Procurement functions have the potential to play a big role in a critical activity – supplier collaboration. But first, Procurement must change their mindset and start viewing suppliers in a new way:
- Suppliers are no longer seen as vendors, they are seen as business partners.
- Contracts are no longer the centre of the relationship, collaboration is the centre of the relationship.
Companies that have adopted this mindset change are better able to use suppliers as a source of innovation, tolerating disruption and driving sustainable business.
Supplier Innovation seems like the perfect solution. Companies need innovation and they can source it from their suppliers. But is it? Are they missing something? And what does Supplier Innovation really mean?
Supplier Innovation works well for companies that are doing it right.
However many current Supplier Innovation strategies hold contracts at the centre of the relationships. Suppliers are still vendors, this time of innovation not materials, and capabilities are seldom leveraged to their full potential.
Without a complete change in mindset, Supplier Innovation would not be the outcome of a strategic partnership between two companies. It would remain a tactical endeavour, focussed on particular outcomes & delivering limited value.
So, what is missing? Collaboration.
Collaboration should be a new area of focus for procurement. Innovation from suppliers then occurs as a result of a new category of activity – Supplier Collaboration & Innovation.
Collaboration replaces innovation as the objective of the relationship, and innovation exists as an outcome. The relationships that once centred on contracts are now built through strategic alignment, improved communication and trust, creating a long term, mutually beneficial partnership.
Innovation is just one outcome of effective collaboration. Through their impact on partnership quality and productivity, procurement will facilitate a step change in efficiency and uncover opportunities for cost savings to be made.
Procurement has a great opportunity to become a hero for the entire business. By adopting the correct mindset, and obtaining support of the vision from C-suite executives, procurement functions will play a key role in driving innovation and sustainability.