3 Ways to Encourage Supplier Innovation

May 12, 2017

“How am I doing?” Few companies ask their key suppliers this direct question. By requesting feedback on their joint activities, those that do can learn a lot.  

Some of the things suppliers complain most about are:

  • Not having enough information about you, the customer. They need to understand your strategy, your operations and your challenges to provide a superior service. 
  • Their innovative suggestions are received and even acknowledged by you but very often not acted upon.
  • Problems and operational issues are not effectively dealt with, take too long to solve or are not addressed to their satisfaction.

These are all barriers to innovation. Your competitors are making continuous improvements to their products and services, and to their processes. If you are not working with them, they will develop your competitors and you will be left behind.   Collaborating with your key suppliers can fuel your growth, differentiate your products and improve speed to market and help you retain your best customers.   

How can your company act in a way that makes your top suppliers more willing to engage in joint innovation?  It is about level of openness you offer them to work with you on reducing costs, improving processes and using technology effectively. Your behaviour and that of your employees towards your key suppliers has a direct effect on how they support you and how successful you can be together.

  1. Share ideas, plans and information with suppliers

Suppliers should know what is important to you, their customer.  If they don’t know enough about your medium and long-term goals or how you operate your business, you have lost an opportunity. Regular supplier review meetings where you share data on key measurements such as on-time-deliveries, returns, quality issues and stock-outs are vital. The more information you share, the better decisions you can make. This is where ideas for improvement get tabled, they need to be followed up and implemented.      

Unilever, the global consumer giant says, “a significant portion of our growth will come from innovation, delivering leading-edge products into the marketplace. We anticipate that around 70% of our innovations are linked to working with our strategic suppliers”. If it works for them, it can work for you.

  1. Educate your suppliers about your internal processes, especially product development and administrative systems

If you involve suppliers in the early stages of your product development they can provide design improvements and help commercialize products.  Also, slow or unresponsive internal systems and processes that cause suppliers to be paid late are really aggravating. When your supplier has a suggestion to speed up the order-to-invoice process, listen to his reasoning. If he wastes time due to your inefficiencies, guess who ends up paying.   

  1. Work with suppliers to improve their competitiveness in both cost and quality.

Here’s a thought. Ask your suppliers about how you can improve their experience in dealing with you; you might get a nice surprise. There may be actions on your side that prevent the supplier from fulfilling his obligations to you; in fact you may be adding to their costs or impacting on their ability to provide you with an optimum service.  When your supplier works efficiently and manages his costs, you share in the benefit.

Where there are conflicting objectives in your company’s functional areas, e.g. sales, procurement, accounts and research and development, delays and frustrations escalate.  Many of these can be overcome through discussion and negotiation. Failure to address these conflicts makes a supplier less likely to want to engage with you any more than he deems necessary, i.e. you are no longer a customer of choice.  

3 tips to improve your supplier innovation pipeline:

  • Open the lines of two-way communication in all of your mutual touch points
  • Develop great listening skills – pay attention to what each person has to say whatever their role at the supplier
  • Focus on those ideas and suggestions that can save you money, get more customers and therefore make you more profitable

As suppliers become more involved in and knowledgeable about your company’s needs, plans and strategies, they will feel more secure in their relationship with you and they will be more inclined to work on innovative activities. Treat them like partners and they will act that way.

Elaine Porteous is a published freelance B2B writer in supply chain. Contact her at dugport@icon.co.za or see www.elaineporteous.com.

This article was previously published in Entrepreneur magazine in Africa.

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