Procurement, a new driver for innovation?

Far from the image of the cost-killer, the Procurement function plays a growing strategic role in the industry. Purchasing management has become one of the company's main performance drivers. By optimizing your teams' activities, you can hope to improve your margins, not only by reducing your operational costs but also by infusing new life to your production chain.

This function plays a significant role in your organization's continuous improvement and innovation process. In doing so, it guarantees the company's sustainability in an increasingly competitive environment.

How can Procurement facilitate product conception?

Long associated with the concept of cost-killing, the Procurement function seemed, by extension, to conflict the production quality or even the development of new products. Nevertheless, by integrating innovative digital solutions, the teams have succeeded in automating a large number of low value-added operations.

Thanks to greater flexibility, they are now able to focus on continuous improvement of the value chain. This includes optimizing their sourcing strategy, improving cost management and reducing time-to-market. By acting on these factors, the Procurement function can reduce uncertainty and support the company's innovation efforts.

Cost management

The era of cost reduction at all costs is over. Companies today are looking to optimize spendings, a trend that is more favorable to development and innovation. However, the cost of raw materials, equipment or industrial maintenance can strongly influence the design of a product. Depending on the company's strategy, excessive production costs can hinder the R&D process of a product.

At this point, the role of the Procurement function is decisive. By eliminating the level of uncertainty related to production costs as early as possible, it is part of an overall approach to continuous improvement. To do this, the teams act on two levels:

  • Internally. Thanks to powerful calculation algorithms, modern costing tools allow Procurement teams to save time in an offer analysis phase. By adopting a predictive costing approach, i.e. estimating costs as accurately as possible using state-of-the-art digital tools, they help the company to make the best decision at the right time.
  • Externally. Once the market analysis is completed, the teams can use their expertise and negotiate the best prices with suppliers. This discussion phase is fully in line with the company's SRM strategy.

Read this article to learn more about SRM strategies.

Time management

One of the most effective ways to improve profitability without compromising product quality is to act on deadlines. As the product life cycle declines, time-to-market becomes a major strategic factor in enabling the company to significantly improve its profitability. It also gives it a competitive advantage and strengthens its market position.

Industry 4.0 and IoT (Internet of Things) are full of innovative solutions for companies seeking efficiency. The integration of smart sensors on your equipment, for example, allows you to align the pace of your purchasing orders with the real needs of your production line.

When a critical level is reached, these sensors send notifications to maintenance teams. They then send the Procurement department a request to order the spare parts and maintenance products necessary for the steady running of operations.

Thanks to its IoT connection, Mobility Work Suppliers, the first platform open to OEMs and consumable manufacturers, even allows you to send this information directly to your industrial suppliers. Ultimately, users will be able to automatically trigger orders from their suppliers.

Reducing time-to-market also means redefining your sourcing strategy. The search for suppliers and the tendering process are time-consuming. Today, solutions such as Mobility Work Suppliers open up new sourcing opportunities for Procurement functions.

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By bringing supply and demand together on a single platform, Mobility Work Suppliers facilitates exchanges between supply chain actors.

Committing to innovation

Procurement not only facilitates interactions within the company but also acts as a hub between supply chain actors. As such, it is the driving force behind a new form of innovation.

Improved sourcing

The rise of marketplaces and collaborative platforms has led to a strategic merger between suppliers and customers.

To this day, organizations are still relying on specialized websites to find industrial suppliers. They then report the results of their research in an Excel spreadsheet and carry out emailing operations as part of their sourcing process. In this context, the multiplication of tools leads to an increased risk of data loss.

The increasing number of flexible and centralized solutions opens up new opportunities for innovation. SaaS and cloud-based applications, such as Mobility Work Suppliers, make it easier to access and analyze relevant supplier profiles. Procurement teams have access to a large amount of data (business sector, official catalog, ratings, etc.) and can contact them directly.

Thus, the organization has simple tools at its disposal to capture the actors of its market and measure the complementarity of their skills for future collaboration.

The rise of co-innovation

Traditionally, innovation has been seen as the preserve of R&D and Marketing functions. The first designs and develops the product, the second evaluates its relevance and customer acceptance. What if you were told that innovation is mainly driven by customers?

For several years now, major names in the clothing and food industries have been engaged in an open dialogue with their consumers. This is where the Procurement function comes into play. The latter is no longer a passive partner but actively contributes to the improvement and design of products. Its feedback is taken into account by suppliers and integrated into the activities of the R&D teams.

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Although this is not sourcing per se, it does have great advantages for companies. This co-innovation method allows organizations to identify, capture and influence supplier innovation according to their needs.

It's a win-win situation. A win for suppliers who have a trial field for their innovations and a customer base assured at the time of marketing. A win for customers who benefit from an exclusive supply contract, often at an advantageous price, and strengthen their supplier relationships.

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