How procurement must be involved in Innovation.

1. Sourcing function: its
transformation and its role in
innovation
What do you feel if you think on the Procurement function?. Before put in the paper my own feeling
… dear procurement professionals and friends who are into my network … excuse me in
advance!!!
I am consultant, so provider and the mine one is very clear: savings, low price, burocracy, auctions
… As an expert in Supply Chain and Logistics: burocracy, no value, trammels, .. And I would not be
honest if I don’t reflect the visión of the Procurement professionals. I have taken a lot of chats with
them and they are not happy with the current situation too. They feel their clients don’t appreciate
their efforts to add value and to look for the best offer from the best provider.
(I hope don’t lose contacts in Linkedin after that comments!!!)
However, the information technology evolution, the digitalization of the business and the new
materials on the manufacturing industry put the Procurement function to a complex (but thrilling)
challenge at the short term.
Become the main channel of External Innovation and therefore of value.
The business digitalization allows (and demands) to listen the clients in so way that the companies,
whatever the industry, must make as flexible as possible their delivery process of products and
services and even define offers based on almost individual requirements.
On the other hand, the newest information technology advances allow the total supply chain
integration end to end. From clients demand to provider delivery making easy the flexibility
demanded by the clients.
The trend named Industry 4.0 in manufacturing shows that approach. Not to mention more obvious
examples like Banking, Insurance or Telcos.
And finally, the suppliers own the key knowledge on these new technologies, materials or services
that are absolutely critical for their clients to develop new product or services or even to deliver to
the final clients as their requiere in the new digital era.
In this scenario where, as a an example, Dow Chemical is able to schedule the production plants
based on the forecasting from the clients trends and needs extracted from big data analysis
application, what is the rol that Sourcing must play … taking in mind the feelings mentioned
before?.
For the paradox that the purchasing function
becomes the cornerstone to channel innovation
and value from suppliers to the supply chain and
even the end customer is given.
Sourcing
Proveedor
Cadena de Suministro
Compras Corpora2vas
Calidad
Valor
Innovación
Plazo Especificaciones
Coste
Especificaciones
Criterios
Normas
Obje2vos
Clientes
Valor
Innovación

2. That is a real transformation!!!. From savings to value, from bureaucracy to value added from
forgotten to co-stars.
(And now I hope that those who are tempted to erase me from Linkedin they have forgotten!!)
OK!!!. Sourcing gains prominence and therefore responsibility in the income statement. But this
grandiloquent phrase "channel innovation and create value" what is it really?.
From my point of view the radical change lies in three axes. What in Induct named Sourcing 3CD:
• First C: Coordinate. Purchasing function must take an active role in both the design phase of
product and services and strategic planning of the company. And what does active role mean?.
Basically, sourcing must understand what the business strategy and new services and products
are and, based on that knowledge, make available for its internal clients suppliers who can
provide all their knowledge to “collaborate” in the future of the company. We are going to call
them “innosuppliers”. (Unfortunately the term partner to providers is applied fairly battered).
• Second C: Canalize. Sourcing must develop the
tools and processes to make sure it is able to
identify those “innosourcers” and to develop the
right channels to make sure their collaboration
with the company to provide value and be
rewarded in based of that (and measured!!!).
• Third C: Control. Sourcing ensure that the new
channel does not become a "black hole" in which suppliers are introduced based on criteria of
who is extremely friendly, familiar or foreign perverting the essence of the concept of
Innosourcer and paying more than the value provided.
Explain how to achieve this transformation would probably requires a series of post of long and
tedious. And, of course, is an arrogant of me to assume that I have the "philosopher's stone" of this
transformation.
But close here would pose a problem article without giving at least some clues to the solution.
In Induct we have worked with Purchasing Managers and recently held a conference table with
several of them by posing these issues. The conclusions of that table are posted on my profile and
available to all who want, but basically the solutions passing through:
1. Innovate (vs evolve) Sourcing function. The challenge is significant enough so that only the
solutions based on innovative thinking to be able to respond. Addresses purchases must
initiate a process with their internal customers to "innovate" function. Continuous improvement,
process redesign, technology are elements that can help but only the use of innovation in
partnership with its customers (rethought in the solitude of the office not worth) can help
purchasing managers to “reinvent”.
2. Open innovation as a channel for innosuppliers. Abandon commerce platforms where
suppliers compete and replace them for co-creation platforms where suppliers can provide
ideas and solutions to the challenges posed by the management, supply chain, sales or person
concerned. And reward providers depending not only on their ideas, but their level of
involvement, their participation and their ability to bring these ideas to the reality of our supply
chain.
3. Evolve buyer relationship manager. Really our future buyers are professionals of the highest
level who are able to understand the strategy and the market and contacting their internal
customers with external suppliers, ensuring collaboration between the two, ensuring that
Sourcing
Sistemá/co Flexibilidad
Control
Precio Valor
Innovación
Compras
Negocio

3. reward based on the value and not forgetting that although we do not like, the main purchasing
function is to ensure that the best buy at the right price is taken.
4. New tools. Open Innovation platforms, new dashboard, new indicators, new analysis tools and
market screening providers ... are basic and essential. But without the tool costs more than the
solution. Let's not be in past mistakes.
And last two messages or "bad news”:
• Achieving this transformation is not something "delegable" to CEO. It is a challenge the
Purchasing managers should take as their own and start the path that each company will be
different, to achieve this co-starring role at the speed your business needs.
• Take on this new role, it involves taking responsibility to provide results in the "bottom line" of the
income that is much more complex compared to saving offer tough and involves working with
internal and external agents.
Eva Díaz
@eva_diazo
eva.diaz@induct.es
Professional with over 25 years of consulting experience in strategy and operations has developed
numerous projects of strategy definition and optimization of operations on large companies;
especially in the areas of Supply Chain, production and information technologies. Responsible for
total quality initiatives in business services and member of the steering committee of relevant
consultants. Currently he overturned in building their own business project partnership with Induct
software, dedicated to consolidating the culture of innovation in large customers. Vocational
consultant passionate about customer service and strong advocate of innovation and differentiation
tool for Spanish business environment.