As competitive environments rapidly change, technological leaders in manufacturing have to find efficient solutions to foster innovation. Crucial innovations are developed using internal sources of innovation, but at the same time, external sources of innovation are increasingly being identified and leveraged. Among external such sources, suppliers are known to have especially large innovation potential because they have a unique perspective of what the companies — that is, their customers — are doing and need.
Achieving Supplier Innovation
Many companies have not yet fully established how they could most effectively leverage external supplier know-how to foster innovation to the benefit of both their suppliers and customers.
In the meantime, other firms are recognizing that their current and prospective suppliers are crucial sources for innovation. Suppliers can impact and advise on shortening product development time through supply chain optimization, use of existing intellectual property, and design improvements for better product commercialization and product/service enhancement.
While working with suppliers to generate value can have a considerable payoff, realizing it requires a paradigm shift in the company's internal processes and in managing the supplier network. From the get-go, it's important to clearly define:
- the role of internal R&D resources and contributing suppliers
- new and more complex responsibilities for the company's procurement organization
- alignment of suppliers' objectives to those of the company.
Supplier Innovation Tips
Focused innovation efforts are bound to lead to increased product and process innovation, however, there are also challenges to look out for in the course of supplier innovation and collaboration. Here are some key questions worth thinking about before engaging the suppliers into the innovation management process.
Fill in the Innovation Gaps with Suppliers
Collaborating with external suppliers is more than just adding extra brainpower and different ideas to the table. Suppliers can bring insights from both the end-customer and the manufacturer. They have an outside perspective of the customers’ needs and the various aspects of the purchase decision that the manufacturer might not be exposed to every day. Suppliers can expand the manufacturer’s strategic vision and technical knowledge by pointing to possible blind spots and lost potential, as well as opening up new opportunities that the manufacturer might not have previously recognized.
A Cultural Fit is Necessary
It will be hard to accelerate innovation without a cultural fit, mutual trust, and openness for innovation with suppliers. Innovation processes will stagnate without a collaborative culture that supports frequent and necessary changes. A significant cultural shift towards a more supportive management is required to stimulate and achieve supplier-driven innovation.
Communicate with Suppliers
Engineers should communicate directly with the suppliers about product development and key use cases. Usually, suppliers do not have in-depth knowledge of the product end-use and could make engineering changes on their end that negatively affect the overall system or product performance. Open communication and a clear definition of the responsibilities within and across the supplier network are key to trust development and subsequent innovation synergies.
Reward Supplier Innovation
Companies can engage and motivate their suppliers to work on their innovation projects and contribute their own intellectual property to the OEMs when supplier incentives are properly designed. Multiple non-competing suppliers will work together on the company’s innovation challenges if they trust that they will be rewarded for their input and collaboration, either directly or indirectly.
Industry Case: DMG MORI
DMG MORI, one of Germany's largest manufacturers of cutting machine tools, sharpened its competitive edge by integrating its suppliers into the innovation process using ITONICS digital innovation platform. DMG MORI involves its suppliers from the earliest development to later design phases to contribute with process and product innovation ideas. Since open innovation allows for a more distributed, participatory, and decentralized innovation, the suppliers’ know-how plays a crucial role to develop customer-oriented and competitive products for DMG MORI. To empower supplier-driven innovation on a global scale with a geographically dispersed supplier base, DMG MORI opted for an easy digital solution enabling higher engagement of suppliers in innovation and idea challenge campaigns. Now with the DMG MORI Innovation Platform powered by ITONICS, the company has got its suppliers on board for innovative initiatives.
Innovation Platform for Supplier-Driven Innovation
DMG MORI’s platform provides a place for everyone to contribute unique ideas continuously. Suppliers can proactively add new product ideas or innovative services to the platform, whereas DMG MORI’s Open Innovation approach ensures that these ideas are being assessed and implemented.
The process for fostering supplier innovation with the open innovation platform is as follows:
- Building supplier innovation portfolio: gathering supplier ideas within 2 modules, namely Campaign Area and Open Innovation Area.
a. In the Campaign Area, DMG MORI itself initiates innovation projects with partners, campaigns, or supplier tech events to accelerate innovative projects in the company.
b. In the Open Innovation Campaign, DMG MORI invites all suppliers to submit new ideas or innovative services to underscore the innovations at their early stages of development.
- Evaluating innovative ideas: selecting ideas that can be further worked on, DMG MORI evaluates every submitted idea in detail with regard to its business and strategic goals.
- Prototyping and testing: for quick and efficient execution and real-world testing and feedback, rapid prototyping is applied to test the evaluated ideas.
- Checking commercial viability: given that even the most innovative ideas need to have commercial viability in them, the next step is to test that viability in a few chosen projects.
- Starting production: starting the implementation phase of the assessed projects.
Benefits of Supplier Collaboration
Bringing suppliers into one platform for participation and collaboration improves:
- Efficiency and time-to-market: innovation across borders, early and cheap testing of ideas, resulting in accelerated prototyping and cost savings.
- Open innovation: creative ideas through combined expertise and views of suppliers and R&D experts.
- Transparency: higher visibility within the organization as well as its supplier base regarding the innovation and new product development activities.
- Synergy: cooperation between suppliers and DMG MORI ensures a more efficient outcome than if parties would innovate individually.
- Focus on core competencies: trusted partnerships with suppliers allow manufacturers to focus on their own intellectual property and key business differentiators while bringing in the supplier know-how for additional product innovations.
Digital Innovation Platform
Digital and collaborative software tools such as ITONICS Campaigns allow engaging various stakeholders, both internal and external (including suppliers) in the innovation management process.
How it will help you: ITONICS Campaigns helps to drive community innovation and idea management. ITONICS Campaigns is a digital innovation tool for running solution-oriented campaigns in order to close gaps along your innovation process. Bring various stakeholders and experts on board to work together on innovation projects and challenges.
Now, unleashing the creative potential of your stakeholders including suppliers, partners, and clients is effortless and efficient. ITONICS integrated innovation management framework including process, methodology, software support, and best practices in various industries helps to systematically develop new competencies in an organization and to monitor progress in the most relevant areas of expertise.