CPOs also use different governance structures to improve supplier collaboration including annual Top-to-Tops, or Quarterly Business Reviews. These communication channels can deliver tremendous value when they are chartered and structured with intent. Jennifer Moceri, Chief Procurement Officer at Diageo, a multinational alcoholic beverages company, is launching a new Supplier Relationship Management (SRM) program to do exactly that. “Our 200-plus brands across 180 countries are constantly innovating. We believe we can make our innovation pipeline and our brand reputation even stronger if our supplier-partners play a more proactive and insightful role in ideation and delivery. This type of partnership will drive sustainable business performance for both parties.”
Innovation from a holistic view
Procurement can see things in suppliers who support multiple lines of business that individual users might miss with a standalone supplier relationship. It is also common for procurement to form internal supplier councils around a given spend category, or for CPOs to share best practices externally in industry groups, creating a broader perspective of supply market capability. This visibility enables procurement to help the business locate better supply sources.
Procurement is also empowered to support growth through innovation because they shape the terms, conditions and compensation of suppliers. They have negotiation tools at their disposal to help form at-risk, gain-sharing and exclusive rights agreements. These commercial terms can influence business outcomes and ensure alignment. Challenging suppliers to invest in your partnership, or come to the table with original ideas, or conduct proprietary market research, is an often-underutilized tactic when forming these commercial relationships.
Any talk of procurement’s ability to support growth and innovation presumes that you have superior base procurement capabilities in place. If, for example, your source-to-pay infrastructure is poor, and you’re paying vendors late, they probably won’t be very receptive to a conversation about innovation. But if your organization is ready, procurement may be able to make a significant contribution to growth.
An initiative to drive growth through supply innovation doesn’t have to be difficult to start. Pick one supplier, business area or spend category. Start with a pilot, and then scale based on what you’ve learned. As Confucius said, “Better a diamond with a flaw than a pebble without.” Too many companies fail to make progress in this space because they over-think or over-plan.
The best corporate-supplier ecosystem is one where each member has a vested interest in everyone else’s success. Your growth means others will grow, as well.
1 Michael Lyman, Ron Ref and Oliver Wright, Cornerstone of future growth: Ecosystems, Accenture Strategy, May 11, 2018.