October 29, 2021
Written by
Darragh Toolan

Supplier innovation: should Procurement lead it or own it?

There is no denying that Supplier Innovation is a topic of choice, with more and more businesses recognising its importance in overall value creation. However, one question which needs to be answered before bringing Supplier Enabled Innovation into the heart of your function is what kind of role should procurement play? Should it be the owner of Supplier Innovation, or, should it be the leader?

Person holding a set of keys

Many people would exclaim that procurement must own Supplier Innovation.  They would say that procurement is the only function which can truly hope to capture, and encourage, Supplier Innovation, and they would be right (to an extent).

Howie Griffiths highlights, in The importance in [sic] supply chain of good Supplier Enabled Innovation, the reasons why procurement is an essential facilitator.  I’ve summarised his points below:

It can connect the needs of the buyer with the capabilities of the supplier

Procurement is uniquely positioned to have access to both the internal needs of its company, and the talents of its suppliers. They can see where change needs to happen, and which suppliers can provide innovative solutions. In short, they’re a perfect matchmaking agency; finding the best match for the buyer and the supplier

They’re the ones best suited to handling negotiations

Suppliers are naturally innovative. They’re the ones who are constantly changing and creating new methods and products. But hand in hand with this innovative streak is a protective nature over their new creations, especially when it comes to taboo topics such as IP ownership. If you’ve painstakingly created a new product, or a new way of doing something, then you don’t want to be fobbed off with the short end of the stick. Due to their veteran experience in negotiations, and their already developed relationships with key suppliers, procurement can make these painful negotiations less painful.

They are invested in both sides

Say if the CFO, COO, or even CEO took over the Supplier Innovation function within a company, the likelihood would be that they were solely concerned on how the company could benefit from the innovation. That’s perfectly natural, but it’s not a perfect starting point if you want Supplier Enabled Innovation. The type of relationship where Supplier Innovation thrives is mutually beneficial. Suppliers aren’t going to innovate again and again for you if they get nothing in return. A good procurement function will not only understand this maxim, they’ll put it into practice.

The points above establish that procurement is the ideal function to lead Supplier Innovation, but does it suggest that Procurement should be the owner?  I don’t believe it does.

I don’t think it does for one simple reason.  Procurement cannot act in silo and remain effective.  It needs the capabilities of other functions within the company, just as other functions need it.

John Paterson says that Supplier Enabled Innovation is:

"the connecting, facilitating, and galvanising of new approaches and products within the business ecosystem through the formal mobilisation of supplier capabilities and resources"

As David Rae points out, the key word here is formal. Without a formal buy in from the whole of the company then any procurement efforts to empower Supplier Enabled Innovation will fail.

Procurement needs the whole company to adopt a culture of trust, collaboration and partnership.  For this to happen procurement needs to get everyone on the same page.  Creating this culture requires time, resources and patience.  Everyone needs to understand why they’re investing in this strategy, and how they can further it.

For procurement to achieve the effective Supplier Innovation that dreams are made of, then they don’t just have to believe in it, they need the company to believe in it too.

Subscribe to read more like this ...

Related articles

Supplier Collaboration - dividerSupplier Collaboration - divider

Ready to build real supplier relationships that impact your organisation?

Contact us