You want supplier innovation? Then demonstrate it matters

Published: 07 Jun 2019 Average Rating: 3.5 / 5 Print

Author: Tim Cummins

'Innovation was for the first time cited as a top-3 driver for more strategic and collaborative supplier management', according to research by SRM consultants State of Flux. That observation is borne out by other studies and by the anecdotal evidence from executive statements and annual reports.

In fact, such statements are far from new. So the interesting point here is not that innovation is being sought, but rather that it still isn't being achieved. And among the key reasons for that is the failure of organizations to really define what they mean and behaviors by Procurement and Legal teams that disincent supplier innovation.

An IACCM study of almost 300 organizations (public and private sector) confirmed 'we want suppliers to bring us innovation'. Some were even clear that they would punish suppliers that failed to innovate. But reward them? Partner with them? Share in investment or risk? Oh no, we don't want to take serious steps to help, seems to be the attitude. At best, if you innovate, you may receive follow-on business.

The study is revealing, in many ways fascinating, and it highlights scattered success stories from which we can learn and replicate.

Understanding goals

A fundamental question which many buyers appear not to consider is whether they are looking for an innovative supplier, or a supplier that will specifically innovate for them. The two are not the same and pose very different questions of selection criteria, incentives, risk allocation and relationship management.

For example, a custom innovation demands much closer collaboration, a readiness to share risk and clear evidence of buyer commitment to the process, which may include financial investment.

Today, a high proportion of contracts have an embedded innovation clause. The evidence suggests these have little or no value. Similarly, more and more organizations are developing Supplier Relationship Management programs, but these too are mostly ineffective because they are too narrow in their remit and authority. In particular, they tend to operate as oversight for 'the relationship' and see 'opportunity management' (if it's considered at all) from a perspective of self-interest.

The IACCM report on 'innovation and continuous improvement through supply relationships' will be issued at the end of June, with a focus on identifying practical solutions, rather than just confirming that there is a problem.


Related Discussions

Please sign in or register to post on this forum
2018-01-24 05:57:07

On boarding of vendors for As a Service offering

Hi There, does anyone have a governance /framework for on boarding "as a service" vendors ? What stand outs that are different compared to the "normal&q...
Replies: 2

2016-06-01 14:55:31

Flowdowns from Prime Contracts

Does anyone have a "best practice" for including Prime Contract flowdowns to subconsultants? Some companies affix the entire agreement; some extract relevant...
Replies: 12

Surrey and Sussex county councils
2017-05-22 09:45:50

Supplier Contract segmentation

Is anybody aware of any dynamic tools for contract segmentation ? What I am trying to achieve is to segment my contracts by the normal risk, complexity, value etc but...
Replies: 2

STC Solutions
2020-08-27 12:28:02


very in interesting subject
Replies: 1

2020-08-12 06:46:49

The end of Procurement

Hello Tim I found your article very interesting. I agree that procurement struggled for years to prove its real value, and it is still struggling. Firstly. Until the ...
Replies: 1

Airbus Defence and Space GmbH
2020-05-25 10:22:15

Call for Help for Contract Innovation in the Defence and AeroSpace Industry for the DASI

Dear All, first of all I hope you are all doing good considering the challenging times. Airbus as most large corparations has initiated and started an internal inno...
Replies: 1

Rock Central, LLC
2020-05-20 13:41:10

maintenance fees for fleet of printers

Our company has a fleet of 1800 printers and are in the middle of negotiating a maintenance contract. Wondering if anyone can help me benchmark an annual fee. We are b...
Replies: 2

2020-05-12 10:47:41

Supplier audits in Europe

I cannot find easily many companies that offer supplier audit services to buying companies. The goal is to have an external provider that help auditing, in agreement w...
Replies: 1
2020-04-07 01:47:23

Manufacturing capacity

Where will the extra manufacturing capacity come from to make goods to combat Covid 2019?
Older entries »
Replies: 1