How can procurement departments boost innovation?

procurement department
July 7th, 2020
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Alongside their traditional goals of reducing costs and managing risk, process digitalisation now makes it possible for procurement departments to focus on creating value. To do this, they have to be able to drive innovation. Natacha Tréhan, Professor of Purchasing Management at Université Grenoble Alpes and researcher at CERAG, shares three ways procurement departments can make this happen:

Identifying innovation on platforms

Innovation can now be found on digital platforms, which bring together procurement departments and different resources, and help to develop open networks.

Many kinds of platform are available:

  • Open innovation platforms: These invite third parties (experts, start-ups, laboratories etc.) to solve internal problems.
  • Hackathon platforms: These challenge participants to come up with digital solutions in record time.
  • Freelancer platforms: These bring together a variety of talented individuals who are specialists in their field.

It is therefore up to procurement departments to identify the sources of innovation best suited to their needs and to cultivate these types of network.

Driving innovation among suppliers

For several years, customer-supplier relationships have been evolving and the balance of power has gradually shifted. Consequently, procurement departments must also encourage innovative suppliers to collaborate with their company.

Rather than simply managing supplier relationships, it's about motivating the suppliers themselves. To do this, procurement departments must make sure that collaborations run as smoothly as possible by drawing on these best practices:

  • Appoint a "Key Supplier Coordinator" who has a comprehensive insight into the ins and outs of the supplier (history, issues, interactions etc.).
  • Use collaborative tools, internal social networks and even supplier portals to make interactions easier.
  • Avoid multiple returns, contradictions, last-minute changes etc.

Improving their company's ability to assimilate information

An organisation's ability to assimilate is characterised by its capacity to identify the value of new information, understand it and turn it into a potential source of value. As the main point of contact for the supplier market, procurement departments play a key role in this area.

However, a company's capacity for assimilation depends on several factors:

  • The extent of the buyers' knowledge, both in terms of their own area of expertise, and also of other company departments, the market etc.
  • Their level of motivation, which can be boosted by the solutions and resources available.
  • The structure of the business, i.e. its ability to share new information with different departments and employees. Again, digital tools play a key role.

More than ever, digitalisation is at the heart of innovation. Different digital solutions ultimately allow procurement departments to boost innovation, whether this is by identifying innovation externally, leveraging key suppliers, or improving their company's ability to assimilate information. All of this eventually helps to create value and contribute to their company's performance as a result.

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