Supplier Innovation in 2015

Whilst business agility was once a major corporate buzz-phrase that took a back seat when the recession started, it is back and this time “agility will prove to be a lasting, fundamental attribute” not “just another passing business fad.” Or so says a recent report in Supply Management Magazine (http://bit.ly/1C0FBP6).

That report quotes a “Key Procurement Issues in 2015” survey in which nearly three-quarters of respondents said that increasing agility was second in their list of priorities (the top one being to make Procurement a trusted advisor).

This is because the business strategy for more than half of responding organisations is to grow their business either through innovation-led market entry or through innovation-enabled market expansion.

And as we all know by now, critical suppliers are a vital component in helping to create and exploit innovation. What the report also emphasised is that senior management wants Procurement to be perceived as a change agent and facilitator in making this happen.

However, the report said the capacity to address these issues was limited. Therefore another finding in the survey was that Procurement departments themselves see it as vital to develop their capability to be more agile.

You might ask what does this involve?

The starting point is to understand what is meant by agility. Rather than use one of the many business euphemisms you can find on the internet, I turned instead to a sports coach for a definition. After all, agility is a real and valuable attribute in sport.

The definition I got was that agility is “the ability to change the direction of the body in an efficient and effective manner and to achieve this you require a combination of speed, strength and co-ordination”.

So what does this mean for Procurement and its key suppliers in the context of the discussion above?

Clearly, there is an analogy between a human body changing direction to react to an event in a sport and an organisation and its suppliers changing direction to react to events in their markets and supply chains.

What we don’t want is for our “corporate body” to be as cumbersome as an elephant in making swift changes. We want the elephant to be able to dance!

The next question then is how we develop the equivalent of speed, strength and co-ordination with our suppliers.

Speed is applicable to a lot of areas when we are dealing with innovation and suppliers. Finding opportunities and capitalising on them is just one and an important element of this is the speed of decision-making.

A large client of mine thought they were good at making quick decisions until we analysed about 150 instances covering 4 suppliers. My client thought about 2 days was the average for these decisions. Our analysis showed that 56% of them took 30 days or more!

Strength in this context can be thought of as the ability to apply a range of techniques and approaches across both organisations (yours and the supplier’s) in finding opportunities to innovate and then converting them into actionable projects. Remember that innovation can be many small improvements as well as the blinding flash of the disruptive innovation that changes the game entirely.

Co-ordination speaks for itself. It is the ability to mobilise the capabilities and capacities of your organisation and those of your critical suppliers in being open and responsive to what is happening in the marketplace and being agile enough to take advantage of the insights you gain.

If we think in these terms of agile requiring speed, strength and co-ordination to be agile in helping our respective organisations to meet their corporate strategies then it is not difficult to find a name for it – supplier relationship management (SRM).

But SRM needs a well-designed and effectively managed process if you are to be agile. Leaving it to the other party to do on their own will not work.

The question is … do you have an effective and well-managed SRM process that makes “the elephant dance”?

If you would like to access a free short video series on creating such a process then go to http://bit.ly/1HArr89.

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