He said companies need to take a proactive approach and build value-added relationships with their strategic suppliers, and asked: ‘How many of us are capable of talking about what our strategic suppliers do?’
Who is innovating?
“Most companies don’t build relationships with their suppliers, they manage them,” said Crichton. “We have to know who is innovating and capture it before the competition.”
One way to do this is to organize individual brainstorming meetings with suppliers and find out what they are spending their money on in R&D.
Crichton said Tokyo for example is obsessed with Muda (Japanese for waste) meetings with key suppliers looking at how to reduce what is not necessary, such as eliminating over production, overprocessing, waiting, unnecessary motion, transportation, defects, and inventory.
“They have pushed the cost out model a far way. Fast Moving Consumer Goods (FMCG) companies haven’t,” he added.
“There is a ‘mega change’ happening today in purchasing. A new type of buyer is coming along, but its difficult bringing about that change.”
Talking about Danone, Crichton said everyone wants purchasing to play a different role - it’s not just about price any more.
Franck Riboud Danone
He said Franck Riboud, CEO, Danone spoke at the Purchasing Convention in November last year telling the audience its direct competitor was no longer Nestlé but the private label companies.
“Riboud said if consumers are buying on price alone, Danone is dead. Our value creation will come from an ‘innovation environment’ but we have never trained anyone to work on innovation, we have to ‘de-format’ people,” added Crichton.
“What he (Riboud) was saying was over the next five years 70% of innovation will come from the relationships we build with our strategic suppliers.
“We can no longer beat private labels, Tesco, CarreFour, Monoprix on price. Companies have got business drivers at both ends but not necessarily in the middle. The challenge for a purchasing director is ‘how do I get those guys on the parameter fence? One answer might be to take marketing people and put them into the purchasing arena.”
Crichton added today the innovation potential in packaging and presentation is enormous.
“Multinationals are changing the way they do business. Are we ready for it?,” he said.
“The word suppliers is becoming out-of-date and we now need business drivers, people who are constantly contributing. Its not about the process, it’s about people who see the bigger picture.
“Instead of talking about the glue lets talk about what it’s going to contribute to. We must no longer be disconnected. We need to understand where the business is going and talk to people about what they are doing in China and South America, for example.
“In future, we are going to do business together in a totally different way but we don’t yet know what that different way looks like. We all have to be creative and to challenge old working ways.”