How to unlock value through supplier-driven innovation

By Charles Nyika | Mar. 21, 2025

Today’s customers will always demand a continuous cycle of new products and services. The increased demand for novel products from customers has recently reached fever pitch.

PROCUREMENT practitioners, who are not having sleepless nights over the current unpredictable economic order, are most probably not reading newspaper headlines.

The profession is suffering under the unbearable weight of omnipresent instability in a disruption-filled business environment.

The world economic order is increasingly characterised by constant changes to product lines, due in part to rapid technological changes. There is a need for organisations to keep pace by ensuring that they continuously engage the supply chain community seeking new innovative ideas.

Today’s customers will always demand a continuous cycle of new products and services. The increased demand for novel products from customers has recently reached fever pitch.

Procurement professionals are now required to go above and beyond the call of duty to drive exceptional value through supplier-driven innovation strategies. Organisations across all verticals are under serious pressure to innovate at pace.

Suppliers, service providers and consultants are generally regarded as subject matter experts not necessarily for one customer’s business but for many others, including for your major competitors.

It is, therefore, important to harness the untapped potential of the supply chain community to contribute valuable insights and novel ideas to the business.

Suppliers are always better placed than the business to identify promising opportunities and white spaces in highly competitive markets.

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The procurement department, through its continuous link with suppliers can be regarded as a prolific source of creativity and innovation.

Most organisations no longer manufacture component parts internally. They are now relying on external supply sources to produce the bulk of raw materials, component parts and or spare parts, hence the need for procurement to harness as much innovation as possible from the supply chain community.

Continuous interaction with the supply chain community enables organisations to reduce the cost of doing business through the identification and introduction of new materials, new technologies and alternative service solutions at more competitive rates.

Suppliers are sources of a large pool of talented minds that can provide innovative solutions, which will keep pace with end-user demands in the marketplace.

Supply chains are required to be agile and flexible in their innovation elasticity, enhancing their capabilities to meet the ever-changing market demands. Innovation initiatives will lay the groundwork for a lasting competitive advantage.

In today’s supply chain environment, cost reduction and innovation should not be viewed as mutually exclusive. To achieve exceptional performance, high performance companies have soon realised that there is need to step out of the box and treat innovation as the precursor of growth and success.

There is a need for a new breed of procurement executives, who are prepared to roll up their sleeves and shed off the traditional mindset of cost cutting.

Procurement professionals should always remember that “a cost reduction only mindset” makes a company realise more profits but only at the same revenue base.

Suppliers will only come forward with innovative solutions which promote growth where they feel fairly treated by procurement practitioners. This will obviously add brain and muscle to innovation initiatives.

Innovation can come in many forms. It can involve collaborative efforts to streamline supply chain operations, or it could be joint efforts targeted at developing cutting-edge technologies, or it could be to explore new sustainability initiatives meant to protect the environment.

The hallmark of innovation-related initiatives will be to harness the expertise of suppliers with the aim of generating value-added solutions that seek to promote operational efficiencies of the supply chain ecosystem.

The Procurement Department’s knowledge of the ever-evolving supply market and its transversal position in the organisation gives credence to compelling arguments for the department to take a leading role in promoting supplier-driven innovation as a business strategy.

Together with suppliers, they should ensure that they go where no one has ever gone before. Expanding the envelope for new product offerings whether in the form of raw materials or in end user products is now more critical than ever.

It would appear the procurement department brings to the strategic table the vision of future trends and suppliers’ innovative solutions at no cost to the business.

Organisations are operating in a crowded marketplace. Your supply chain must find innovative ways of standing out of the crowd. It must be able to effortlessly differentiate itself from the madding crowd.

Promotion of supplier-driven innovation emphasises the need to push established boundaries by challenging the status quo. The ability to sense and adapt to the dynamic changes in the economic landscape is now critical than ever.

The most progressive procurement practitioners are expressing their willingness to adopt supplier-driven innovation strategies in order to achieve the next level of business value.

There is, therefore, a need for procurement to advance a new value proposition by initiating supplier-driven innovation and process improvements, which will in turn lead to cost reduction not as a goal, but as a by-product of the process.

Suppliers should, therefore, be treated as valued business partners. This will give organisations the opportunity to gain access to diverse perspectives and expertise, creating opportunities for mutually beneficial business relationships coupled with top-line value.

Collaboration must become a defining characteristic of a successful innovation roadmap. Innovation can only thrive where there is close collaboration between procurement and suppliers.

The mutual relationship will facilitate easy privileged access to supplier ideation. This will promote the sharing of strategic information for use in developing future products that will have a significant market impact when they are introduced on the market.

Supply chain partners, who work together in a collaborative manner, are better able to respond to the rapid change in consumer tastes and needs, at short notice.

Collaboration will assist supply chain partners to strike at the heart of the major challenges obtaining in the supply market. Collaboration provides an added advantage of sharing information, financial and material resources coupled with expertise to create synergies that promote mutual benefits for all parties.

Creating enduring collaboration capabilities that drive long-term success at corporate level will be key as we move into the future.

Collaboration creates an enabling environment that encourages creativity, experimentation and knowledge sharing. With collaboration, businesspeople will be in a position to navigate the intricate complexities of the global supply chain landscape with confidence and swagger.

Long-term success will be a function of the way your collaborative efforts embrace the need for innovation, providing the shortest route to new solutions.

Best in class organisations have soon realised that innovation has since evolved from being purely an internal capability driven by research and development to something largely driven by the external network of the supply community spearheaded by the procurement department.

Supplier-driven innovation is much cheaper and the fastest way of bringing technology to the organisation than the research and development process which is not only expensive but time consuming.

Procurement professionals should, therefore, take an active role in promoting supplier-driven innovation by identifying and developing a supply base with complimentary capabilities that encourage innovative thinking.

Supplier innovation strategies must be closely aligned to the business’s goals, objectives and priorities. Organisations are, therefore, required to offer a free pathway to suppliers to unlock value, drive innovation and foster lasting success.

This will offer considerable competitive advantages to the supply chain ecosystem with a view to create a future ready organisation. Supplier-driven innovation will enable suppliers to make valuable contributions during the design stages of new products enabling organisations to capitalise on supplier’s knowledge and capabilities.

The ideas that are normally harnessed from supplier-suggested innovative initiatives will assist in the production of goods with shorter to market cycles and lower production bottlenecks.

Such products will enjoy first mover advantages on the market. This can only happen where organisational structures provide enough entrepreneurial freedom to support innovation in product development.

Given the high costs of research and development, suppliers make huge investments in time, money and effort in developing innovative products.

In order to harness as much innovation as possible from the supply market, there is need to cultivate relationships that are solely based on transparency and honest relationships, which are breeding grounds for a win-win relationship through mutually beneficial long-term business relationships based on accountability and stretch targets.

Therefore, for supplier suggested ideas to gain the traction required during implementation, there should be an agreed formula to share success, with particular reference to intellectual property rights from joint efforts.

Building on thought processes that seem to religiously believe that fresh eyes may be better able to find unique and award-winning solutions, supplier-driven innovation has taken a much bigger dimension.

Most procurement departments are now introducing supplier portals where all preferred suppliers are encouraged to post any innovative ideas for possible adoption.

Novel ideas that are game changing will be rewarded with big supply contracts. Some companies have introduced supplier evenings where the procurement departments invite suppliers for drinks while discussing new ideas in an informal environment where everyone is encouraged to participate. The cost of hosting such supplier evenings could be high, but so are the returns.

In conclusion, it is important to point out that while so much has been said about supplier-driven innovation, the success of this strategy is only as good as the company’s ability to fully and properly execute it since there is always a disconnect between intentions and actions.

The value of supplier-driven innovation lies in implementation, walking the talk so to speak. This will inevitably lead to a triple win. The supplier will benefit, the buying organisation will benefit, the customers or end users will benefit.

Everyone will be happy. In pursuit of this high-valued strategy, supply chain professionals will be required to take small, yet seemingly tedious baby steps day in, day out with a view to reach the desired destination. The chances of generating increased revenue and profit year-by-year will remain ever present once supplier-innovation is given its place in the sun.