Procurement and Innovation: Strange Bedfellows or Perfect Pair?

Procurement and innovation. Let’s be honest – historically, the two have existed rather far apart. Procurement hasn’t really been an area targeted by innovation nor has it positioned itself as a true enabler of it.

Fortunately, that’s changing – and supply chain finance is playing a key role.

According to research conducted by PricewaterhouseCoopers and numerous others, too few financial resources are one of the top reasons why business innovations fail. Companies simply don’t have enough working capital to fuel the R&D engine or are forced to cut corners that ultimately impede the success of the initiative.

Historically, the focus for procurement has been to reduce costs of a product or service. But the situation is changing. Procurement is in a unique position to help solve the financial challenges that limit innovation. It’s a belief we have at PrimeRevenue, one espoused by our clients and one shared by innovation advisory firm PA Consulting.

According to a recent blog posted at Procurement Leaders, it comes down to being “entreprocurial.” Here is a brief extract from this thought-provoking article:

“EntreprocurialTM is the idea that procurement should behave like an entrepreneur in order to help deliver an organisation’s growth ambitions. It is a mindset that procurement professionals should adopt to stay relevant in today’s changing world…

In a world where the pace of innovation is unprecedented and is necessary for survival, procurement must be flexible and agile. Adopting an Entreprocurial approach pushes the function towards that all-important top line contribution.”

Perhaps the best way procurement can help overcome the biggest obstacle to innovation (cash flow) is through supply chain finance (SCF). These programs allow companies and their suppliers to generate significant free operating cash flow. This capital can be used to fund innovation initiatives that can improve competitive differentiation, help sell into new client segments or survive economic volatility.

Just ask the retailer that unlocked $1 billion in their supply chain to help launch a sophisticated digital buying experience and the opening of 400 new stores. Or a global food conglomerate that – amid a major drop in demand for its products – used supply chain finance to fund a multi-billion dollar initiative to develop and acquire new in-demand products. These examples demonstrate how procurement-led supply chain finance programs are having a transformative impact on business innovation.

Many of the Chief Procurement Officers we work with view their role and their team’s through an entrepreneurial lens – and are leading their organizations toward a new standard of procurement excellence. They recognize the full potential of procurement and see supply chain finance as one way to deliver tangible, powerful value to their organization. Where some view innovation and procurement as strange bedfellows, they represent a symbiotic pair.