INNOVATION
will become less competitive. An ongoing tariff war is also likely to have a distorting effect. While businesses are still looking for new low-cost regions from which to source, they are also looking to suppliers to create new value, rather than simply to help reduce costs. Secondly, the choice of suppliers is becoming more important because of pressure from consumers and ethical groups for companies to be more transparent and responsible for their supply chains. The environmental, social and economic impact of supply is becoming all the more apparent to consumers, and they understand and care about the ethical credentials of the goods and services they receive. But they still expect competitive prices. Building more ethical and sustainable supply chains while keeping costs down requires innovation. Thirdly, artificial intelligence, automation, and cloud computing create a manifest change in the way suppliers and the companies they supply can be integrated to create value. While these systems have been available for some time, this extraordinary set of tools has become cheaper, more accessible and easier to use in recent years. They are already having a profound effect on the way relationships develop and suppliers can integrate their data into the buyer’s systems. Consumer Goods Forum, which represents FMCG suppliers and global retailers, has been promoting technology-led innovation and collaboration. In one of its recent papers, Julie Hamilton, global chief customer and commercial leadership officer of The Coca-Cola Company, says: “Technology will… have millions of trickledown effects that we must understand. But we can’t do it alone. Successful evolution of this industry will only come through collaboration with our supply chain partners and retail customers.” For these three reasons, we are long past the time when procurement created functional relationships that simply drove down the cost for on- time delivery. Most CEOs now think relationships between companies and their most important suppliers should be focused on how they can create value for each other.
Sir John Hood’s career highlights
2009 – present. Chief executive officer of the Robertson Foundation, a private, family foundation which seeks to have a positive social impact. It awards grants in education, climate change and environment, and medical research. 2011 – 2019 Chairman of the Rhodes Trust, part of the University of Oxford, which has a mission to identify and develop leaders to achieve public good. 2018 – present. Director of Blackstone, a world leading alternative assets investment firm which seeks to create positive economic impact and long-term value for investors. 2015 – present. Chairman BMT Group, a leading international maritime design, engineering and risk management consultancy. 2017 – present. Director of Aurora Energy Research which offers data- driven analytics on European and global energy markets providing intelligence and consultancy services.
2007 – 2016.
Non-executive director, BG Group Limited, a British multinational oil and gas company which Royal Dutch Shell acquired in 2016. Vice chancellor of Oxford University, ranked the top university in the world by Times Higher Education in 2019.
2004 – 2009
Barriers to innovations Businesses know they should rid themselves of the tendency to neglect ideas that were ‘not invented here’. Business leaders are aware that if their organisation is not taking the best ideas from suppliers, then their competition probably will. No one can tolerate ‘not invented here’ for long. On the supply side, suppliers are hungry for change. They understand that to sustain market share and increase revenue with their current customers, they must show how they are creating value. With the connected technologies I’ve already mentioned, suppliers can be linked directly into their customers’ systems, and everything managed and tracked. The automation of certain aspects of work from supplier to buyer inevitably intensifies as they work together to create value for final customers.
Avoiding complacency Suppliers who have failed to see these opportunities need to get up to speed or buyers will transition away from them. There are many hooks in the supplier-buyer relationship in working in this way and buyers do not want to end up tied to the wrong vendors. It is a risk they will want to address through deeper understandings of, and partnership, with their suppliers. While those at the forefront of SRM might have some advantages as they try to harvest supplier innovation, they cannot rest on their laurels. Organisations can be fragile. You cannot make too many assumptions about the future based on the past. You have to be current and on your toes. As a company director, I keep abreast of what is happening in the supply market, geopolitics and technology (see reading list box). The trick is not to be complacent based on past success.
2019 GLOBAL SRM RESEARCH REPORT
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