Supply Management’s Role in New Product Innovation

Supply management leaders from midmarket consumer products to global automotive manufacturers are yearning to unleash pent-up growth in their R&D labs by more quickly advancing their new product ideas into the hands of paying customers. Those new products are popular with consumers: The 2015 Nielsen Global New Product Innovation Survey found that 63 percent of consumers like when manufacturers introduce new products.

When developing and bringing new products to market, one challenge supply managers face is the ability to acquire early cost data: According to 40 percent of respondents in an IndustryStar poll, that factor is the single greatest challenge preventing them from bringing earlier supply chain market data into new product development. Yet, poll respondents surprisingly rank cost reduction as the third most important reason, after lead time and time to market, for involving supply management earlier in new product development.

These findings show that while consumers prefer innovation, supply management professionals need to find better ways to deliver innovative new products in less time and at lower costs.

While there is no “secret elixir” to hasten our pace in creating the next big thing, here are nine techniques that have proven effective.

1) Foster innovation culture. The hum of business can distract supply management’s intentions of getting involved in the company’s innovation efforts. To help nudge us in the innovation direction, we need company systems that reward risk. Starting small and building momentum usually fosters lasting success. Launching a weekly product ideas meeting, innovation board or posting customer problems in public areas are good places to start.

Actions, once started and repeated, can become ingrained organizational habits. Leaders must publicly and positively acknowledge employees that take risks and fail. Finding ways to celebrate failures by reviewing what the organization learned and defining next steps in team meetings can help shift your team’s mindset toward innovation.

2) Enter the arena. New product innovation involvement offers supply management professionals an opportunity to positively impact their company’s growth. Teams must build bridges of collaboration with cross-functional colleagues who are required to effectively speed innovation. The best ideas will jump off the starting blocks when we intimately understand our customer’s pains, new product features and functionality.

To make the most impact, we must join the conversation, with a curiosity that will allow us to empathize with our colleagues’ early commercial needs, then enable us to creatively solve them.

3) Personify a trusted advisor. Be a problem solver by becoming a trusted advisor to your product-development teams. By taking an active role in co-developing your company’s future products and quickly solving challenges, you’ll earn trust — while ensuring alignment and developing a common language over time between design, engineering and supply chain.

With the move toward more connected products, supply management must assume a larger role as the steward of supply-base knowledge. The pace of innovation today requires that we work to remove every bit of drag possible in commercializing new products. Improving relationships with colleagues inside and outside our organizations will shave valuable time off new product-development efforts.

4) Broker commercial information. Engineers often say that supply management focuses on production, not the next breakthrough. Given that current production generates the revenue that pays everyone’s salaries, there is some truth to this.

However, if there is no supply management involvement in new product development, companies are gambling with their future revenues. Supply management is uniquely positioned to be the key broker of commercial information so products succeed in the marketplace.

5) Develop key partnerships. We can make a considerable impact by connecting the right need with the right supplier that can solve it. Selectively leveraging relationships to foster supplier partnership early in the process can prove invaluable. While supplier capabilities are critical to product development, “it’s important to understand that suppliers have comfort zones, so at times they might not want to take on additional early product involvement risk,” says Michael Prince, president of Chicago-based Beyond Design.

Because they’re not issuing the POs, designers and engineers often can’t generate the same level of supplier support as their procurement counterparts. Left without early support from supply management, they are forced to work with only suppliers willing to invest time. A vacuum in supply management involvement can equate to longer lead times and less commercial flexibility.

Supplier fatigue in product development often stems from a lack of understanding about the market opportunity and planned production. Taking time, even when things are in flux, to walk suppliers through product vision and their potential role requires a conscious effort but can make an outsized impact on product success.

6) Involve suppliers early. As suppliers often have unique and/or proprietary approaches and designs, there is some concern of additional supplier-induced risk by involving them early in new product development. These concerns are largely overblown, and significantly more upside than downside can be realized by involving suppliers as early as possible in product development.

“Supplier involvement in new product development can yield such benefits as reduced cost, improved quality, reduced product development time, and improved access to technology,” says Robert B. Handfield, Ph.D., Bank of America Distinguished university professor and executive director of the Poole College of Management Supply Chain Resource Cooperative at North Carolina State University in Raleigh, North Carolina.

Further, any risk can largely be mitigated through active supply management participation in shaping a product, but a deeper understanding of the key underlying technologies is needed.

Supply management can flag future commercial headwinds brought about by the sole reliance on a unique input. When executed fluidly, this back and forth can accelerate innovation and prevent future rework.

7) Engage smaller suppliers. Your largest suppliers are unlikely to present technological breakthroughs, as historically, state-of-the-art ideas tend to come from newer, more innovative, and often smaller suppliers.

Partnering with smaller suppliers may require you to accept that some creature comforts might not be at the level of larger organizations. Thus, your expectations for determining success with smaller suppliers need to be adjusted. This doesn’t mean you should accept all outputs from smaller suppliers, but you need to acknowledge their limits.

These subtleties usually surface in the selling process. Procurement has a meaningful opportunity to lead this effort by quoting smaller suppliers and breaking up larger pieces of business to trial suppliers.

A proactive partnership approach is needed to seek out and court these smaller suppliers to enable your company to tap into their innovation.

8) Tap technology experts. There is an understandable level of anxiety with sharing prospective product plans with suppliers, but much more can be gained through collaboration than lost. Implementing robust supply chain processes, securing NDAs, and controlling what, how and when information is shared can reduce collaboration risk, while aiding team productivity.

If new technology is a paramount ingredient to producing a product, finding a supplier that’s experienced and confident in the breakthrough technology is key. Without knowing the intricate details of how to manufacture a specific technology, the design process is handicapped, and the product is at high risk for delays and failure. Co-development with the proper upfront commercial and legal frameworks in place can further unleash innovation.

9) Act today to improve tomorrow. Supply management can positively impact the development of new products in many ways beyond cost. It is up to us to help shape the early value-add narrative.

Embracing the critical role in shaping your company’s future products won’t be easy. It will require extra work, a deeper understanding of what your colleagues do, what you buy and how your underlying product technologies work.

Great products liberate organizations to increase profit margins, gain market share and ultimately build and enhance strong companies. Truly innovative new products help solve customers’ most pressing pains while exploiting uncontested markets.

New product innovation is more akin to competitive running: We constantly need to be seeking ways to gain an edge to improve our time. Using these best practices will help you make visible progress on your road to boosting innovation.