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Suppliers Are Next For Innovation    [Date Added : 09/06/2016 ]
Historically the procurement sector has not been known for innovation. However, recent findings from Wax Digital's research into innovative procurement shows that it is a term that is increasingly likely to be associated with the business function.

Procurement Innovation Pathway, conducted by Morar Consulting, surveyed the opinions of 100 British senior managers responsible for procurement in organizations of all sizes. It showed conclusively that almost all respondents are headed on a journey of innovation, designed to drive the business, as well as improve their own processes.

Innovation is essentially about finding new ways to do things, sourcing different solutions to problems, challenging the norm and being ready to take bold steps on new ground - all in the interests of improving an organization's prospects.

The research reveals that today's procurement professionals actually consider themselves to be innovators. They also see (and like the fact) that the businesses they work within are innovative and that their role is increasingly pivotal to this. Most procurement people are, at the very least, involved in a broad range of business innovations - and some are actually leading it.

There are five keys areas for innovation on the supply side. Almost one-half of the survey respondents agreed to the following:

- Supplier Relationship Management (SRM) (57 percent)

- Sourcing suppliers for product innovation (49 percent)

- Introducing processes/technology to improve collaboration (47 percent)

- Reducing supply chain risks (45 percent)

- Automating processes to save time/resource (42 percent)

With regards to supply chain collaboration, 84 percent of respondents claim that they are currently involved in supply chain collaboration, 40 percent said that they are currently leading it, and 50 percent expect to be leading it in this innovation area in the future.

This picture is mirrored when it comes to procurement technology investment. Clearly technology has a central role to play in shaping and driving innovation. The two technologies most commonly in use today among procurement professionals are heavily supplier focused, with supplier information management top at 51 percent and contract management in second place at 49 percent, while SRM tools are among the most common technology investments planned for the coming 12 months.

Overall, more than 70 percent of survey respondents see procurement technology as being equally vital to process efficiency and genuine innovation. Procurement systems are now also perceived as delivering equally to the department and the business as a whole.

Effective supplier management - from evaluation and on-boarding to ongoing performance review - is a fundamental requirement of any business that is serious about spend management and risk reduction. But without the right tools, managing a supplier community that can often be made up of several thousand companies can be a hugely labor intensive and costly.

This is where procurement technology comes to the fore by enabling procurement professionals to become more innovative by freeing up time by automating a range of processes. Also, SRM and eSourcing tools can give procurement far greater visibility into potential supplier or supply chain issues, meaning innovative solutions can be used to resolve these problems before they become more significant.

Procurement is recognizing that technology must do more than just prop up existing processes; it must drive on multiple levels - departmentally and business wide, delivering process efficiency and innovation.

On the negative side, the report suggests that procurement may not be realizing its full potential and is more likely focusing more on 'safe' innovation. A willingness to take risks (20 percent) and a investing in R&D (19 percent) are clearly not considered priorities for procurement.

The research also suggests that procurement isn't really sure whether it wants to be the ones driving decisions or just part of a collaborative team that makes it happen. To become real innovators, procurement professionals must foster the right business relationships, nurture the correct set of new skills and seek to break ground in their approach to technology. That is the challenge ahead.
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