The procurement function should reduce its focus on cost cutting and place more emphasis on supplier collaboration.
Supplier collaboration can lead to shorter new product development, potentially discover value added opportunities for all parties, and potentially lead to new product development itself.
The key is shared data and analytics in a collaborative environment.
This post is based on the Supply Chain Digital article, From periphery to driving force – procurement tech is enabling innovation, by Alex Saric, October 6, 2018. Image source: Shutterstock / Syda Productions.
1. What happens to new product development within a company if key suppliers’ only concern is cost reduction?
Guidance: Students should review new product development and sourcing. What happens to quality if there is excessive cost pressure on suppliers? Is there incentive for suppliers to provide knowledge and help if costs are the only concern by the buyer? The students should see that a cost reduction focus on sourcing can lead to many poor outcomes if not coupled with long term partnership arrangements.
2. Will sharing data and analytical outcomes with key suppliers be dangerous to the company? What incentives could be put in place to ensure the partnership remains safe for all parties involved?
Guidance: Student discussion should include the matters of sharing trade secrets, other intellectual property concerns, and the potential that suppliers may find incentive to undercut the firm. Students could develop a list of incentives that will ensure the partnership remains positive and that could be implemented in some form, e.g. a contract.