The importance in supply chain of good Supplier Enabled Innovation

Business concept: Gears and Procurement Management on computerProcurement-Leaders.com is a membership community of top supply chain executives who have banded together to form a global intelligence network. Their analysts have just completed a study that indicates that many businesses are failing to capitalize on the potential contributions from their supply bases. In what ought to be a desirable aim, businesses are not drilling down into their suppliers reservoirs of innovative ideas and capabilities which could substantially add to the research and development that these business ordinarily undertake.

Supplier Enabled Innovation (SEI)

Supplier Enabled Innovation (SEI) is a relatively new concept from the point of view of those at the top of the supply chain feeding on the information of suppliers throughout that chain. The suppliers themselves have in the most part always been innovative. They have to be in order to remain in business and increase their market share. The trick however for companies at the top of the supply chain is recognizing this innovative trait, and plugging into it.

The problem for these businesses is that they may not have the wherewithal within their own organizations to recognize this innovation and use it to best advantage, and even if they do, they may then face problems with suppliers who are overly protective of their intellectual rights.

Lack of awareness of the meaning of SEI

The first difficulty that many of these businesses, who are failing to capitalize on this rich resource encounter, is that they are not actually aware of what Supplier Enabled Innovation means. It’s therefore understandably hard to take advantage of.

There are two mains schools of thought. One school says that SEI should not be seen as something separate, but instead something that should be viewed as other areas are that come under the auspices of the procurement finction.

The other school of thought however views SEI as a particular series of specialized work-streams that can be monitored and progressed and built into a series of organized, innovative programs; programs which are separate from other work streams and therefore that need specialized management.

Matching the benefits of SEI internally and externally

If procurement at the top of the supply chain can be more focused and targeted with enabling this innovation, then it can have a greater impact. But the main problem that procurement faces, is in finding a way of matching the internal needs that their companies have for SEI in their product development and supply chains etc, with the suppliers themselves who provide the SEI in the first place; in a way that enables both internal and external partners to mutually benefit.

It’s a problem that only procurement can deal with. They have to somehow link the capabilities of the suppliers with the needs of their internal stakeholders by forging better communications with suppliers at various levels. It is this improved communication that is the governing factor.

Best dealt with by a small group of specialists

The problem is that not everybody can be innovative. In fact the companies that believe they have achieved a culture of innovation often find it difficult to spot innovation in others. The analysis carried out by Procurement Leaders.com found that sourcing external SEI, is better than when it is the responsibility of a few nominated individuals and not the company as a whole.

The importance of understanding the end client’s needs

Another important factor in identifying SEI that can contribute to a business’s culture is in understanding what the customer really needs. All too often procurement is distanced from this need, therefore making it much more difficult to not only find appropriate SEI, but to learn to drive it in a way that can have maximum impact on their business’s output.

When all is said and done, procurement must not only be savvy in terms of supply, they must be savvy in terms of demand at the same time.

The key is to employ strong SEI Metrics

The analysis conducted by Procurement-Leaders.com also found a firm link with companies who already have strong SEI metrics up and running, and the cost economies and other benefits that they enjoy as a result. This compares favorably against companies that don’t have appropriate metrics in place and therefore who have no way of managing SEI performance.

As might well be expected, the more proactive a company is in pursuing and promoting SEI, the stronger their business performance results are.

Those who lead versus those who languish

The final results of Procurement-Leaders’ analysis records a marked differential between the leading companies who proactively promote SEI, and the rest of the field. It seems that trying to manage and promote SEI within the routine function of procurement works nowhere as well as when this function is managed separately by a small bespoke group of executives; just as long as they have an appropriate SEI metrics structure in place.

Communication is king

One of the key drivers to success in employing SEI through the supply chain is the communication; not only between internal stakeholders in companies at the top of the supply chain with outside suppliers, but also with other interested bodies such as universities.

The other essential ingredient to SEI success is to ensure that understanding and communication between procurement and the end customer is maximized.


Can Supplier Enabled Innovation make a difference to your company’s performance? If so how would you set it up – within or without the procurement function, and why? Have your say at the feedback section below.

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