Business innovation starts with suppliers
Analyst Steve Steutermann closed out Gartner’s Supply Chain Conference in London with a forward-looking glimpse into the supply chain of 2028. He projects the new workforce will be based on value derived from the combination of humans and machines working side by side. Human talent and AI combined, he suggests, will provide superior capabilities to either one acting alone. Displaying five potential job evolutions in the future, one of the intriguing transformations is the Sourcing Leader evolving into Innovation Coordinator. The connection makes a ton of sense once supply chains instill an outside-in approach, starting first and foremost with the customer in-mind. Every move should, in theory, somehow point back to delivering value to the customer. Traditional sourcing models were often built around low cost and efficiency. In the coming years this will rapidly evolve towards sourcing models that seek and foster customer-facing value and innovation from the supply network. It’s already happening in some companies.
Luis Allo from Johnson & Johnson spoke at Gartner about the role of suppliers in innovative ecosystems. He called out that traditional procurement is about finding the most value out of a relationship. But value is not simply cost related. Every brand and retailer feels the urgency to innovate on new products and services. Allo explains that sourcing and procurement leaders have an opportunity to drive a different dialog around value. He describes co-development agreements between brands and suppliers, and innovation funds in partnership with suppliers to develop new concepts, materials, products and services. Sourcing and procurement leaders should seek and develop creative new ways to partner with suppliers and foster collaboration. He recommends finding ways to incubate concepts and technologies to deliver new products, new services, new ways to improve sustainability, and new ways to please the customer.
“In the near future,” Allo says, “firms will be defined by the ecosystems they control rather than the assets they control.”
Is this a stretch of reality? One example of supplier collaboration that exists today to drive innovation comes from Levi Strauss & Co. Levi’s partners closely with its suppliers and invests in the relationship to ensure better quality, compliance, and sustainability measures at the factory level. Levi suppliers have access to capital in the form of an early payment program, through the IFC’s World Bank. Suppliers are rewarded with even more competitive rates based on how they perform against a sustainability scorecard. Levi’s is investing in the health of its suppliers and seeking non-capital returns through suppliers that are responsible and willing to make change for the better.
Another example of supplier collaboration to better please the customer comes from Adidas, who partners with its overseas suppliers to produce and deliver custom sneakers directly to consumers in less than two weeks. Adidas empowers its suppliers with data and technology to seamlessly process custom shoe orders, produce them within their mass production lines, and then pack and ship the sneakers directly to the end consumer, all from the factory floor.
Both of these examples show brands recognizing the value of collaborating with suppliers and empowering them to do more than just manufacture goods. Regardless of industry – retail, pharma, auto or chemicals – there’s an urgency to innovate to counter disruption and mounting pressures from customers, investors, government agencies and regulators. The supply base remains an untapped source of value and innovation for many organizations. Those who are quick to break down the barriers and silos that exist in their supply network and operate as a cohesive networked ecosystem will have an advantage in the years ahead. The combination of machines and humans working side by side will do this by automating processes and making data more shareable, usable, accurate and useful. AI, for example, can look at massive quantities of data to uncover patterns regarding specific supplier quality or performance. It can assist sourcing and procurement executives in selecting the right supplier for the right product or service, with data-supported evidence pointing to the optimal choice. It can assist suppliers in obtaining the materials or resources they need to develop new products by prescribing the most suitable options or ingredients. AI will help uncover new opportunities to improve service and deliver greater value to customers - a major advantage to the Innovation Coordinator of 2028.