4. Seek supplier innovations relentlessly
Continuous improvement and development are essential in a market economy. Products and processes can—and should—be improved by leveraging your own personnel, customers, suppliers, and other stakeholders. This blog explains why and how suppliers should be utilized for new ideas, innovations, and other improvements.
In tenderings and supplier negotiations, you’ll engage in both zero-sum games (negotiating prices and payment terms) and synergistic discussions (how to improve collaboration, grow together, and differentiate from other supply chains). Previous blogs focused on winning the zero-sum game; this one focuses on creating synergies with suppliers.
Typically, a company has as many supplier companies as it has employees. Your suppliers have a vast number of people ready to contribute to development, innovation, and all kinds of flexibility for your company—so it’s worth leveraging the supplier network systematically. Your suppliers are experts in their fields and they also know your competitors. You are professionals in your own field but dependent on your suppliers—otherwise, you wouldn’t be buying from them.
Many suppliers openly market their innovations, but you can also co-innovate with selected suppliers, for example in joint brainstorming sessions. You can share your growth and development goals with suppliers, ask for ideas, and refine them together or independently. It’s also wise to use supplier innovativeness as a supplier selection criterion and emphasize the value of good ideas in every meeting.
Suppliers are usually eager to engage in joint development because it enables growth with you. It also allows them to differentiate from competitors and be better positioned in future tenderings. A supplier’s idea could give your company a competitive edge at the customer interface.
You should have a channel through which suppliers can propose their ideas. Additionally, guide both existing and potential suppliers to offer solutions to your specific problems. Don’t focus only on solving your biggest challenges (as they may be unsolvable); seek solutions to smaller, nagging issues. Solving many small problems may unlock bigger barriers to competitiveness or growth.
Searching for supplier ideas takes time and effort. This crucial area of procurement may be neglected if you're overwhelmed by managing difficult suppliers, running tenders, or juggling internal stakeholder demands—so make sure you’ve addressed the topics from earlier blogs first.
You can also encourage supplier ideas through joint meetings with multiple non-competing suppliers, where synergy can multiply—not just 1+1=3, but 1+1+1+1=10. For example, a design-to-cost approach may require involvement from several companies and multiple functions within your own organization. If you bring relevant suppliers into the awareness of your R&D, design, and production—and know how to lead collaboration meetings in an inspiring, demanding, fair, and mutually beneficial way—you’ll rally even large groups to improve your operations.
Supplier relationships tend to be long-term. It’s said that competitiveness is no longer just about the company, but about the entire value chain. Your goal should be to ensure that your company’s value chain is the most competitive—and that you are the firm in your industry with the best products and the best suppliers.
In summary:
Top procurement teams grow their employer’s revenue—not just profitability, cash flow, and competitiveness—by systematically leveraging supplier innovations. Suppliers should be guided to solve your company’s problems as free consultants who are rewarded through increased business. Supplier innovations can be large or small, and relate to products, services, or processes. As a procurement professional, you must make room for supplier-driven innovation.
