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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Turning procurement into a revenue generator through supplier innovation

SEI can have a major impact on revenue generation in a business, but unlocking this potential hinges on successfully instilling new ways of working

revenue enhancement

 

“If ideas are not turned into projects, then they waste time. The focus needs to be on taking those ideas through the pipeline and turning them into revenue.”

 

You might expect these words from someone in product development or R&D, but they come from a more surprising source – a procurement executive.

 

With a mandate to source innovation from the supply base, this executive has tracked the contribution of tens of millions of dollars to their business’s top line, underlining the revenue impact that a supplier-innovation programme can have.

 

This purchasing executive isn’t alone in capturing this kind of value. A quarter of procurement functions with formal supplier-enabled innovation (SEI) programmes report revenue enhancement as its most potent impact area, according to Procurement Leaders research.

 

But while procurement holds the keys to tap into this value stream, realising it is not a given. Without systematic and deep-rooted change, procurement functions consistently fail in their efforts to drive revenue through supplier innovation. It is for this reason that unlocking the function’s potential as an innovator hinges on the implementation of new processes and ways of working.

 

Turning doubters into believers

 

To develop an SEI programme, no factor is more important than linking internal business needs to supplier innovations – something for which stakeholder buy-in is essential.

 

This is made difficult by procurement’s reputation for focusing on cost savings.

 

“We need to work on the perception that procurement doesn’t have any value to add in this area,” says Steve Cousins, procurement manager at defence company Leonardo. “I’ve completed a number of briefings across our sites, but we still need to collect a list of specific technology needs that we can use to challenge suppliers.”

 

Cousins’ point goes to the heart of the matter. If key stakeholders do not believe in the value-adding potential of procurement, then the function won’t be able to understand a company’s technology and product needs, making the sourcing of relevant innovation all the more difficult.

 

For most companies, the process of improving procurement’s reputation is best achieved by highlighting supplier capability to the business and, importantly, how instrumental the function is in facilitating the capturing of new ideas.

 

There are several ways in which this can be achieved, but one of the most effective methods regularly used by leading functions is to align supplier meetings with a company’s wider innovation days. This allows suppliers to share insights in the discussions taking place, raising awareness of the expertise they possess and the role that procurement can play in linking the two.

 

Cousins and Leonardo will be using this method during the company’s innovation day in September 2018. “We basically need to demonstrate the value of SEI to the company,” explains Cousins, “and putting our suppliers in front of key stakeholders at an innovation day is an ideal way of doing so.”

 

Engaging innovative suppliers

 

With internal support secured for SEI, the question then turns to how procurement can source innovation from its suppliers. After all, suppliers are used to being squeezed on cost and therefore may be unwilling to share their knowledge and intellectual capital.

 

Half of suppliers will not make “strategic recommendations” to customers due to a lack of openness or incentivisation, according to recent research by 3M. Moreover, 70% of suppliers say half of their customers do not have the systems and processes needed to facilitate supplier collaboration.

 

Buying organisations in the Procurement Leaders community relate similar feedback on their experiences with supplier engagement. Three companies, for example – two in the manufacturing sector and one in pharmaceuticals – have spoken of a need to improve their standing as a customer of choice in their suppliers’ eyes.

 

One common initiative each has adopted to further this aim is a net promoter score (NPS) survey. These surveys are sent to suppliers to score the buying organisation as a customer based on several value indicators, with the results later used as a roadmap to improve the relationship. Through these results, each company has been able to enhance its standing with key suppliers, paving the way for the sharing and implementation of new ideas.

 

A marathon, not a sprint

 

These are only some examples of what can be done to access supplier innovations that drive revenue. A strategic and effective SEI programme entails the rethinking of other fundamental and deeply embedded procurement practices, from category management to team skills and everything in-between.

 

The process is necessarily incremental, with barriers chipped away at rather than torn down. But, as we have seen first-hand at Procurement Leaders, the purchasing function occupies a privileged position where it can generate revenue through innovation. For procurement functions determined to do so, it is just a matter of utilising this position and introducing the right changes.

 

Samuel Wrest

 

This content is produced by the Procurement Leaders’ Supplier-Enabled Innovation Center (SEIC) and originally appeared in Supply Chain World magazine. To learn more about membership to the SEIC, please email us; to learn more about Supply Chain World, please visit their website here.

 

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