Procurement Best-Practices in Managing Innovative Suppliers

Dear reader,

The analytics of this blog constistenly show approximately 50 readers per month, which is stimulating. Thank you all for your feedback & valuable contributions. 

I need more insights via one last small survey: Practices When Managing Innovative Suppliers.

The first survey and two roundtable discussions give industry insights from over 120 NZ organisations.  It identified a number of procurement best practices. This is helpful for the industry and researchers alike. I am still working on analysing the results, see the previous blogs for some of the results.

You might also check a recent posting onthe BravoSolution blog on supplier enabled innovations in larger US corporations. Although my first survey showed that smaller organisations behave differently from larger organisations, readers could use some of the findings from the US blog.  

I now want to validate when the industry uses a particular best practice. 

Hence please complete this brief survey (4 main questions). Practices When Managing Innovative Suppliers.

Again two people will receive a copy of the Business Model Generation handbook. 
All respondents receive a copy of the survey results.

(BTW: I have finally changed the title of my blog. Entrepreneurial companies and green-tech innovations are still an important part of my research, but for a long time the research focus has been broader.) 

Best regards, 
astaal@aut.ac.nz
Anne Staal

3rd UPDATE survey results on Managing Innovative Suppliers

Meanwhile 120 people completed the survey, which is good! TXS all! (But then I could need a few more survey respondents…). This post discusses some survey results in more detail. 

COMPANY PROFILES

The survey has focused on companies and professionals in the built environment here in New Zealand.

SIZE DOES MATTER

Approximately 50% of surveyed companies have less than 100 employees; and 30% have more than 250 employees. Debating when a company should be considered small or large is quite a different story, which I will not discuss now. I do not follow a EU (< 250 staff) definition nor an NZ (< 20 staff) definition, but something in between. 

Based on literature I assume companies with less than 100 staff (65 respondents) will behave differently from companies with more than 250 staff (35 respondents), with in-between companies showing a sort of mixed behaviour. But then size does not explain everything and other variables will have an impact on the firm's behaviour. Anyway, for contrasting large and small firm procurement behaviour in this post, I skipped the middle segment (10 respondents). Later-on I will use more advanced statistics for analysing the effects of multiple variables.

DIFFERENT FROM OTHER NZ FIRMS. 

Most surveyed small-companies seem service-oriented, have an entrepreneurial approach and focus on excellent products. 

The surveyed small-companies claim that supplier interaction helps them in realizing successful green innovations and in achieving better company results. The intensity of such interactions with suppliers seem to vary, but small-companies seem to indicate more often that they have medium or high intense relations than large companies.

At the same time, small-company respondents indicated that their general management and strategy experience is markedly higher than their innovation or procurement experience. In general large company respondents suggest they have higher experience levels. 

Please note that we purposely (also) selected survey respondents from small entrepreneurial and ‘green’ companies. Hence our survey outcomes may differ from the wider building environment in New Zealand and at the same time could give some learning to other companies.  

SOME MORE SURVEY FINDINGS

Briefly some findings as they seem to appear.

When it comes to defining what specifications companies need from innovative suppliers (1st picture), both small and large companies seem to have fairly similar requirements. They both focus either on the technology or on the economic value, and want innovative suppliers to contribute to the specifications (light blue arrows). They did not consider that they had to manage adversial relationships (dark blue arrows).  

Both the survey and the roundtable discussion showed that managing relationship (2nd picture) with innovative suppliers is very important with small companies. These relations also seem more focused on mutual goals and learning for future opportunities. Although some recent procurement research (Wynstra, 2016?) could suggest that early supplier involvement is not always beneficial, this is still seen as fairly important with both small and large companies.

In case of  finding or selecting (3rd picture) innovative suppliers, small companies seem to appreciate flexible and cooperative suppliers, whereas large companies appreciate that their suppliers know the profiles and demands of end customers.  Large companies seem to use a wider set of selection criteria than small companies. Scanning overseas supplier markets is not high on the priority list of both types of companies. 

Overall, negotiating and contracting (picture to the right) was seen as a low-priority activity within small companies. This could partly be explained by their low negoiation power.

Moreover, negotiations of small companies seem to focus more on opportunities. Larger companies seem to focus more on total costs or managing risks. In line with that, they also seem to focus more on formal contracts than small-companies do.

ROUND-TABLE DISCUSSIONS

Last Friday (24 June) 15 professionals from the built environment discussed first survey results at AUT City Campus. They had lively and industry relevant discussions and appreciated the interaction. “Must do this more often”. “Thanks for these insights, it was most informative”. We will have a second discussion round at NZGBC on the 7^th of July.

Please complete the survey & contact me if you want to participate. We've already confirmations from several people. The discussion again promises to be a good learning moment for all of us.

Enjoy the week - stay tuned for more research. Best regards, Anne

2nd UPDATE SURVEY: Managing innovative suppliers in New Zealand

First preliminary insights from 50 respondents. 
!Only need 50 extra respondents!

HUNTING FOR NEW SUPPLIER IDEAS 

Finding a good innovative supplier seems more important than having a good contract or managing such a supplier.

CO-DEVELOPMENT WITH INNOVATIVE SUPPLIERS
Most important: Make very clear what you demand from your innovative supplier. Still least important: a good contract.

MORE ON MANAGING INNOVATIVE SUPPLIERS
- Innovative suppliers contribute to functionality.
- Focus on both the economic value & the technology that innovative suppliers provide.

- We use a wide range of criteria to select such suppliers
- Suppliers must be flexible and cooperative
- Supplier negotiations focus on cost, risks and opportunities.
- Relations are based on mutual goals, future opportunities, and early involvement.

WHO SAYS THAT SUPPLIER INVOLVEMENT IS BENEFICIAL?
- 37% of respondents are business owners. Respondents are experienced in management & strategy and somewhat less experienced in procurement or innovation.
- Respondents seem most satisfied with procurement activities with their innovative suppliers, and least satisfied with M&S activities with their innovative customers.
- Innovations with suppliers clearly seem more beneficial than innovations without suppliers. To a certain extent supplier involvement could (!) also result in more succesful green innovations.

SOME PRELIMINARY CONCLUSIONS
(Based on only 50 respondents). Innovation procurement could be different from our ‘normal’ procurement practices which in the NZ built environment often focuses on lowest price and delivery and a lower level of trust. The type of innovation and the entrepreneurial orientation could also influence procurement.

Want to know more …

Complete the survey now and you will get a full report.
Your response will improve the quality of the survey!

SURVEY: SME procurement practices with innovative suppliers

SURVEY & ROUND-TABLE DISCUSSION 

Please forward this blog to your business relations interested in the research.

Interested in doing the survey first: click here
Interested in the AUT round-table discussion (24 JUNE):  click for more info

Procurement in innovative or entrepreneurial (SME) companies is different in two ways. It is certainly different from large-firm procurement (purchasing) but it also seems different from procurement in traditional SMEs. Large-firm procurement often focuses on cost-cutting and business continuity with specialised procurement professionals and formalized processes. There are heaps of good procurement guidelines (text books, blogs and best practices) to help us there.

SME PROCUREMENT

BUT: an SME (1-250 employees) is not a dwarfed-down version of a large organization (Welsh & White, 1981). This seems obvious from the Figure below (Nicolas, 2011), but is not so obvious when we need specific guidelines on SME procurement practices.    

Our Dutch research at Hanze University on mainstream (more traditional; Reboud, 2011) SMEs suggests that SMEs exhibit a sales-driven approach when they procure their key goods or services, Despite the huge variety of SMEs (e.g. Meijaard, 2005) our research confirms that SME procurement processes are often more informal and centred round the owner's attitude and experience (e.g. James, 2012). We have identified a number of critical practices which have been discussed at procurement and entrepreneurship conferences in Australia and Europe. We are currently developing procurement tools together with a number of Dutch SMEs.

My NZ PhD research would suggest that innovative construction SMEs go one step further. These SMEs have an entrepreneurial approach to procurement and seem to treat key suppliers similar to their customers. They manage supplier risks, and pursue supplier opportunities as they would pursue opportunities with new customers. These innovative SMEs seem to neutralize their famous "liability of smallness". They scan their supplier markets and interact with large overseas companies to introduce radical innovations into the industry. Again, this all may seem obvious. But there is no website or textbook discussing such entrepreneurial procurement practices. We must know more, so that companies can benefit.

SURVEY ...

That is why AUT will survey entrepreneurial (or innovative) firms interacting with innovative suppliers on green-tech construction innovations. Via the survey we need 100 responses from for example members of PrefabNZ  or NZGBC, or other companies & professionals who work with innovative suppliers. My focus is on companies with less than 250 employees that are active in the construction industry (either new-build, facilities management, or retrofit).

The survey runs from 18 April. Please on this link if you want to participate. We will draw 5 respondents who receive a hard-copy of the Business Model Generation handbook. Check the preview if you’re interested!  
Survey results are confidential and cannot be related to you or your company. 
Participation is voluntarily. All participants can receive anonymised survey results. 

... ROUND-TABLE DISCUSSION
To learn more on this topic, we organise an industry round-table discussion on Friday morning, the 24th of June. If you are interested, please give name & email. We will again draw 5 participants for the famous Business Model Generation handbook. We will use the world-cafe method as advocated by Schiele e.a (2011) and Hoffmann (2012). This method stimulates discussion and brings good results for participants. 

HOW FIRMS WILL BENEFIT

Last week I attended a PrefabNZ conference here at AUT. New Zealand has clever and innovative construction companies. 

A large part of the value created for customers can be procured from suppliers (e.g. Van Weele, 2010; Staal & Walhof, 2014). Construction innovations are expensive and risky and companies can benefit from best-practices with innovative suppliers. The survey and round-table discussion are excellent means of developing and sharing procurement practices with the industry. 

Last year, I published a 4-page article on the role of green suppliers: Get your Green Suppliers on Board. It described findings from a workshop with 20-odd Facilities Management professionals, and has so far resulted in 100+ downloads. Likewise, I will publish on this PhD research via New Zealand blogs, websites and newsletters. Keep following this blog for updates.

As usual, you are welcome to email your suggestions & questions. They really help. 

TXS in advance, Anne

Interested in doing the survey: click here

Interested in the AUT round-table discussion (24 JUNE):  click for more info