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How to Thrive Through Supplier Innovation

2/6/24

Prior to the pandemic, the supplier-customer relationship was something companies might look at once a year, choosing suppliers based on price negotiations and then drawing up contracts and cutting purchase orders as needed. It was more of a set-it-and-forget-it, one-and-done transactional relationship. And it worked because the supply chain was mostly predictable.

As the world emerges from the pandemic, the traditional supplier-customer relationship is evolving into something far more strategic and mutually beneficial. Companies are now recognizing the many ways they can tap into their suppliers’ expertise to drive more value. Suppliers now understand that they, too, must bring more to the table and continue to innovate by offering unique benefits to their customers. Speakers at a Supplier Innovation Panel hosted by Grainger in 2023 shared their experiences and advice for optimizing procurement processes. They also shared examples of how supplier-customer collaboration can benefit the bottom line.

Using Data Effectively

Panelist Rob Fuhrman, chief procurement officer at Accenture Consultancy, helps global companies drive costs out of their businesses. Rob’s expertise in data analysis is one way he helps clients uncover improvements in how they procure and manage inventory.

Rob referenced one client who was spending $400 million on MRO and was storing $600 million in inventory. The company had no way to track where specific inventory was located, how old it was or even how often it was turning. Using the data they had available, Rob and his customer worked together to figure out how to gain control over their procurement situation. The collaborative effort not only enabled the customer to streamline its processes, but they were also able to pinpoint the data they would need moving forward so his client would understand their inventory status in real-time.

Panelist Sara Barker is the vice president of Corporate Support Services for Medxcel, a facilities provider focused on building and maintaining healthcare facilities throughout the U.S. Sara leads Medxcel’s supply chain, compliance and project management services. In order for Medxcel to achieve its goal to help hospitals operate 24/7, Medxcel must rely on secondary and tertiary suppliers. “Partnering with a supplier and truly understanding their capabilities is essential," she said.

Digging into Processes

Part of Medxcel's portfolio of services for their healthcare clients includes providing roofing maintenance and repair services. To manage this, Medxcel was employing local labor in each market. With more than 2600 sites nationwide, this approach became inefficient and costly. Medxcel and their suppliers agreed to evaluate the issue together to find a mutually beneficial solution. 

Leadership from Medxcel and their supplier partners joined Grainger representatives in an open dialogue at Medxcel’s headquarters. The teams came to an agreement from that initial meeting to start from scratch, and consider working in a completely different way. They agreed that to reduce costs, one possible solution was the idea of a dedicated crew model, meaning the partner would hire crews dedicated solely to working on Medxcel hospital roofs, rather than relying on local subcontracting.

Over the next few months the teams met regularly to build out the innovative program, implement, and continually evaluate how the model was working and to adjust as needed. "We built a capability together that didn’t exist before." Sara says. It didn’t take long for both Medxcel and their supplier to both realize benefits from these changes. "Within the first nine months of the program, the roofing partner actually came back and said, we've learned so much, we can do this cheaper now and they were then able to pass on additional savings to Medxcel." 

Untitled Document

“Innovation to drive change often comes from one simple question: What if? What if we approached this problem from a different perspective? What if we tried something different?" 
—Sara Barker, Medxcel 

Finding Solutions in Unexpected Places

Rob recommended his customers look beyond their industry to leverage their supplier relationships. What, for example, do best practices look like for some of the larger technology firms? How do these companies use their suppliers and how can their practices be applied in your world? He also recommended bringing more people to the table besides the sales team.

“Get input from people doing the work, so you can see how they really operate,” he said.

Technology can also provide opportunity. Fuhrman cited artificial intelligence as a tool that could help companies discover trends, collect information about the marketplace, optimize productivity or gain intel on the competition. He cited an example of a sourcing manager needing to write a request for proposals (RFP). Generative AI could create the RFP document, leaving the sourcing manager to review and fill in some gaps. “Generative AI,” he said, “allows people to do more strategic things, and can help them do their jobs more efficiently. It’s not going to take people’s jobs.”

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How to Thrive Through Supplier Innovation

This article describes how companies that think more strategically about how to collaborate with suppliers can bring about positive changes.

The information contained in this article is intended for general information purposes only and is based on information available as of the initial date of publication. No representation is made that the information or references are complete or remain current. This article is not a substitute for review of current applicable government regulations, industry standards, or other standards specific to your business and/or activities and should not be construed as legal advice or opinion. Readers with specific questions should refer to the applicable standards or consult with an attorney.