation Goes to Die?
Procurement – Where Innovation Goes to Die?

Mervyan Konjore, Managing Director & Social Change Measurement Specialist, Measure Value Ltd

Mervyan KonjoreMy Big Idea looks at Corporate Social Responsibility programmes and the gap between aspirations to make the world a better place, and creating a better world.

Many companies have adopted and integrated Michael Porter and Mark Kramer’s premise about the link between competitive advantage and corporate social responsibility (CSR), by finding ways to incorporate suppliers in their value chain, upskill, train and capacitate staff and give back to communities where they operate. 

However, the impact of these social programmes are still largely assessed using either financial metrics or anecdotal reports, both of which fall short of capturing changes in behaviour such programmes strive to effect. 

As companies come under greater scrutiny regarding whether their social programmes transcend statutory compliance, the realisation that there is a need for different measurement metrics is slowly starting to dawn. 

There is a need for measurement metrics capable of helping companies determine the gap between aspirations to make the world a better place, and creating  a better world. Such metrics need to capture, quantify and determine the impact of and value created by CSR programmes. Quantifying the changes in behaviours can allow organisations to see the impact of these programmes in people’s lives.

Do you work in supply chain or procurement in Africa? What’s your Big Idea for the future of profession? Let us know and we could be discussing them on April 21st.

Want to know more about Big Ideas 2016? Then visit www.bigideassummit.com, join our Procurious group, and Tweet your thoughts and Big Ideas to us using #BigIdeas2016.

Don’t miss out on this truly excellent event and the chance to participate in discussions that will shape the future of the procurement profession. Get Involved, register today.