Small and Medium Suppliers as a Source of Innovation (and of Risk!)

I recently did a webinar on the topic of “Supplier Management: The Need of the Hour”, for a number of supply chain executives through the Zycus spend management series they have been sponsoring.

The webinar discussed some of the challenges that exist for small and medium sized companies who are seeking to develop relationships with larger companies. Too often, large companies look at suppliers only by how much they are spending with them, and ignore the importance of risk and innovation as factors for consideration when developing supplier relationships. This is especially important when it comes to innovation and commercialization of new products and services.

On the first point, risk is a function of supplier capability and capacity. Many companies are rolling out new innovative services or products, which often rely on a supply chain that has not been well-tested. In some cases, smaller suppliers are selected for single source components – some of which are not considered “critical” to the functioning of the product. Not critical, that is, until you run out! Much to their consternation, procurement executives discover how important it is to have these items at the last minute, when the supplier is overwhelmed with orders and their production lines are operating 24/7, and still unable to keep up! Understanding supplier capability and capacity is important in developing new products and services.

In the second case, small suppliers are often overlooked as sources of innovation, not just for new technology, but for radical and disruptive innovations in business processes, quality, and cost savings ideas. Companies need to establish a core set of “blue sky” supplier development engineers, who can scan the supply market for the best suppliers who have the intellectual capacity and innovation to come up with new ideas that can be developed in a collaborative fashion. Too often, large companies discount small suppliers and go to their large companies for ideas, and may or may not be successful. A new approach for supplier-driven innovation is needed.

I will be talking more about one of the core foundations for supplier relationship management: Procurement Analytics: The Role of Sound Master Data” at 2 pm EST on a webinar Thursday, January 12, 2012

Performance measurement is a fundamental element for managing improvement and change in procurement, yet many challenges exist in today’s operating environment for establishing a simple baseline for analysis. Any analytical or strategic procurement/supply chain initiative requires access to accurate business information for all stakeholders and underscores the value of clean and consistent master data to procurement.

Procurement Analytics are based on master data that is reliable, accurate, and has other quality attributes, yet many organizations struggle to achieve this goal. In many cases, procurement master data exists in multiple formats in different legacy systems, and establishing a baseline for tracking procurement spending, supplier performance, and organizational accomplishments is challenging.

Registration to view this webcast is free of charge, courtesy of Zynapse, at www.zynapse.com.