September 05, 2022 | Procurement Strategy
Improving business processes through innovation and implementing new ideas to stay ahead of the competition are some strategies enterprises must maintain for long-term growth. In this effort, procurement is an important area enterprises should focus on to foster innovation.
A systematic approach to procurement innovation requires enterprises to drive value through collaboration – internal and external. Additionally, enterprises must ensure that the procurement team’s objectives align with other functions and the overall organizational objectives.
Innovative procurement strategies, such as supplier collaboration, encourage suppliers at every step to come up with creative ideas and plans to supply products or services.
Organizations benefit from innovative practices as follows:
Procurement innovation necessitates the involvement of all functions within an enterprise, ensuring that their goals are aligned and fostering collaboration and effective knowledge transfer.
Transparent and ongoing collaboration with suppliers helps in two ways:
● By ensuring suppliers are aligned with the enterprises’ sourcing, production schedules, and customer sales
● By speeding up the innovations while reducing the risks of implementing them
By innovating the processes and systems, enterprises ensure that they live up to customer expectations by delivering the right product at the right place timely and safely. It also helps them retain customers.
By adopting sustainable practices, enterprises project responsible growth, strengthening their image globally and impacting customers’ and suppliers’ buying choices.
Focusing on wise spending instead of just cost reduction will reduce waste, thus improving the ROI across the value chain.
Innovative procurement ideas from suppliers are far more successful and commercialized much faster.
Lack of collaboration between various functions within a business and insufficient cooperation with external partners and suppliers are detrimental to innovation in procurement.
Opportunities for growth or savings are lost when procurement fails to recognize specific market indicators and trends, whether due to ignorance, inexperience, or a new market.
Additionally, poor communication within the business and lack of knowledge sharing between functions result in wasted efforts and substandard agreements, resulting in avoidable losses for the business.
Building solid relationships requires collaboration between the customer and supplier and the use of the latest digital technologies that manage and measure all activities to realize the value by effectively deploying the new product or service.
Targeted innovation means seeing how suppliers and outsourcing partners are innovating and transforming. Businesses must observe and identify what the markets or the customers need.
Firstly, by offering opportunities to minority and women-owned firms, the enterprises’ supplier base grows and diversifies over time, enhancing the flow of new ideas, their exposure to new markets, and their resilience.
Secondly, enterprises can optimize their supply chains to reduce costs and carbon footprint by optimizing and digitally transforming the supply chain network.
Here are a few best practices that enterprises may adopt for fostering successful procurement innovation in their respective organizations.
Create an innovation platform to attract ideas about new markets, opportunities, technologies, process improvements, products, and services from employees, customers, suppliers, partners, and various other teams across the enterprise to improve efficiency, cost optimization, and deliver value.
Create a tech-savvy team that is competent in relationship management and strategic oriented.
Identify innovative technologies that can synergize well with the existing technologies and free up supervisors to focus more on strategic tasks and contribute to the innovation pipeline.
Enterprises need to collaborate with suppliers transparently to promote competition and maximize innovative solutions. Also, they must review supplier performance to ensure that benefits due to implementing innovations are delivered.
ESG policies often add value to the business. It forces the organization to think and innovate to work around the ESG policy.
Procurement innovation can help organizations stay ahead of the curve by creating value in terms of cost savings, reducing risks, and increasing the top line and bottom line. Combining technology, expertise, and experience with the right supplier partner can do wonders to an enterprise’s image as an innovative entity.
Create an innovative procurement platform that can attract ideas from employees, customers, suppliers, and partners regarding new markets, trends, opportunities, technologies, products, or services that could deliver value to an enterprise.