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What do procurement teams think when it comes to innovation in supplier management?

October 27, 2016
Posted by adjuno

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At the recent eWorld Procurement & Supply event, Adjuno learned some of the latest attitudes of Procurement professionals when it comes to investment into innovation projects for supplier management. We thought we would summarise some of the pertinent points and give a brief overview of the key session with the findings from a recent report.

A report commissioned by Wax Digital looked at 4 main areas of innovation:

  1. Business
  2. Procurement
  3. Soft skills
  4. Technology

Sixty-nine percent of the Procurement respondents viewed ‘Procurement’ as a function that was responsible for helping the business to innovate in this area, and eighty percent went as far as to say that Procurement are expected to play an important innovative role. So ultimately Procurement Teams are the driving force behind new improvement projects in supplier management.

When asked the question what makes an innovative business? Answers were spread over three main areas:

  • 43% said it was having “a clear business vision”
  • 33% said it was being “able to react to markets quickly”
  • 32% said it was a matter of “reviewing and improving processes”.

When looking to future projects on the horizon for supplier management, procurement teams had their focus spread across the below areas:

  • 36% were looking at “improving procurement best practice”
  • 24% were looking at “reducing supply chain risk”
  • 14% were wanting to move away from being administrators to strategic leaders

When looking at the broader ‘Supplier Relationship Management’ process, there were some key areas of focus and forty-six percent of the respondents were looking to innovate their processes in the next 2 years, with thirty-four percent focusing on improving spend visibility with suppliers specifically. Cost will always be a main driver to closer supplier management, but it’s increasingly not the only driver. This is due to more organisations adopting the ‘Triple Bottom Line’ (TBL) accounting framework which evaluates their performance against social, environmental and financial factors in order to measure broader business goals.

Supplier information management was cited as an area that needs innovation and businesses were looking to more closely monitor their supply chains to meet regulatory standards which are often changing and far-reaching, each with its own very specific challenges in relation to the industry in question. Pharmaceuticals for instance need to have visibility and traceability of all its suppliers to prevent counterfeit drugs being in use, as well as complying with governments Good Manufacturing Practice (GMP) and Good Distribution Practice (GDP) in preparation for inspections. Many retailers are now also members of the Ethical Trade Initiative (ETI) and so must audit their suppliers to ensure they comply with minimum working standards across their entire supply chains.

Much of the focus of procurement professionals is around removing risk from their supply chains and managing compliance more effectively. Any negative news story in this day and age, can reach global proportions in a matter of seconds with the rise in social media, so businesses need to more closely manage risk in order to safeguard their reputations. However, supplier relationship management is being seen more of a two-way street as improved compliance comes from improved collaboration and working relationships. Therefore, some companies are looking to carrying more performance questionnaires with internal stakeholders and well as with external suppliers in order to get a true representation of the operational relationship and opportunity areas for innovation that can then benefit both parties. The likely catalyst to improved collaboration will be giving a workforce the means to easily share information, so technology as always will be an enabler, but first the programmes and investments must be put in place for procurement teams to see improvement projects succeed.

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