INNOVATION FEATURE
Is SRM and procurement missing the supplier innovation dividend?
Procurement professionals hear a lot about supplier innovation, but what are organisations actually doing? Here, State of Flux digs into its unique supply chain data to reveal the inside story.
E veryone loves to talk about rarely have well-defined terms for innovation and use the slippery nature of the word to avoid measuring impact or demonstrating value. To prevent the definition becoming a constant caveat when analysing evidence of innovation, we asked respondents what they mean by the term. We found 34% of companies define innovation as truly transformational change and improvement, but a larger proportion innovation. What people mean by it is quite another matter. In our research, we find organisations (40%) believe it also encompasses continuous improvement. A smaller group (24%) see innovation as only continuous improvement. Supplier innovation – how good are we? In this years research we asked companies to assess their current approach and capability on a scale of 1 to 10 ( 1 = very poor and 10 = very good). The largest proportion of respondents (65%) rate themselves at 5 or lower, indicating very low confidence in their ability. Only 6% rated themselves as good (8 or above). Barriers to innovation It is clear from the feedback that organisations struggle with supplier
not benefit from supplier innovation. Only just over 12% of companies report more supplier innovation as being one of the benefits they receive from SRM. While the picture is different for SRM leaders, still only just over 26% say they benefit from supplier innovation. There is much room for improvement. Innovation metrics With so few organisations reporting that they have effective supplier innovation management processes in place, it is not surprising that few organisations have meaningful metrics. One in every three organisations report having metrics for supplier and those tend to measure outputs. Only 37 out of 402 companies report having effective measurement of the end-to-end process covering inputs, in-process and outputs. Despite the perceived barriers, supplier innovation remains a top-three business driver for investing in an SRM programme for over one in four
innovation and despite the opportunity it represents are faced with a number of barriers. The two most commonly reported relate to people and process. Almost half of companies say they do not have sufficient time and resources to engage with suppliers properly, and just over 40% blame not having an innovation management process. Other barriers include organisational complexity and other business priorities both mentioned by around 40% of respondents. Despite the perceived barriers, supplier innovation remains a top- three business driver for investing in an SRM programme for over one in four companies. More than eight in ten companies that have created a value proposition for SRM (47% in total) have made specific mention of supplier innovation. organisations and over 50% of SRM leaders. Of those companies that have developed treatment strategies aligned to their segmentation (67% in total) 69% have included specific reference to supplier innovation. Do organisations benefit from supplier innovation? Overall most organisations say they do Supplier innovation is also used to segment suppliers by 29% of
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STATE OF FLUX
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