As practitioners in business innovation we would like to share our ideas with you in the hope that you will understand the enormous benefits to be gained by applying innovation to both processes such as lean manufacturing, supply chain management and to the development of new products/services.

What is Innovation?

Innovation is the generation and application of ideas to improve existing products/services and processes or to add new products/services and processes in order to satisfy customer needs and add value.

Process innovation should address all processes in the business. These include management, manufacturing, marketing, supply chain, logistics, financial and human resources processes to mention a few.

Innovation not only involves big step improvements but also includes continuous incremental improvements as well. Most company improvement activities are targeted at the incremental improvement opportunities. The cumulative impact of these improvements can be as large as the big step improvements.

Objectives of Innovation

The reasons for companies to place considerable emphasis on innovation are :

• Create or enhance a sustainable competitive advantage in the market place so as to provide a benefit to the customer through better products/services.
  
• Replace or rejuvenate mature products, services or processes. A similar concept applies to processes eg manufacturing and supply chain processes where the cost/unit begins to rise as the cost of maintaining and upgrading equipment and technology begins to rise and as new more efficient technologies become available.
  
• Survival. A company that does nothing or very little will decline relative to it's competitors and eventually fail.

Innovation is essential to company progress and development. It does however involve some level of risk which can be minimised but not totally avoided.

Approaches to Innovation

There are four approaches which companies can use for innovation. These are through:

• Research and Development either carried out by the company or contracted out to CSIRO and other research institutions.
  
• The imitation of ideas generated by competitors or other companies in similar industries. Benchmarking often initiates action in this area and leads to ideas for improvement.
  
• The purchasing of new plant or equipment or of licenses to manufacture products or to use technology to improve products and processes.
  
• Continuous improvement of existing products and processes whether it involved incremental or major rejuvenation.

Most improvement in company performance results from incremental improvements. A good example of how this can be achieved in supply chain management which is described after the next paragraph under the heading Improvements from Supply Chain Management

The Innovation Process

The four stages to the innovation process are:

• Allocation of resources eg staff, money, consultants.
  
• Generation of ideas
  
• Evaluation of ideas.
  
• Implementation

As our by-line says "BFG Consulting Group are practitioners in business innovation". We specialise in assisting manufacturing companies to use innovation to improve all activities of their business. The following is an example of one business activity we assist companies to improve.

Application of Innovation to Improve Supply Chain Management

It is a fact of business life but a very misunderstood one, that all organisations compete with their supply chain, not just by themselves.

Companies that try to compete by themselves, and most do, are not using smart tactics because there are a multitude of activities in their supply chain outside of their control which impact on the productivity of their business.

If managed effectively the supply chain can provide a major source of competitive advantage. This can be found:

• Firstly in the ability of the company to differentiate itself in the eyes of its customers, and
  
• Secondly by operating at lower cost hence greater profit.

All successful companies have either a productivity advantage or a value advantage or a combination of both derived primarily from their marketing and manufacturing operations.

The productivity advantage gives a lower cost profile by reducing non value adding activities from the multitude of internal and external activities in the supply chain.

The value advantage gives the product or service a differential "plus" over the competition by adding value to distinguish it from the competition. If the product or service cannot be distinguished in some way from competitors it is likely to be viewed by the market place as a commodity and the sale will go to the cheapest supplier.

As more and more markets become in effect commodity markets where the customer perceives little technical difference between competing products there is a need to create a differential advantage by adding value through customer service.

In order to satisfy customer needs, companies must:

• Firstly identify customer expectations through regular market surveys, and
  
• Secondly deliver the added value to customer service through effective supply chain and logistics management.

The benefits of supply chain management achieved by many manufacturers in Australia include substantially improved customer service, profitability, inventory reduction, forecasting, productivity, market share and capacity utilisation to mention a few.

In the current climate of pressure on pricing, supply chain management offers organisations the opportunity to establish relationships with key suppliers and customers to give them a competitive advantage.

Contact us to find out how BFG Consulting Group can help to improve your business.