20
OCT
Currently at the PLN Forum in Vienna, innovation is the talk of the town.
Interestingly, at a time of crisis, commodity inflation and financial uncertainty, the most pressing issue for delegates is innovation.
At yesterday's category management masterclass, at which the PIU presented its recent executive research on the topic, time and again the audience asked about innovation. "If you want to be serious about innovation," one audience member noted, "you have to structure around innovation".
The category plans that result from that, therefore, also develop structures within business as well as between suppliers, which create best facilitate the launch of new products or new solutions.
It is important to remember, however, that not all suppliers are innovators. In the morning session's keynote talk by Mark Engel, CPO at Unilever, we saw how the supply base can be segmented through suppliers' capacity to innovate. Unilever had a graduated pyramid structure where ever fewer suppliers became closer to the business, but were the ones with the ability to innovate. This was capped at about 20 suppliers, which had truly strategic relationships with the company.
Most interesting here was the openeness required between the buyer and supplier relationship. "Ask your suppliers," Engel said, "to scan your business and ask 'do you know what we need to know?'"
By inviting suppliers to search all areas of the Unilever's product lines, suppliers could innovate in intriguing ways. Indeed, they saw laundry detergent goods aiding a toothpaste line and even a mayonnaise-based good improving its shampoo offerings.
This also helped the buyers to develop their own skills. For Engel, Unilever, "is getting more skilled at orchestrating its supplier base". But also, by inviting the supplier in it also ties them to the business and enhances Unilever's ability to secure limited supply capacity in an unceasingly uncertain economy.
Views: 1621 | Comments: 3
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Mel Shutes
24 October 2011
It appears that Unilever are the exception rather than the rule. In their recent 2011 SRM survey report State of Flux refers to a “premium” benefit associated with SRM being the way it should improve access to, and management of, supplier innovation. However, the survey findings revealed that this is an area that has yet to fulfil its potential.
It seems relatively little attention has been paid to developing the mechanisms to harness supplier innovation effectively. This extends from winning the hearts and minds of internal colleagues to consider external ideas positively (overcoming the “not invented here syndrome”), and to the systems and processes required to capture, evaluate and progress supplier ideas and innovations. Less than half of survey respondents believe they have a good track record when it comes to attracting, evaluating and implementing innovation proposals from key suppliers. SRM can play a key role rectifying this.
Mel Shutes
24 October 2011
Supplier Relationship Managers must be supplier innovation champions, engaging with relevant business areas and seek to inspire, enable and facilitate the creation of a company-wide belief in suppliers as powerful allies and not simply cost levers. Align understanding and strategies to “nudge” the creative thought process in directions that are consistent with an organisation’s competitive challenges and growth strategy. Implement an effective end-to-end innovation process to stimulate and captures ideas, manage evaluation, feedback, funding and adoption.
Robbert den Braber
27 October 2011
It's very true that in order to contribute to innovation, one must organize (part of) procurement completely different from what we're used to. Both procurement and R&D/Marketing must escape their functional silo and start managing the value chain. I also agree with Mel that this is actually done in very few companies and on a small scale (for example, Mr Engel states explicitly he focuses on 20 top innovative suppliers, but what about all the potential in start-ups / other value chains / etc?). Besides organizing Innovation Driven Procurement, the title of this article reveals a key element: become the preferred customer and actually receive innovative capabilities. There's a lot more to becoming preferred customer than delivering steady business, good to see Unilever recognizes this.