Supplier Led Innovation – Staying Ahead of the Curve

Several weeks ago I had the opportunity to attend the latest Supply Chain Resource Cooperative meeting at NC State. For those that don’t know the program, it’s run by Dr. Robert Handfield, and brings together business and academia to share best practices in the field of supply chain management. Overall, these semi-annual gatherings are a great opportunity to gain visibility into leading edge concepts and strategies related to our field.

This being my third time attending the meeting, I had high expectations for the content, and I was not disappointed. The primary topic for this conference was “Managing Relationships to Drive Supplier-Led Innovation”. Of course, within the manufacturing community, the concept of utilizing suppliers as a source of innovation is nothing new. However, what is new is developing formal plans of action to collect this information and creating an environment to cultivate innovation from suppliers. Having a strategy around supplier innovation seems pretty straight forward, but it still isn’t being done to the extent it could – best practices are still being developed.

The basis for all supplier-led innovation plans discussed at the conference was formalized supplier relationship management (SRM). Without a management program that brings supplier and customer together, innovation can only be obtained in an ad-hoc fashion. Throughout the presentations and case studies discussed, there were common themes as to what organizations did to ensure successful SRM, and thereby successful supplier-led innovation. These three mantras seemed to be repeated over and over again:

  1. Manage it! It’s called supplier relationship management for a reason. You have to put in the time required to manage the program, even the tactical stuff – coordinating meetings, creating agendas, etc.  Without Sourcing departments providing a formal (and somewhat tactical) management layer, you cannot expect the program to be successful.
  2. Invite the C-level.  High level executives should be involved in supplier meetings, and they should be making it a priority. It’s the only way to sustain the program and make the commitment to SRM organization-wide. But if you have the C-level attending the meetings, you also need to give them a script! They should be coming to the table knowing what message they need to provide to suppliers.
  3. Align with organizational and market sector strategies.  If your SRM program is heavily focused on purchasing-related activities and KPI’s (hard-dollar cost savings, VMI, etc.), then you will only gain operational improvements. However, if your objectives are tied to the over-arching goals of the organization or the market you service, the results will produce a competitive advantage.

The conference clearly demonstrated how SRM helps create supplier-led innovation opportunities, which can serve as an incubator for top line revenue growth. Still, because formalized SRM is still in its infancy and hasn’t truly made headway outside of manufacturing, the opportunity to capitalize on these benefits are still very much untapped in many organizations. Source One is helping large companies get serious about SRM – by establishing governance models and program policies, and providing the on-demand support to implement the programs across the organization.

It will be interesting to watch these programs gain steam over time. As best practices begin to develop and programs become refined, supplier-led innovation will become a true outlet to help build better products, technologies and services, allowing companies to better support their customers, adapt to changing needs, and drive efficiencies across the supply chain.

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