27 Feb 14

Imagine supplier innovation becoming a reality

Imagine supplier innovation becoming a reality

Imagine the sales growth and efficiencies you could achieve if all your key suppliers delivered you new innovations.
When Procter & Gamble agreed to a case study in our 2013 Global SRM Research Report, they stood out as leaders in innovation. More than half of all product innovation coming from P&G today includes at least one major component from supplier innovation. P&G turn to external partners to source innovation – material innovation, product innovation, supply chain innovation, and innovation of services and new business models. 
“We must fuel our innovation pipeline with new ideas, new materials and new services from our external business partners. We welcome those new ideas, and typically have focused resources to help guide the commercial and technical innovation work with our most critical business partners.”
Mary Wagner, Proctor & Gamble’s Director of Global Chemicals & Ingredients Purchases
Innovation is consistently identified as one of the most important elements of the supplier relationship management (SRM) value proposition and ‘leading’ companies are four times more likely to benefit from supplier innovation. However, with only 4% of companies being ‘very good’ at attracting, evaluating and implementing supplier innovation, it is understandable that many companies find it challenging to believe supplier innovation can be a reality.  
Our global SRM research showed supplier innovation as one of the areas of SRM making the least progress - barriers ranging from organisational complexity reported by 49% of respondents, to lack of process and lack of clear ownership reported by 45% and 38% respectively.

How do you make supplier innovation a reality?

The supplier innovation opportunity is significant beyond product or service innovation. The ability to apply supplier innovation to all areas of the supply chain including risk, sustainability, quality and delivery performance creates a compound effect if done correctly.
The foundations of making supplier innovation a reality are also the characteristics of good SRM. 
  1. Value proposition – A clear understanding of the value of supplier innovation and how it relates directly to company objectives and performance.
  2. Ownership – Accountability for sponsorship and delivery of supplier innovation ensures momentum is maintained. Equally the roles all the way from sales/marketing, R&D and procurement to the supplier need to be clear and integrated. 
  3. Focus – On where supplier innovation is going to provide the greatest ROI to meet company objectives.  In turn, suppliers’ objectives, contracts and KPIs should support this focus too.
  4. Alignment – The approach to supplier innovation must be strategically and culturally aligned; it should aim to mirror the company’s behaviours and organisation. This should be extended to the relationships created at an individual, team and company level. 
  5. Simplification – Supplier innovation processes should be lean and agile - from the process to gather new ideas, to the approval of innovation business cases.
  6. Visibility – Supplier innovation activities should be open, visible and transparent. Opportunities to share through open and guided innovation and supplier forums should be maximised.
  7. Enablement – Use of the right tools and technology can accelerate supplier innovation as well as ensure that all opportunities are maximised.
  8. Recognition – Feedback and recognition in all forms is essential, from strong communication to benefits sharing.
The results of our research shows the slow progress in making relationships truly innovative is broadly confirmed by suppliers. Although 75% of suppliers say that being part of an SRM programme has helped them present innovative ideas. The symbiotic relationship between SRM and supplier innovation is evident. It is also reinforced by the benefits of being regarded as a real innovation partner and customer of choice by a supplier. Making supplier innovation a reality should no longer be just in the imagination.
Call us on +44 (0)2078 420 600 or email  at enquiries@stateofflux.co.uk to find out how you can increase sales and efficiencies through supplier innovation.