Strategic Supplier Management Is Procurement’s Next Innovation Frontier

We are delighted to post this article from guest author Daniel Ball, director at eProcurement specialist, Wax Digital.

Better supplier relationship management (SRM) has always been a key priority for procurement professionals, but in the future it plans to take a far more innovative approach to achieve this. That’s according to our recent findings in our Procurement Innovation Pathway research into how innovative procurement considers itself to be.

Innovation is essentially about sourcing different solutions to problems, challenging the norm and being ready to take bold steps on new ground – all in the interests of improving an organisation’s prospects.

Think back to procurement’s heritage and you would have to agree it wasn’t the department most likely to be associated with innovation. But this has clearly changed and procurement now has clear priorities for where it plans to start on its innovative pathway:

  • Supplier Relationship Management
  • Sourcing new suppliers
  • Reducing supplier risk

The research we conducted with Morar Consulting and which surveyed 100 UK senior procurement professionals puts SRM as procurement’s top current innovation area, with sourcing new suppliers for product innovation second. Reducing supplier risk was also a top five innovation, suggesting that the supply base is under serious scrutiny as purchasing professionals seek to drive change.

Over half (57%) of respondents cited SRM as a priority while 49% are addressing supplier sourcing for improved innovation. Managing supplier relationships remains the top priority into 2017 and improving supplier sourcing practices also comes into the top five, suggesting that a focus on enhancing the supply base will remain central to procurement’s drivers for some time.

Compared to a number of other broad business innovation objectives, manging supplier relationships also features as a key focus for the survey respondents. 84% said they were currently involved in supply chain collaboration, 40% said that they were currently leading it, and 50% expect to be leading in this innovation area in the future.

The picture is mirrored when it comes to procurement technology investment. The two technologies most commonly in use today are heavily supplier-focused, with supplier information management top at 51% and contract management second at 49%, whilst SRM tools are among the most common technology investments planned for the coming 12 months. Overall, more than 70% of survey respondents see procurement technology as being equally vital to process efficiency and genuine innovation. Procurement systems are now also perceived as delivering equally to the department and the business as a whole.

All these findings point to the UK’s procurement professionals heading on the innovation journey, designed to deliver and drive the business, as well as improving their own day-to-day processes.

Procurement’s path to innovation may not be an all-together smooth journey as it has the potential to be hampered and restricted by its own inherent aversion to risk. However, it’s clear that building better relationships with the right suppliers, whether existing or new, is clearly uppermost in the mind of procurement professionals. Many of the more transactional and process quick wins have already been achieved, so it is natural that we see more and more companies looking to strategic supplier management as the next frontier to conquer.

Procurement is an innovative profession, but are they heading in the right direction or truly prepared to break the mould? To become real innovators, procurement professionals must foster the right business relationships, nurture the correct set of new skills and seek to break ground in its approach to technology. That’s the challenge ahead! 

First Voice

  1. Jordan:

    Nice insight Daniel. I feel that moving towards innovation with suppliers, will require a real mindset shift for a lot of procurement departments. More supplier information isn’t going to alter a combative relationships that’s focussed on short term metrics. For innovation to flourish, collaborative supplier relationships are a must and goals need to shared targets.

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