The 8 Modules, 31 Focus Points and 5 Collaboration Phases of the SEIC Methodology provide a path to success

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Our Diagnostic Tool provides a gap analysis of SEI capability to support the strategic planning process

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In-depth explorations of the approaches and techniques used by leading organizations in the field of SEI today

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Thought leadership and insightful articles on the most important issues for companies pursuing an SEI agenda

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Insight calls are available to join for all members of the SEIC and will be addressing a number of topics

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Useful downloads, from unique research to practical templates, frameworks and tools being used by SEI leaders

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The 11 modules of the SEI methodology focus on the key processes that enable the successful rollout of SEI

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Our Capabilities Assessment tools provide the means for organizations to gain insight into their own SEI approach

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In-depth explorations of the approaches and techniques used by leading organizations in the field of SEI today

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Thought leadership and insightful articles on the most important issues for companies pursuing an SEI agenda

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Useful downloads, from unique research to practical templates, frameworks and tools being used by SEI leaders

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Overcoming SEI’s challenges: takeaways from the SRM & Innovation Summit roundtables

During our 2018 Summit in London, companies discussed how procurement must abandon old practices and adopt new ways of working to make a success of SEI

summit roundtables

 

Developing a supplier-enabled innovation (SEI) strategy in procurement comes with various considerations. With an aim of working more collaboratively with suppliers to access innovations that benefit business growth, SEI requires that procurement change or replace entrenched processes with entirely new ones. This inevitably has its challenges.

 

At our 2018 SRM & Innovation Summit in London, the assembled companies split into deep-dive roundtables to examine some of the key changes and challenges that SEI brings about. Below, we break down the main takeaways from the discussions.

 

Customer of choice

 

Challenge:

 

Years of cost-cutting programs have resulted in many buying organizations not being a preferred customer. This in turn makes suppliers hesitant to share their IP and expertise or invest in the buying organization. To reverse this, procurement must evolve how it works with the supply base to enhance its reputation as a customer of choice.

 

Solutions:

  • Make sure your brand value is significant – this will attract suppliers and ensure they want to work with you;
  • Ensure you understand how your suppliers fit into your strategic roadmap and communicate this to them. This allows a buying organization to better sell itself to the supply base;
  • Involving senior management in communications enhances interaction and strengthens the relationship;
  • Create a survey where the supplier can rate how satisfied it is with its relationship with the buyer. This allows the buyer to see how relations can be improved and shows the supplier a commitment to do so. Importantly, it can also be turned into a metric that tracks improvements in the relationship.

Segmentation

 

Challenge:

 

Traditional criteria used in supplier segmentation, such as overall spend and cost saving potential, is often irrelevant in SEI. New segmentation criteria, which better reflects the capability of the supplier and their openness for collaborative innovation, often needs to be introduced instead.

 

Solutions:

  • The Kraljic four-point matrix – looking at bottleneck, non-critical, strategic, and leverage items – is still used by many procurement functions, but most find it ineffective when applied to supplier innovation and collaboration;
  • Price paid and criticality remain important, but must be augmented by innovation capability or potential innovation capability;
  • More criteria need to be added in segmentation. One example is: does the supplier see you as a strategic customer? If not, performance management rather than relationship management may be more important;
  • Other business functions, such as R&D and engineering, should be consulted to help validate segmentation decisions;
  • For suppliers willing to collaborate, assess their innovation performance and make a projected assessment of future performance.

Incentivization

 

Challenge:

 

Not all suppliers will be willing to share their IP with a buying organization, even if that organization is seen as a customer of choice. In this instance, procurement may have to incentivize the supplier to make the sharing of innovation beneficial for both parties.

 

Solutions:

  • Understand what leverage you have vs. the supplier. This will provide insight into the incentives you can offer;
  • Don’t overreach with your incentives. Ensure you can incentivize without committing too much and that the incentive will have a tangible benefit for the business;
  • Non-commercial benefits – better communication, network-sharing, and PR opportunities – are effective initial incentives to try;
  • More advanced incentives – such as cost sharing, IP sharing, and gainshare – can be rolled out by more mature SEI programs.

Metrics

 

Challenge:

 

The business case for SEI becomes easier if its commercial effectiveness can be proven, but getting such clarity isn’t straightforward. Tracking the return on each dollar invested is complicated by many contributing factors, such as understanding which metric best reflects value.

 

Solutions:

  • First, define what you mean by ‘innovation’ and ‘SEI’. Is it incremental innovation, or disruptive? Once this is understood, applying specific metrics becomes easier;
  • Metrics change depending on the need of the business. Determine what these needs are before rolling out any metrics, and re-evaluate every year to ensure what is measured reflects business priorities;
  • Possible metrics include revenue enhancement from SEI, impact on sustainability, cost savings, and ideas-to-projects conversion. Most companies agreed that ideas-to-projects should always be tracked, regardless of industry focus;
  • Measure no more than one or two metrics. Any more becomes cumbersome.

For procurement functions new to supplier innovation, these challenges will not necessarily be easy to solve. However, as we heard during the Summit’s discussions, companies willing to invest the time and effort to pursue SEI stand to transform their procurement function and the business itself. As one participant observed, “Challenges exist today, but the opportunities that SEI represents far outweigh them.”

 

This content is produced by the Procurement Leaders’ Supplier-Enabled Innovation Center (SEIC). Membership to the SEIC provides access to tools, templates, and case studies that explore the subjects included in this article in more detail. To learn more about becoming a member, please email us.

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