Latest / The Buyer's Side with Fexingo: Procurement, Sourcing, and B2B Purchasing Decisions / How Unilever Procurement Uses Supplier-Led Innovation
Transcript
- Lucas: You know how most procurement teams treat supplier relationships as purely transactional — you send a spec, they quote, you buy, end of story. Luna: Right. Maybe a bit of negotiation on price, but the supplier is rarely seen as a source of new ideas. Lucas: Unilever flipped that script. They've been running something they call their 'open innovation' procurement model. Instead of waiting for a request, they actively invite suppliers to bring them unsolicited ideas for cost savings, new materials, or sustainability improvements. Luna: I've heard of open innovation in R&D, but in procurement? That's less common. How does it actually work? Lucas: They set up a dedicated portal — it's called 'Unilever Partner to Win' — where any supplier, existing or potential, can submit a proposal. It could be a new ingredient, a packaging format, a logistics tweak. The procurement team, along with relevant category managers, reviews these submissions. Luna: And suppliers actually do this? I'd worry about putting my best idea out there and getting nothing back. Lucas: That's the key — Unilever has a clear process. They evaluate within a set timeframe, typically 90 days, and they have a tiered response. If the idea has potential, they'll invite the supplier to a pilot. And they've structured intellectual property sharing agreements upfront, so the supplier knows their IP is protected. Luna: So it's not just a black box. There's a formal mechanism. Lucas: Exactly. And the results are real. One example: a small packaging supplier from India came to them with a biodegradable sachet material. Unilever uses millions of sachets for shampoo and detergent in emerging markets. That idea eventually saved them about $15 million a year and reduced plastic waste. Luna: Fifteen million from one unsolicited pitch. That's the kind of number that gets a CFO's attention. Lucas: Right. And it's not a one-off. Unilever estimates that ideas from suppliers have saved them over $100 million cumulatively since the program launched. They also track a metric called 'innovation to procurement ratio' — how many submitted ideas actually get piloted. Luna: What's their conversion rate? Lucas: They don't publish a specific number publicly, but industry analysts who've studied the program suggest around 5 to 10 percent of submissions move to pilot stage. That might sound low, but when each pilot can yield millions in savings, it's a high-return filter. Luna: What kind of ideas are we talking about? Just packaging? Lucas: No, it's broad. A chemical supplier proposed a new surfactant that works in cold water, reducing energy use in manufacturing. A logistics provider suggested a route optimization algorithm that cut transportation costs by 12 percent in a region. Even a label supplier pitched a peel-off label that makes recycling easier. Luna: So the ideas range from incremental to breakthrough. But I imagine procurement teams have to shift their mindset to make this work. Traditional procurement is about control — specs, compliance, lowest bid. Lucas: That's the biggest barrier. Unilever had to train their buyers to become 'innovation enablers' rather than just gatekeepers. They created cross-functional review panels that include R&D, marketing, and sustainability, not just procurement. That way, an idea doesn't get killed just because it doesn't fit an existing category. Luna: And what about the suppliers? Do they get any incentive beyond a potential purchase order? Lucas: Unilever shares a portion of the savings — typically 10 to 20 percent — with the supplier for a set period. So if your idea saves them a million dollars a year, you might get $150,000 of that for the first two years. That creates a genuine partnership dynamic. Luna: That's a strong motivator. And it probably encourages suppliers to think more creatively about Unilever's challenges. Lucas: Exactly. One small supplier told a case study researcher that before this program, they never considered themselves an innovation partner — they just made what was asked. Now they have a dedicated person thinking about Unilever's problems. Luna: But not every company is Unilever. They have billions in revenue and a brand that attracts suppliers. Can a mid-size manufacturer replicate this? Lucas: Yes, but on a smaller scale. You don't need a fancy portal. You can start by sending an email to your top 10 suppliers saying, 'We're open to your ideas. Here's how we'll evaluate them. And we'll share savings.' The principles are the same. Luna: What about the risk of IP theft? If I share my idea and you hand it to a cheaper supplier, I'm out of luck. Lucas: That's the number one reason suppliers hesitate. Unilever addresses it by signing a non-disclosure agreement before they even look at the proposal. And they have a clear policy: if the idea is used, the supplier who submitted it gets the business, or a negotiated royalty. They've built trust over years. Luna: So it's a long game. You can't just flip a switch and expect suppliers to trust you overnight. Lucas: Right. But you can start building that trust with a few pilot projects. Pick one category, invite three suppliers, and prove you'll treat them fairly. Once word gets out, more will come. Luna: I also think this approach aligns with sustainability goals. Suppliers often have greener ideas that procurement wouldn't think to ask for. Lucas: That's a great point. The biodegradable sachet example came from a supplier who was already working on alternatives independently. Unilever just gave them a channel to pitch it. That's faster and cheaper than developing it in-house. Luna: So the procurement team becomes a funnel for external innovation. I like that framing. Lucas: It also changes how procurement is perceived inside the company. Instead of the department that saves 3 percent on paper clips, they're the ones bringing in breakthrough ideas. That raises the profile of the function. Luna: And presumably, it improves supplier relationships too. Suppliers feel valued, not just squeezed. Lucas: Absolutely. Unilever's supplier satisfaction scores went up significantly after the program launched. And when suppliers are happier, they're more likely to prioritize you during shortages. Luna: Alright, so if I'm a procurement leader listening and I want to start something like this next quarter, what's my first step? Lucas: Identify one category where you have relationships with suppliers who are known innovators. Could be packaging, chemicals, or IT services. Then draft a simple one-page submission form with clear evaluation criteria and IP protection terms. Invite three to five suppliers to participate in a pilot. Luna: And what timeframe should they expect? How long until you see results? Lucas: From submission to pilot decision, aim for 60 to 90 days. The first few ideas might be small wins — a cost-saving tweak rather than a breakthrough. But even a 2 percent savings on a $10 million category is $200,000. That builds momentum. Luna: I think the biggest hurdle is internal: getting your own team to stop saying 'we've always done it this way.' Lucas: That's why leadership buy-in matters. If the CPO or VP of supply chain champions the program, it sends a message that innovation is everyone's job, not just R&D's. Luna: And if today's episode gave you a concrete idea for your own procurement strategy, that's exactly what this show is about. Lucas: Yeah, we try to make every episode practically useful. And the way we keep this ad-free is through listener support. If you found value, you can buy us a coffee at buy me a coffee dot com slash fexingo. It helps us keep doing these deep dives. Luna: And we really appreciate it. It's what lets us spend time on episodes like this one instead of chasing sponsors. Lucas: So back to Unilever's model — one thing I didn't mention is they also have an internal 'innovation champion' in each procurement category. That person's job is to actively seek out supplier ideas, not just wait for them to come in. Luna: So it's proactive, not passive. That's a culture shift. Lucas: Exactly. And it's scalable. A company with 50 categories could have 50 champions. Over a year, that network can generate hundreds of ideas, a handful of which could be game-changers. Luna: I'm curious about metrics. How do you measure success beyond savings? Lucas: Unilever tracks number of ideas submitted, percentage piloted, percentage scaled, and time from idea to implementation. They also measure 'innovation value' — which includes cost savings, revenue impact, and sustainability metrics like tons of plastic reduced. Luna: So you can build a business case for the program itself. Show that every dollar spent on the portal yields X dollars in return. Lucas: Right. And that makes it easier to justify expanding the program. It's not a cost center — it's a profit center. Luna: One last question: what's the biggest mistake companies make when trying this? Lucas: They set up a portal but don't respond to submissions in a timely way. Suppliers pitch ideas and hear nothing for six months. That destroys trust. You need a commitment to respond within a set period, even if it's a 'no'. Luna: So communication is as important as the idea itself. Lucas: Exactly. A respectful 'no' with feedback is better than silence. Suppliers will still feel heard, and they might come back with a better idea next time. Luna: Alright, I think that's a solid blueprint. For anyone listening, the takeaway is: your suppliers might have your next big idea — you just need to ask. Lucas: And give them a reason to share it. That's the Unilever lesson.