For example, a buyer may specify a change in a schedule
target that requires an innovative change to the supplier’s
processes. The outcomes of supplier innovation range
from ( 1) incremental improvements in a product, service or
process to ( 2) new products, services or processes.
In our CAPS Research CPO Insights survey in 2016, 95
percent of the 21 respondents felt that it is important to
assess supplier innovation for potential new suppliers, and
90 percent felt it important to do so for current suppliers.
On a seven-point scale ranging from “not at all important”
( 1) to “extremely important” ( 7), the average answer was 5. 5
for current suppliers and 5. 8 for new suppliers.
Despite the perceived importance of supplier innovation
potential, only 25 percent of CPO respondents agreed that
their organization had a system
that actively evaluates supplier
and only 33 percent of them
indicated that their organization
had a system that actively puts
suppliers’ innovative ideas into
OPINIONS DIFFER ON
These findings were mirrored in
our interviews as well. Four of
the 11 organizations had formal
supplier evaluation systems;
in two of those cases, supplier
innovation was included as a criterion, and in two cases it
was not. In the former two cases, superior suppliers were
recognized in a formal award program, and in one case, the
organization had an annual supplier innovation award. The
data indicates that many organizations do not have formal
systems and processes in place to find, assimilate and use
innovation from a supplier.
Unlike cost and quality, innovation is more di;cult to
quantify because of its uncertain and dynamic nature.
One purchasing executive from our interviews described
innovation as a “moving target” that calls for “free thinking.”
Thus, the assessment of innovations can easily be influenced
by subjective opinions or personal preferences.
From our interviews with 11 CAPS Research member
organizations, we found that purchasing executives did
not share a common definition for supplier innovation.
Furthermore, because a supplier is an independent and
TO FIND VALUE, ASSESS THE SITUATION
self-interested organization, a buying organization does not
have full information on the supplier’s ability and intent to
produce innovations valuable for the buying organization.
Our research and interviews suggest that a supplier’s
historical innovation performance does not necessarily
predict its future innovation potential. Likewise, having
innovative suppliers is of no value if the organization can’t
identify or assimilate their innovations. Thus, we recommend
performing three di;erent types of assessments to maximize
value from supplier innovation:
1) Assess existing suppliers’ historical
innovation performance, using such data
as project records and buyer perceptions.
This may be focused on critical supplies
2) Assess existing or prospective
suppliers’ future innovation potential
using research and other information
about their organizational systems for
innovation. This may be particularly
useful when developing a new product
3) Assess your organization’s ability to
identify and capture value from your
suppliers’ innovations. This should be the
CPO’s tool to assess the organization’s
capability and improvement.
The success of a supplier innovation management
program relies on an open organizational culture, strong
internal support and ongoing conversations with suppliers
based on data from supplier innovation assessment
tools. By understanding the current state and future of
supplier innovation assessment and management, supply
management executives should play critical roles to prepare
their organizations for the ever-changing future in assessing
and managing supplier innovations. ISM
Tingting Yan, Ph.D., is associate professor of supply chain management
at Wayne State University in Detroit. Kevin J. Dooley, Ph.D., is a professor
of supply chain management at the W. P. Carey School of Business at
Arizona State University in Tempe, Arizona.
SUPPLIERS IS OF
NO VALUE IF THE
IDENTIFY OR ASSIMILATE