15 Apr 14

Ideas on how you can build supplier partnerships in Responsible Procurement

Ideas on how you can build supplier partnerships in Responsible Procurement

Guest blog from Alis Hemmingsen at Responsible Procurement Excellence 
We live in an ever-changing world, where increased competition, higher consumer expectations and shifting attitudes towards the environment means that today, the expected lifetime of a product is becoming ever shorter.
This places heavy demands on the ability of your organisation and suppliers to develop new products that are sustainable from the outset.
How can you build stronger partnerships with your suppliers and include them in the very beginning of an innovation process?


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.

See your suppliers as an extension of the company

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

Why is it not happening?

Up until now procurement has been viewed (and acted) as pretty much process oriented and savings obsessed. What they really need to do is move to a function where focus is on customer service and helping achieve the corporate strategy. (My mantra is typically that, there is more to procurement than savings. This fits really well here.)

Procurement and suppliers have to move

Procurement teams are often disconnected from the functions they serve and the markets they engage with. They are not fluent in the nuances of the business and hence lack expertise and authority. And besides that their typical response is: "let's run a sourcing exercise and issue a tender which takes too much time".
You could say that procurement has to move from a focus on savings, contract compliance and risk reduction to a focus on time to market, product success and project efficiency. And suppliers will have to engage and understand the agenda even further.

How can you build partnerships?

In order to build partnerships you can:
  • Become a trusted customer – you should build an atmosphere which is welcoming
  • Show fairness – it could be risk compensation
  • Share information, by developing supplier involvement strategies and communication plans
  • Develop effective scouting technologies – attract the right suppliers

Empower your partnerships

You can also empower your partnerships with a “supplier management platform”. Have a look at the Supplier Management Platform from State of Flux Technologies.
It is an integrated platform that empowers enterprise-wide connection, collaboration and value creation. You can manage suppliers, contracts and categories, to reduce risk and cost; drive innovation; improve performance; and build relationships with your suppliers and business partners.

Typical barriers to effective partnerships

Not invented here

Many do not believe that ideas coming from outside can be used (Source: Henry Chesbrough of the Center for Innovation, Berkeley, California).

Lack of awareness

When a solution doesn’t suit an individual business unit but may be used in whole or part in another part of the organisation, a supplier might not be informed - not because of ignorance, but because of a lack of awareness that the requirement exists elsewhere in the organisation.

No control over IP rights

Some customers want complete control over the IP rights, which suppliers are unable to provide. In the worst case, this can terminate the process.

Forgetting to share knowledge-sharing tools

Procurement forgets to incorporate KPIs related to innovation into the cooperation. One might well give a reward for the number of ideas a supplier has made ​​over one year. You could also segment the suppliers from an innovation point of view (gold, silver or bronze).
Including the use of scorecards: How many ideas have they come up with? How useful are the ideas? How much value do they bring to the company? How much they save us per year?

Lack of periodic reviews with strategic suppliers

What technological investments, new product developments and capacity forecasts are suppliers anticipating in the coming year?
Responsible Procurement Excellence is specialised in helping companies around the world develop and integrate an actionable approach to Responsible Procurement. An actionable approach goes beyond compliance, and has a positive effect on the reputation, cost and efficiency.
Find out more about State of Flux Technologies' Supplier Management Platform and request a demo.