Implementing procurement to improve innovation and accelerate products time-to-market

In recent years, increased demand from customers, shorter product lifecycles, competition, and economic downturns have caused supplier innovation to move up the list of priorities for many companies. Traditionally, R&D would usually work within their own teams when it came to developing new products. But procurement is increasingly playing a greater role to achieve design goals, boost innovation, increase competition, and improve the top and bottom lines.

In the recent Deloitte 2021 CPO Survey, “73% of procurement organizations see innovation as a top business priority.” But many organizations are still behind the curve. R&D continues to involve procurement teams late in the innovation process, only looping them in when it comes time to procure a specific good or material. For many companies, procurement is seldom seen as a strategic innovation partner. The Deloitte survey adds that “39% of procurement organizations reported that they are rarely involved during innovation.”

Solely relying on R&D can lead to several challenges, such as increased product costs, reduced savings, longer cycle times, and decreased quality. But giving procurement a seat at the table, creating an effective product development process, and collaborating with suppliers is proving to be more challenging than organizations thought.

Benefits of supplier-enabled innovation

When you include procurement during new product development, you can:

• Create new opportunities to build innovative products. Tapping into the skills and knowledge of your suppliers can provide value that organizations may find hard to produce internally.
• Commercialize quality products faster because innovations have already been verified with external suppliers.
• Gain a better understanding of local needs. Suppliers that are located in specific regions will have more insight into that market, which in turn helps you develop attractive offerings for customers.
• Discover new ways to reduce costs or decrease total cost of ownership. Partnering with your suppliers at the beginning of the new product development cycle can help you find the right materials at the right price.
• Accelerate design and launch cycle times. Stakeholders can focus more on resolving issues within the innovation process, adding more value.
• Improve overall customer experience and satisfaction.

Building trust

Boosting innovation with your suppliers is easier said than done. One of the most common barriers to supplier innovation is trust; building trust with suppliers is not something that can be done overnight. Organizations may hold back from sharing too much information on their innovation goals and capabilities. On the other hand, suppliers may find it difficult to open up about their own costs and capabilities, fearing that it may hurt them in future negotiations. In order to build trust, buyers and suppliers need to build a relationship of give and take.

Create a systematic approach

Organizations should implement a strategic process to have an effective supplier-enabled innovation ecosystem. Some of the steps you can take include:

• Ensuring your company is ready to include procurement early in the innovation process.
• Mapping out supplier innovation goals, priorities and capability areas.
• Encouraging cross-collaboration between procurement, R&D, product development teams, and external suppliers to work towards building a long-term, trusting partnership.

When integrating procurement and collaborating with suppliers, ask yourself these questions:

1. What parts and products within our business should we innovate with suppliers?
2. Which suppliers should we partner with during innovation?
3. What are the incentives for both our company and the supplier?
4. Which suppliers do we trust and won’t pose any type of disruptions? What is our plan to manage/mitigate risk?
5. How will our innovation projects be managed and completed?

Implementing supplier management tools can help

Once you have a strategic innovation approach in place, the next step is investing in supplier management. By integrating procurement within your product development process on a unified platform, you can speed up your product development process: streamline supplier qualification and sourcing, select the best suppliers, and mitigate risk.

With an automated supplier management solution like Oracle Cloud Procurement, you can systematically qualify, source and collaborate with suppliers, quickly turning ideas into commercialized products. Your procurement and development teams get greater insight into supplier designs, sourced materials and reliability, while also controlling costs.

With effective supplier management, your company can become more resilient, gain competitive advantages, and accelerate innovation.

Learn more about how you can collaborate and unlock continuous innovation with your suppliers to turn your ideas into market leadership.