Innovation – including supplier innovation – is an essential part of any successful business.
Keeping products, practises and processes the same as they have always been because they worked in the past carries no guarantee that they will continue to work in an evolving market, and some markets are evolving fast! Being able to identify when change is needed and what that change should constitute can be a challenge for any business.
How does this translate into supplier innovation?
Consider the following: What are your business relationships like with your suppliers? Do you communicate regularly to keep up to date with each other’s progress and to figure out if anything can be done to benefit both your business and supplier?
A big problem with many supplier relationships is that there’s simply not enough communication going on. This is a sign of poor Supplier Relationship Management (SRM), which is detrimental to business. A solution to this is keeping in regular contact to maintain a positive and mutually beneficial relationship. It’s a win-win and presents opportunities for growth and innovation.
Is organic communication enough?
Having excellent communication and an amicable relationship with your suppliers may stimulate organic supplier innovation, in that suppliers will let you know if there’s a new product that’s going to help you grow or work better. Despite the undeniable benefits of this slow, steady approach, pushing supplier innovation through a structured process in your supplier relationships is probably going to be a more effective means of reaching your supplier innovation targets.
The statistics speak for themselves. Almost all top organisations have a formal structure in place. 90% of leading companies have a structured process for collaborating with suppliers, and 54% of the rest of the companies also have this structure in place. We believe that it can be just as effective for SMEs.
Supplier relationships are rarely perfect
The problem with suppliers is there’s always risk attached. This couldn’t be truer in the current climate of Brexit-based uncertainty.
Prices can change, suppliers going out of business altogether, leaving dependant businesses struggling to find a new supplier isn’t unheard of. That’s why setting up your supply base correctly is so important. Having a formal SRM structure, where you check your suppliers and create relationships based on rigorous fact-based research will provide you with the assurance that you’re getting the best deal possible and you can confidently rely on your supplier.
It’s all about collaboration
Ultimately, if you want to see the levels of supplier innovation you want, both you and your supplier should be as transparent and communicative as possible, so you both benefit mutually from the relationship.
With the usual day-to-day demands of work, it can be easy to neglect this critical interaction. However, the fact remains that if you don’t focus on them, you’re likely to miss out on a fantastic ROI opportunity by investing resources in your procurement employees’ training, so they can evaluate supplier innovation capabilities and performance.
If you want to improve the running and bottom line of your company through supplier innovation, get in touch with us to see how to make the most of your SRM.