4 Key Collaboration Takeaways That Will Make Your Job Easier

Aug 24 2015, 9:58 AM6 min read

One of the key topics at the Big Ideas Summit 2015 was the concept of innovation in procurement and the supply chain. Many organisations look for innovative solutions from suppliers, but how easy are these to come by? And are suppliers rewarded for this?

Saying that innovation is a key pillar for an organisation, and actually being able to successfully embed an innovation strategy, are two very different things. Supplier innovation can be tricky to nail down and many procurement departments are not looking in the right areas.

How it can work

For some organisations, it’s about working with the right suppliers. Craig Muhlhauser, CEO of Celestica, spoke at the Procurement Leaders ‘Ovation’ event in July, and spoke about how he brings about innovations for his organisation and for the companies they supply to.

According to Muhlhauser, both organisations need to be open to change in ways of working and ask questions in order to understand the other party’s point of view. Where procurement is concerned, Muhlhauser believes that the profession needs to be less prescriptive to suppliers, leave specifications more open and use the expertise of the supplier to uncover innovation.

This collaborative working relationship has successfully borne fruit across a number of industries. In the automotive industry, Brose, a German-based supplier, worked closely with its customers to produce a new door unit, way ahead of its rivals in terms of quality and innovation.

The key for Brose had been procurement on two sides – their customer, but also internally in order to allow them to build collaboration and trust with their own suppliers to make innovation a reality. Supplier collaboration has also helped to improve supply chain sustainability in the NHS in the UK and led to GAP Inc. being named the winner of the GT Nexus Innovation Award 2015.

Both positive examples have highlighted the work of procurement in supporting the innovation.

Why it fails

Failure to generate innovation, or sustain innovation in the supply chain can come down to a number of factors, although it would be hard to pinpoint one in particular as a key culprit.

A common issue can be with one or both parties not fully engaging in the process. In the Brose example, one supplier involved had to make a financial commitment before a production contract was signed. Payments like this are certainly not common, but here help to build the commitment and trust between the two parties.

Strategy is another common issue. Where strategy is too rigid, or where the strategy is simply pointing to procurement savings, innovation will suffer as the parties in question have approached it with the wrong mind-set. Where innovation is seen as a step to future learning and opportunity, research has shown that it is more likely to endure.

The other side to the strategy argument is that often procurement functions do not formalise the innovation process. Formal programmes are often reliant on senior stakeholder buy-in, something that procurement may struggle with if they lack credibility in the organisation.

Just Reward

While formal programmes and investment can help to drive innovation, it’s worth remembering that rewards or incentives for innovation will help the process. In some cases, procurement has been tasked with saving money, so spending more to achieve innovation is not rewarded.

Suppliers who feel like they will be supported and rewarded are more likely to go the extra mile and suggest innovation to procurement. Building incentivisation into contracts can help to formalise the relationship and underline the support on both sides.

The Real Question

“Is procurement open to innovation?”

That’s the real question. There are good examples of innovation in procurement and supply chains, but plenty more where there is inactivity or hesitance. Have we as procurement professionals been painted into a corner, where savings and the bottom line are the only things that are considered?

We better hope not, or, as Craig Muhlhauser argued, it’s adapt or cease to exist.

Have you got any good examples of innovation in your procurement department or supply chain? How do you encourage it? Let us know on Procurious!

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