When it comes to innovation and the impacts it brings to market changes influenced by internal and external factors, these impacts are simultaneously positive and negative.
Specifically regarding changes in supplier relationships, André Gurgel, a member of the Procurement Club, highlights that “new technologies applied to Procurement, such as RPAs, Blockchain, and AI, for instance, allow interactions to be more fluid and traceable, and opportunities to be more democratized, especially when looking at the tail spend (Class C). Consequently, we achieve a significant gain in reducing purchase order issuance and order entry costs, in addition to greater compliance and adherence to standards and quality benchmarks.”
The cautionary point Gurgel emphasizes is how technology applied on a large and indiscriminate scale could trigger a more distant relationship between buyers and suppliers; and even “colder, potentially losing the sensitivity to better explore opportunities through direct, personal interactions.”
Today, gaining a better understanding of clients can be accomplished through all kinds of surveys using appropriate technological tools that offer greater convenience to respondents and efficiency to those consolidating data; however, personal contact captures important nuances that technology still cannot fully translate.
To stay one step ahead along this path of change paved by innovation, companies must recognize that not all technology works all the time and everywhere. It takes discernment to evaluate what works best and genuinely delivers the proposed benefits for a specific organization or procurement structure. Therefore, being highly discerning when selecting a technology that will truly drive relevant improvements with a compelling cost-benefit ratio is the key ingredient in a recipe for success.
Another important point, according to André Gurgel, is to remember that innovating does not necessarily involve technology. Moreover, “thinking outside the box often leads us to simple process changes, procedural updates, and why not organizational culture shifts? To stay one step ahead, one must have the sensitivity to perceive what truly makes sense, will positively impact internal customers and suppliers, and will deliver concrete, measurable results for the organization.”
How should a company structure itself to innovate?
The innovation movement seeks to promote technologies that connect company departments and their suppliers, and this new reality tends to become increasingly integrated. How are companies preparing for these new times?
“In my opinion, this is the main success factor in this entire process. There seems to be a gap between the desire to stay updated and aligned with this new era and actually engaging in this movement.”
Every change process requires everyone to step out of their comfort zone, and for that reason, it can be challenging to implement. That is why it is essential that the entire organization is engaged in this journey, and it is necessary to seriously discuss to what extent it is willing to immerse itself in this proposition.
There are still many doubts and uncertainties in the market regarding preparedness to live and experience innovation; in this scenario, the fear of change is understandable. Regarding this, Gurgel considers that “a full migration also relies on substantial effort and investment. Younger companies, startups, fintechs, etc., benefit from being digital natives. However, for other companies, this migration is more painful, time-consuming, and costly.”
From the suppliers' perspective, the reality is less uniform. Some are more prepared, while others are less so. This poses a challenge when implementing a specific technology intended to cover 100% of a company’s supplier base. As an example, the Executive and member of the Procurement Club points out the effort required for the seamless adoption of marketplaces or even the efficient use of a simple digital signature solution. “This suggests that we still have a long way to go and a lot of work to do.”
Innovation and Business Models
Every case is unique and, as previously mentioned, innovating does not necessarily involve technology. Innovation itself resembles a large department store. Everything inside is appealing and attractive, but you don't necessarily have to buy the entire store. You only purchase what makes sense for you and provides utility in some way. With this perspective, the Executive reflects: “the acquisition of new technologies should undergo the same scrutiny and prior analysis. Bearing in mind that often, after investing in a particular technology, the exit strategy can be more painful than the initial rollout. It is best, therefore, to think through choices thoroughly before starting your journey to avoid severe headaches.”
Foundational pillars for a company to align with the concept of innovation
To embark on this initiative, it requires:
- Commitment
The entire organization must be committed to this transformation. Staying flexible and open to new opportunities will be a constant necessity and an essential step along this journey.
- Study
Gaining a deep understanding of genuine internal pain points requires thorough study: identifying what needs improvement, what should be maintained, and what must be phased out.
- Mapping
Following these studies, it is critical to conduct thorough analyses of available technologies and map them out to implement what makes sense, effectively addressing the areas for improvement that were identified and mapped.
- Focus
Naturally, focus on execution, tracking the implementation process, and continuously refining what is being introduced cannot be overlooked.
- Monitoring
Establishing indicators to measure progress and gains is essential for sustaining the credibility of the process.
Risk Assessment – Revenue vs. Expense
To assess risks effectively, managers and business leaders must weigh expenses against revenue in relation to the investment. André considers this “the million-dollar question” for reaching a new level. Because we are experiencing times of extreme volatility, risks and threats seem to surround multiple sectors and companies. Therefore, the frankest and most honest answer is: “stay alert, because times of crisis are also times of great opportunity. Furthermore, during this period of social isolation, many companies were compelled to rapidly enter the digital universe.”
There is an extensive, forced experimentation with many tools in this realm. Today, the priority is certainly no longer cost vs. benefit, but rather business survival.
Changes in supplier sourcing driven by innovation
In this case, two factors are most relevant. First, the emergence of various applications for supplier search and qualification. “Every day, we see that offline time spent searching for suppliers is being reduced through the use of digital platforms for vendor registration and qualification. The management of this vast data repository is evolving into increasingly sophisticated and precise solutions, resulting in selections that are ever more data-driven.”
The second point is that, as previously mentioned, the supplier base is not uniform. Some sectors are naturally more up-to-date with technology and innovation, while others lag behind. “Additionally, and especially in Brazil, regional disparities significantly impact the search for uniformly qualified and updated suppliers across all our states and cities. This often makes the standardized rollout of a specific solution a major challenge for organizations.”
The challenge is substantial, and there is certainly plenty of work ahead. However, current circumstances are driving many companies to innovate and experiment with new solutions rapidly and collaboratively. “Even in this context, never before have the concepts of fair trade and win-win been so critical for organizations and procurement professionals. We will need to learn to take this step together if we wish to build a technological, connected, and innovative environment.”
