Costs more important than innovation, say supply chain professionals

Two-thirds of British businesses (67%) have said that a focus on reducing supplier costs is blocking innovation.

According to research conducted by spend management software provider Ivalua, 60% of UK businesses consider the role of suppliers important when it comes to pushing innovation, but 55% said that cutting costs was more important than innovation.

Alex Saric, smart procurement expert at Ivalua, said: “The pressure is on for businesses to innovate at pace, so collaborating with suppliers to use their industry expertise to develop new products and services has become vital.

“The majority of UK businesses (92%) say they are now highly dependent on their suppliers, so when it comes to innovation, companies must rethink how they approach supplier relationships.”

More than two thirds of those surveyed (69%) believed achieving innovation and cost savings were not mutually exclusive.

Saric said: “Effective collaboration with suppliers requires UK businesses to take a smarter approach to procurement, so they can understand supplier capabilities and strengths, assess risks and recognise opportunities.

“Procurement must refocus to foster, rather than block, innovation. Not only will this allow UK businesses to innovate at pace, but it also fosters collaborative partnerships that speed up innovation, rather than always asking suppliers to cut costs.”

The survey was based on a UK study of 200 procurement, supply chain and finance professionals in financial services, manufacturing, telecommunications and retail businesses with over 1,000 employees.