Purchasers must 'open their eyes' to innovation

11 February 2011
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11 February 2011 | Paul Snell

Buyers must consider the cost to their business of not encouraging innovation in the supply chain, rather than the cost of doing it.

Tony Gale, director of corporate operations – infrastructure at GE, told delegates at yesterday’s Sustainable Procurement – The New Era conference in London that purchasers with a risk-averse attitude were hampering innovation.

“In certain companies innovation is looked on as being more expensive,” he said. “Innovation is taking a risk where I don’t need to take a risk, if you talk about procurement. And it is hitting a corporation’s bottom line.

“We are looking to our supply chain to work with us, we want procurement to open their eyes to the benefits of working with innovation, because if not Britain’s going to be left behind as an economy. I would ask the procurement people here to review how they look at innovation and the cost of not doing it, against the cost of doing it.”

According to Mike Barry, head of sustainable business at Marks & Spencer, this could mean investing with suppliers. “We created a central innovation fund for Plan A, a couple of million pounds a year, and people from our business units bid for it to get the technologies we need for the future,” he said. “But our suppliers can also bid for it. They are increasingly coming to us with good ideas, saying if M&S puts £50,000 in we will put £50,000 in and we can come up with something very special. Just like all innovation, some things will fail miserably and some things will change M&S for the future. You have to got put some money on the table to drive that.”

Gale agreed, saying the $200 million (£125 million) the company has spent through equity investment or working capital at SMEs was an investment in the future of GE’s supply chain.

Barry also said the burden on suppliers has to be reduced through buyer collaboration.

“You cannot have a separate set of Tesco standards, Sainsbury’s standards, M&S standards - that way madness lies. Not just for us, but for the suppliers filling in different questionnaires. We are trying to work as much as we can to make sure there is a common platform in the supply chain. It has to be the same common language.”

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