Procurement Continues to Struggle With “Innovation,” says New Study

According to research from APS Group, only 1 in 20 procurement professionals prioritizes innovation when selecting a supplier.

The study, which included interviews with 20 senior procurement professionals, reviewed some of the considerations at play when choosing a potential partner –  and how procurement teams can overcome the challenges posed when trying to balance cost savings alongside innovation.

The results revealed that procurement teams still lean towards a more conservative approach, with 56% of respondents claiming they preferred a partner that had a strong track record as opposed to one that could offer innovation. Secondary to this was a supplier’s ability to deliver a consultative approach (25%), followed by cultural fit (10%). Innovation appeared to be considered a ‘nice to have’, with just 5% saying it was of primary importance. 

‘‘Conversations with procurement professionals revealed that the desire to introduce innovation is there, but that most departments are finding it difficult to prioritize this above all other considerations.’’ said George Smart, business development director at APS Group.

‘‘Part of this comes down to a culture of ‘short term-ism’ which sees departments focus on the immediate gains, such as cost savings. Long term goals are often secondary considerations, and, rightly or wrongly, innovation can often fall into this category.”

In an interview with SCMR, Smart says that putting a value on innovation is loaded with difficulty, however.

“ But what we can do is look at how companies, like Philips, have successfully managed to work with suppliers to introduce innovation,” he says. “What we’ve learnt is there needs to be a commitment from senior management to see innovation happen. When this is the case, it allows procurement to confidently present a long term business case, as well as those short term savings.”

Finally, says Smart, when that high-level “buy-in”exists, procurement teams can start to assess their own processes and skill sets to ensure they are able to work closely with suppliers, and the internal departments that will benefit, towards a shared goal. 

In terms of where price ranked when selecting a partner, almost one fifth said it matters more than anything else. The vast majority (83%), however, claimed that there were other factors which were more important. 56%, for example, said that they wanted a supplier that had a reputation for delivering on time and on budget.

The full findings are included in APS Group’s whitepaper: Putting a price on innovation: The procurement puzzle. This study highlights how multinational electronics company Philips is driving innovation through procurement. It also advises how other procurement professionals can achieve the same success.