Best SCM Practices to Boost Supplier Innovation
Organize and promote Business Intelligence
Seeking innovation from suppliers involves first to be able to clearly communicate the strategic lines of innovation. This is certainly not to curb creativity, but to guide the proposals towards the strategic priorities of the company (miniaturization, energy reduction, connectivity, CO2 reduction …). The innovation plan or technological road map is a key tool to project and share that vision through a multi-business governance.
Then it is appropriate to map the innovation ecosystem with care. This is not limited to suppliers but includes a more complete set of partners (suppliers, customers, universities, laboratories, start-ups, consumer associations, etc.).
Finally, the areas of innovation can be promoted and shared with the innovation ecosystem stakeholders through various communication channels (strategic meetings, innovation portals, open innovation, forums, etc.).
Identify and select the right suppliers
Too often, companies rely on a traditional model of SRM (Supplier Relationship Management) to identify preferred suppliers for innovation. These models are often guided by a desire to rationalize the number of suppliers and lead to selection of suppliers able to meet all the required criteria.
But, the larger suppliers are not necessarily the most relevant for innovation! Successful innovation comes also from smaller suppliers as they are more agile and able to accompany you in the evolution of your business model (especially guided by the digital revolution).
Select 3 major criteria to identify the right partners:
- Skills:technological, quality, industrial, financial…
- Ability to cooperate:which is expressed by the strategic alignment and agreement on the main principles of cooperation and governance of innovation projects
- Fit:the compatibility of cultures, but especially the desire and commitment of top Management
Share the right information with suppliers
Driving supplier innovation and co-innovation is first knowing to be open and not hesitating to share information deemed sensitive: market visions, consumer developments, innovation plans, key elements of the technology roadmap, etc.! Of course, this must be mutually agreeable.
It is important to conduct strategic reviews with key suppliers (usually twice a year) to ensure the involvement of top management and alignment of the two companies.
Create a climate of trust
A majority of innovations come from the exchange and confrontation of ideas. There are multiple ways to organize this cogeneration: specific meetings, challenges, tech-days, creative sessions, collaborative platforms, etc.
In any case, it is important to agree in advance on a collaboration contract which sets rules for collaboration (particularly in terms of intellectual property, risk sharing, etc.). Many attempts died or were given birth to in pain and frustration because the terms of the collaboration were not clearly defined from the start and the leaders of both companies were not specifically involved.
Structuring idea consideration
Generating ideas is not the most complicated part. It is then required to evaluate and sort ideas easily using rational criteria. This requires the establishment of standard documentation sheets where the factors are described (customer value, differentiation, competitiveness etc …) as well as the level of risk (technological, industrial, etc …). A fluid process must help sort innovations quickly to give quick feedback to discuss with suppliers.
A good practice is often to make the assessment in 2 stages which allows you to quickly rule out invalid ideas to focus on those with a real interest.
Promote and structure the internal exchanges
The establishment of a multi-business governance (marketing, R & D, Purchasing …) is a key success factor to organize the promotion and driving of innovation with suppliers or ecosystem partners.
This governance is fundamental to aligning technology roadmaps, procurement strategies and supplier roadmaps. Some companies can significantly transform their organizations. For example, a leading automotive supplier brought together under one organization (“Engineering Procurement”) part of its R & D and Procurement / Suppliers Development teams to drive supplier innovation and ensure alignment with operational roadmaps.
Valuing in-house innovation
Fostering an innovation culture requires the establishment of a change management policy which is based around three axes:
- Create the right mind-set:communications, celebration of success, highlighting suppliers, etc.
- Demystify:organize industrial visits / labs, share benchmarks, communicate on simple innovations, etc. Innovation is within everyone’s reach!
- Create desire:create challenges, incentivize managers on the resources dedicated to innovation, create a synthetic indicator, etc. …
Promote individual involvement in innovation
It must be at the initiative of everyone and the more the better. If communication and promotion of innovation contribute to create this state of mind, this is not enough. It should also be relayed by HR and managerial actions.
- Empowering managers:train and coach them so they can relay to the teams; enable them to grant time for innovation
- Integrate criteria of innovationin recruitment, assessment, and in newcomer integration programs.
Develop the right skills to capture and retain the value created
Successful innovation with suppliers also requires the know how to develop the right skills:
- Develop technical skills:the classic mistake is to focus suppliers innovation to address a lack of internal technological skills! On the contrary, you have to be able to always control innovation from the supplier to be able to capture the fair share of value but also to keep it on time. The mapping of knowledge is an important prerequisite before committing to such an approach.
- Develop life skills:the skills required to stimulate and drive supplier innovation are not those traditionally expected of buyers. Functional and technical expertise give way to leadership skills, Business Development, “Intelligent Risk Taker”, etc.
Behaviour Cross Function
Business Accumen – Global Mindset- Intelligent Marketing- Project Management- Champion of Change
Technical & Functional Excellence
Technological Knowledge- Negotiation- Supplier Evaluation- Purchasing Tool- Contract Management- Risk Assessment- Market Knowledge- Cost Monitoring
Growth & Customer Focus- Effective Communication- Leadership Impact
Connect for further discussion to re-engineer the Supplier Management Processes
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