Supplier Innovation: The Way Ahead
The operational landscape in the manufacturing industry comprises three broad activities – sourcing, making, and delivering (including sales and marketing). These three activities are represented by the stakeholders – suppliers, manufacturers, and customers – who ensure that the manufacturing value chain thrives and evolves continuously. Suppliers today are increasingly playing critical roles in product innovation and the development of new supply channels such as multi-channel commerce. 'Supplier innovation' is a company-supplier relationship focused on fostering innovation through joint product development and exploring new ideas for optimizing supply chain networks.
Key Drivers of Supplier Innovation
Prior to understanding the need for a supplier innovation framework, it is important to identify the key drivers of supplier innovation. These operational requirements along with other factors such as changing customer preferences, drive product innovation in general and supplier innovation in particular. The major factors that drive supplier innovation are supply chain costs, market agility and better technology along with IP protection.
Supplier innovation also depends on the robustness of mechanisms that help in ideating and communicating with suppliers. TCS’ experience suggests that supplier collaboration platforms continue to be a key innovation trigger for procurement and sourcing solutions. Once supplier collaboration evolves to an innovative partnership phase, the next step is to enable supplier innovation.
Enabling the Supplier Innovation Model
The supplier innovation enablement model helps modern enterprises realize their potential in offering new products and services through a collaborative supply chain. To enable supplier innovation, companies need to undertake an innovation program – a concerted step towards engaging with suppliers for product and procurement innovation. The key components that cover all dimensions of an innovation program P2C2 that include
- People: In every supplier innovation program, key stakeholders from the enterprise as well as from the supplier's side need to align with the larger aspects of innovation focused collaboration. The first step is to create a platform for the people involved to collaborate with each other.
- Product: The product is at the core of an organization's innovation strategy. To achieve efficiency in enabling the 'product' ingredient of an innovation program, enterprises should create an infrastructure that includes shared R&D facilities, innovation hubs, and technology sharing agreements. This will ensure engagement and shared innovation metrics for supplier participation early on in the product lifecycle.
- Communication: If the product and its innovation are regarded as the core of the innovation strategy in any organization, then communication can be considered as the overarching protective layer. The key enablers of communication in the context of supplier innovation include:
- A communication strategy
- Supplier summits
- Cultural integration to ensure faster communication
- Performance feedback meetings
- Cloud-based, mobile, and social media channels for effective communication
- Continuous Improvement: Innovation focused supplier collaboration can take time to establish and evolve. Supplier development is a cyclical process that goes through various toll gates such as supplier audit, quality certification, and score card based performance evaluation. Score card based assessment of suppliers can help gauge suppliers at various stages in the supplier lifecycle management.
Expanding the Impact of Supplier Innovation
The supplier innovation program can help organizations move from siloed R&D efforts to a joint innovation path. The P2C2 based supplier innovation framework proposed in this paper is a generic framework applicable to all types of manufacturing organizations. However, it can be customized for specific operations in manufacturing. For instance, in the automotive, aircraft, and other engineering industries, given the large number of supplier components and the nature of purchases, the robustness of supplier collaboration focused on innovations can impact new product launches. A P2C2 based supplier innovation enablement model built on a robust ERP solution can be customized to suit the needs of different industries. This, in turn, can enable suppliers to drive innovation in conjunction with the organization for better business outcomes.