Procurement Turns to Supplier Relationships for Innovation
As procurement seeks to increased its involvement in innovation, it’s turning to its supplier relationships to drive change.
This article was written by Daniel Ball, Director at Wax Digital.
Wax Digital’s Procurement Innovation Pathway research is based on 100 interviews with the UK’s senior procurement professionals, to canvass their opinions of the key topics in the profession.
Previously, we highlighted that procurement wants to be more involved in innovation. However it is the risk averse nature of procurement that appears to be holding it back.
In this article, we assess the importance of good supplier relationships.
Mutually Beneficial Relationships
Achieving effective, mutually beneficial relationships with suppliers can be a great way for procurement to drive positive change. That’s just one reason, according to new research, why procurement professionals are prioritising suppliers in their quest to innovate.
In fact, Wax Digital’s research showed that procurement’s top two innovation areas relate to working with suppliers.
In first place, 57 per cent cited supplier relationship management as an area that can aid innovation. Sourcing suppliers for product innovation came in second, with 49 per cent. Reducing supply-chain risks also scored highly.
Turning to Supplier Relationships
Compared to lower scoring areas, like automating processes to save time/resource, and improving spend management by empowering people, the supplier is clearly where procurement is turning its attention to innovate.
New ways of engaging with suppliers, through self-service portals for instance, and ensuring supplier compliance through automated contract management, are key priorities.
But it’s equally about what suppliers can do for procurement. There’s a desire to find partners who can be a catalyst for innovation at the core of the organisation’s products and delivery.
Technological Investment
These priorities remain the focus into 2017 too. This means the future could see an even more supplier-focused innovation mind-set in the procurement function.
Adding weight to this, the two most commonly used procurement technologies are also heavily supplier-focused. 51 per cent of organisations favour supplier information management, while 49 er cent are looking to contract management systems.
And the most common technology investment planned for the coming 12 months is supplier relationship management (SRM) tools. Procurement is clearly doing more than talking the talk on supplier innovation.
Challenge of Involvement
The future looks promising in this regard but there are challenges ahead. Procurement sees the value of supplier focused innovation but it is not always in control of it.
84 per cent of respondents said they were currently involved in innovations around supply chain collaboration. However, less than half of these, 40 per cent, said that they were leading it. Although this figure rises to 50 per cent in the future, there’s still some way to go before procurement fully takes the reins of innovation.
Now that many procurement professionals have already achieved some of the more transactional and process based quick wins, it’s natural that we see more and more looking to strategic supplier management as the next frontier to conquer.
Building better relationships with the right suppliers, whether existing or new, is clearly uppermost in their thinking.
The Innovation 2016 research was conducted by Morar Consulting. The research involved 100 interviews to canvass the opinions of UK senior procurement professionals, working in small to large UK enterprises.
You can find out more about the research, and download the report, by visiting the Wax Digital website.
