3 Strategies for enhancing Collaborative Innovation with Suppliers.

Relationships, in many contexts, can be defined as compilations of dynamic and complex interactions, which form a mutually existing history between two or multiple parties.

The relationships formed between purchasing entities and their suppliers, in regards to the definition above, are no different. Buyer-supplier relationships are typically complex and take time to develop. Just like all relationships, those of buyers and suppliers typically face turmoil throughout history and are forced to find dynamic solutions to continue collaboration or end the relationship all together.

Collaboration.

It’s a word spoken of, with much pertinence, when delving into the topic of supply chain management and supply chain optimization. Supply chains everywhere are vying to get ahead, leveraging their relationships between themselves (purchasing entities) and their suppliers; resulting in collaborative innovation and mutual growth.

Like most journeys to success, when it comes to enhancing collaborative innovation with suppliers, the proof is in the planning.

Though collaboration is abundant, it’s been suggested that few procurement professionals feel satisfied when collaborating with suppliers (see figure below).

Source: BCG

So I figured I’d help the cause. Here is:

3 Strategies for enhancing Collaborative Innovation with Suppliers.

Supplier Development

The old leadership adage: ‘You’re only as good as your team’ truly applies when it comes to optimizing the innovation, supplier collaboration can create and maintain.

Supplier development and engagement strategies can enhance the probability of supplier relationships bearing realized innovation; creating mutual prosperity both entities can enjoy.

Leveraging external suppliers, and developing their growth, is equally important to supply chain innovation as building development strategies in your internal operations. Nurturing the development of suppliers’ strategies builds parallel values. Whether it is maintaining performance, improving product quality or meeting mutual sustainability goals.

Take Walmart for example:

In the past few weeks Walmart announced that they will be implementing strategies to reduce GHG emissions by 1 billion metric tons by 2030.That’s emissions equivalent to the removing over 200 million passenger vehicles from being on the road.

The majority of the Scope 3 (operations they don’t have direct control over, such as suppliers and sub-suppliers) emissions are to be counteracted by developing suppliers’ knowledge and engaging with suppliers more frequently. Walmart is launching online tool kits for their suppliers. This is in an effort to provide their suppliers with the information and education necessary to implement sustainability strategies in their own operations.

Senior VP of Global Sustainability, Laura Phillips, remarked, “We are initially working with 250 of our top global suppliers, working across multiple product categories like food, personal care products, toys, electronics and apparel”.

Phillips continued, [the toolkit] “a digital resource center with the materials, videos and the information we’ve been working on for [over] 10 years in one place” (GreenBiz 2017)

This kind of involvement, and engagement, into the success of suppliers operations instills an invaluable level of trust in the buyer-supplier relationship. Implementing supplier development programs shows your supplier that they are, in fact, a partner of long-term value rather than a means short-term profitability.

Define the Core and Non-Core activities

“Companies see supplier collaboration programs as a way to improve performance in multiple areas. Cost savings is by far the most common goal, cited by 77 percent of procurement executives. The next most-common goals are innovation, higher quality, and increased efficiency, cited by 46 percent, 34 percent, and 33 percent of procurement executives, respectively” (BCG 2013).

For most companies, supplier collaboration and the agreement/engagement in that collaboration (on the part of the suppliers) is heavily based around a possibility for profitability.

As many business ventures, realizing profitable collaboration is easier said than done. Making sure that both entities are focusing their efforts towards common goals is a good starting point for assuring collaborative efficiency.

This process is most effective when the competencies of both parties in the collaboration are utilized to their fullest potential.

“Clearly define the core and non-core activities and outsource a select number of non-core activities that are not crucial to achieving your innovation goals” (atkearney.se 2014).

Segmenting focus areas in the collaboration can result in a better opportunity for creating mutual value. Agreement on issues such as IP (intellectual property), quality management and delegation of tasks can avoid the possibility of later tensions in the collaboration (bcgperspectives 2013).

Putting the right people in the right places opens up the operation for innovative solutions and methods.

Supplier Governance

Governance is a word that typically has hierarchal connotations. This can definitely be a drawback when implementing governance strategies into your supplier collaboration.

When it’s all said and done, governing suppliers to assure that collaboration can render innovative activity, and growth, is a necessary function in supply chain management.

Initial assessments, audits and performance evaluations are crucial practices to assure your organization is cooperating with suppliers that are looking to create a mutually profitable and long-term relationship. These governance functionalities also assure that suppliers are operating with the same standards in mind that your organization conveys to your end customer.

Governance strategies build a basis for collaborative innovation to occur by eliminating defective suppliers, and allowing you to focus on building meaningful relationships with those who are worth building meaningful relationships with. Governance strategies assures quality, performance and manages risk in your daily supply chain operations.

Until next week.