Procurement consultancy veteran Peter Smith has expanded on two apparently synonymous terms: procurement of innovation and innovative procurement.
Procurement teams may be familiar with the profession’s bread-and-butter concerns (e.g. cost reduction, tail spend management, strategic sourcing, etc.) but may assume that these two phrases are merely different ways of saying the same thing. But drawing from the recent procurement conference ProcureCon Indirect, Smith teases out four distinct aspects to procurement innovation.
Two of these concern procurement as a function within an organisation, while the other two are outward, market-facing concerns:
Innovative operational procurement:
This simply refers to conducting procurement duties and tasks in an innovative way (e.g. using new, cutting-edge tools and systems from one end of the procurement process to the other to optimise sourcing, or selecting suppliers and negotiating new contracts creatively).
Innovation in procurement strategy:
This means using in-house procurement talent to offer procurement services to external partners, as Danske Bank recently did with its clients and Westminster Council did with public sector organisations (PSOs) to help them manage the financial squeeze they were facing.
Purchasing innovative goods and services:
This is one of the two outward-facing dimensions. This is usually what PSOs refer to as ‘procurement innovation’ or ‘procurement of innovation’ – ways of purchasing innovative, novel and early-stage goods or services like IT, drones, military equipment or medical products. This is frequently much more challenging than sticking with established products from established suppliers.
Encouraging innovation from every supplier:
The other outward-facing issue and possibly the most important of the four. The principle undergirding this policy is that suppliers should be encouraged to come up with innovative ideas and plans about supplying goods and services in every procurement exercise and contract. This policy applies irrespective of the purchase, whether it’s basic raw materials, cardboard boxes, a construction project, a legal services purchase or a fleet of delivery vans.
Peter Smith has spent 25 years in the procurement industry as a manager, CPO and consultant.
Steve has over 28 years of success as CPO, MD and Procurement BPO leader in a range of industries. Steve is COO at Odesma, responsible for Odesma’s delivery capability & infrastructure.