Schneider Electric has embarked on a program to encourage innovation in its relations with key suppliers. Sri Gopinath, director of procurement strategy, explains.

SCB: What is Schneider Electric doing these days in working with suppliers to promote innovation?

Gopinath: We have a combination of measures that we’re taking to promote innovation with our suppliers. Over the years we have come to realize that they have capabilities that far exceed what we might be currently buying from them. They bring to the table many innovative technologies and solutions that, if we were able to integrate them into our offerings, we would be able to satisfy our customers' needs much faster. We could bring products to market that would differentiate us from the competition and provide us with a total solution that we can deliver to our customers. So we’re trying to encourage our suppliers to put their best foot forward in meeting our current and future needs.

SCB: That, of course, requires that you give them the necessary information, which you receive from your own customers. Does downstream data come to you and get passed up to suppliers on a regular basis?

Gopinath: It will happen if we’re on top of it. We have a good organization that enables this communication. Over the last few years, we've paid a lot of attention to that. But facilitation of that ability, especially in a company as large and global as Schneider, doesn't happen by itself. We have to make sure it’s a strategic priority, and put in the right mechanisms within the organization to promote that interaction. R&D, engineering, supply-chain, procurement and suppliers all have to form a community that works as a single ecosystem to propagate the innovation pipeline.

SCB: Sounds great, but what is the relationship between supplier innovation and customer value?

Gopinath: There’s a lot of correlation there. If a supplier brings us an innovation, either on the product or services side, that fits the needs of our customers, we’re able to integrate that into a product much faster. We have access to talent without needing to reinvent the wheel.

SCB: At the same time, procurement is under constant pressure to help improve the bottom line. How do you balance that with the need for true supplier innovation and partnerships?

Gopinath: This morning I had an opportunity to hear a great speaker who asked, What are we doing? We spend a lot of time talking about today's problems and how to solve them. There’s always pressure to do more. But how much time are we spending thinking about tomorrow, or even the day after that? Will we be ready for what’s coming down the pipe? This to me is the big question with our supplier base — that innovation should be in the DNA of a company like Schneider.

We are a company that grew up in the energy business, supplying electrical hardware and stuff like that. Now we’re in the process of transforming to energy in a digital way. We’re connecting our products to the digital layer, and extracting intelligence out of the data in order to provide more value-added services to our customers. This kind of thing would not have been possible without the advent of technology and innovation. But in order for us to enable that transformation quickly, we need our supplier partners to share with us their daily challenges of enabling productivity, efficiency improvement and cost reductions. We have to preserve our financial health in order to innovate and reinvest those savings in R&D and other things. Innovation is one of the key criteria that we use to select our strategic supply partners.

SCB: For a company the size of Schneider, that’s a complex universe.

Gopinath: Our suppliers are not all the same. Many are of the regular supplier model, and very few are true innovation partners. They go through a highly selective process of determining how they fit our needs. So we have two conversations taking place at different points in time. There are operational challenges that we continuously work on to solve the problems of today. At the same time, we’re talking about the problems of tomorrow and the day after that. We don't typically mix the two, because it tends to contaminate the relationship. Our long-term perspective is that our suppliers need to stick with us and adopt a partnership mindset. Together we go through the good times and bad times, and we also take care of operational needs as they come.

SCB: There’s been a lot of talk of late about supply-chain digitization. What is the impact of that on procurement?

Gopinath: Digitization has already brought many changes to procurement, and is continuing to impact us at both the organizational and individual levels. We have to understand how to integrate technologies like process automation, artificial intelligence, machine learning and language processing to become more efficient and help us make better decisions. That’s the real change that we all must be ready for.