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Do you ever get to the end of year supplier review and have the awkward conversation with a supplier about innovation?
It goes something like this:
At best, these conversations become a source of frus- tration for both parties and at worst, they lead to ‘supplier fatigue’ – that is, the supplier deciding it is not worth the time and trouble to give you any more innovations as they know they never go anywhere. From our research, we have seen that harnessing supplier innovation is often one of the key drivers for starting an SRM programme and also one of the reasons organisations actively seek to become a customer of choice. At State of Flux, we define a customer of choice as an organisation that, through its practices and behaviours, consistently positions itself to receive preferential access to resources, ideas and innovations from key suppliers, giving it a competitive advantage. Over the last five years of conducting global SRM studies, we have seen that the more you invest in SRM, the more benefit you get out of it. SRM leaders not only have the most developed programmes, but they are also receiving much higher benefits; both in terms of hard financial (some in excess of 8%) as well as customer of choice benefits. If your organisation is not among SRM leaders, the chances are you are actually falling behind. For over the last five years we have seen the benefit gap widening between leaders and followers, especially in customer of choice benefits, with the greatest differential being access to innovation. “At T-Systems we have put in place an innova- tion framework that we share with all of our key suppliers. We have defined three types of innovation: continuous improvement (innova- tion within the contract); generic innovation (broader scope outside of the current contract); and ‘blue sky’ (transformational). We require suppliers to bring a high level benefits statement when they submit ideas. We workshop the ideas and proposals in specific innovation forums (with innovations suggested by T-Systems) and aim to track mutual benefit.” – DONNA HALEY, SUPPLIER AND CONTRACT MANAGEMENT, T-SYSTEMS LIMITED
VENDOR MANAGER – “The contract says you were to give us five innovations over the year and we haven’t received any.” SUPPLIER’S ACCOUNT MANAGER – “What do you mean, we gave you ten!” VENDOR MANAGER – “Innovations? They looked more like speculative sales pitches to us.” SUPPLIER’S ACCOUNT MANAGER – “They were innovations, but what do you expect when we make the effort to submit new ideas and never get any feedback.”
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