Businesses Look To Suppliers To Boost Innovation

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Author: State of Flux

Entrepreneurial SRM will drive growth
in the face of disruption, State of Flux report says

Eight in 10 companies are actively seeking more innovation from their supply base, research from leading procurement and supply chain consultancy State of Flux has found.

The study of 372 global companies from more than 25 industry sectors shows their chances of harnessing supplier innovation depends on how effectively they manage relationships with their vendors.

Among leaders in supplier relationship management (SRM), 54% benefit from supplier innovation, either greatly or creditably. As such, supplier innovation is either a key or increasing element in their growth strategy. Only 12% with poor SRM performance benefited from supplier innovation, the study found.

Contributing to the report, Kellogg chief procurement officer Shelly van Treeck said, “Agility, speed and value come from relationships that are open and strategically focused – whether it’s being first to have a new idea, product innovation, or service enhancement.”

The State of Flux study shows investment in SRM translates into hard cash: 27% of SRM leaders achieve post contract benefit of more than 6%, compared with only 16% of firms outside the leading pack. In effect, businesses are leaving millions of dollars of benefits on the table through poor management of supplier relationships.

SRM is also a driver for business growth as disruption threaten conventional commerce, said Johanne Rossi, chief procurement officer of Caltex, Australia’s leading in oil and fuel retailer.

“The world is changing. People are talking about the fourth industrial revolution, autonomous and electric vehicles are on the rise, and the sharing economy is growing. We are looking at what these changes mean for us at Caltex and we are making some significant changes as a result,” said Rossi, who also contributes to the report.

Alan Day, State of Flux chairman, said the organisations which can work with suppliers in an entrepreneurial way would be best positioned to grow as digital disruption grips most sectors of the economy.

“When you look at companies like Airbnb and Uber, you see that with little capital investment, an entire sector can be dismantled and reassembled by business models which offer services on demand through direct contact between customers and suppliers, usually via an online platform and mobile technology.

“The procurement function cannot wait for a top-down prescriptive blueprint before forming alliances to help the business grow. There is a sense that successful procurement leaders are already becoming entrepreneurs, looking for and seizing opportunity both within and outside their companies. They are looking to change the value that procurement offers the business. Instead of savings, the focus is on growth, new markets and profit,” Day said.

State of Flux’s 2017 global SRM research report, Entrepreneurial SRM: Solving the Value Puzzle also finds:

  • 66% of businesses report improved supplier collaboration as a direct result of their SRM programme
  • 90% of leaders have a value proposition for SRM; only 40% of other businesses do
  • only 20% of organisations have implemented some form of SRM training
  • 43% of respondents describe current SRM software systems are poor or very poor
  • 57% of organisations believe that supplier innovation would be easier to capture with help from technology
  • only 33% of organisations have an effective innovation management process in place.

Download State of Flux’s 2017 global SRM research report from here or by contacting patrice.day@stateofflux.co.uk

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