I recently spoke with John Paterson, IBM’s chief procurement officer, about a new, smarter supply chain initiative called Supplier Connection that IBM is announcing on September 14. We talked about the potential a smarter supply chain holds for small business suppliers and large corporate buyers. And we explored how building a smarter planet means using smarter systems to create new business and employment opportunities.
Q: Tell me a bit about the problem with today’s supply chain from a small business’s perspective.
Paterson: It can be very challenging for small businesses to become suppliers to large companies today. The application process can be quite daunting, especially when you are talking about small businesses that can’t afford to dedicate resources to manage through that process. The challenge becomes really intimidating for a small business if they want to become suppliers to dozens of large corporations, each with their own specific application forms, formats and requirements. Then you are talking about a major investment of time, money and expertise that most small businesses simply do not have. And since small businesses are the primary source of overall economic growth, there is an even bigger opportunity if this situation can be improved.
Q: So what’s the solution?
Paterson: We think at least part of the solution is to accelerate and streamline the application process – to make that process smarter. Nearly all procurement offices seek the same data, but companies collect that data in different ways, using varying formats.
So IBM, with the help of several other large companies from a variety of industries, is launching a free Web site, called Supplier Connection, that will be a central portal for small businesses to connect with the supply chains of large corporations.
The consortium of companies (which includes AT&T, Bank of America, Citigroup, Pfizer, and UPS) has agreed to use the portal to standardize and simplify their application processes. It will provide small and mid-sized suppliers with a single, streamlined electronic application form that can be filled out just once to potentially become suppliers to all the participating companies.
Q: Isn’t this something that the government could fix? How can corporations make a difference?
Paterson: It’s not enough to wait for government action. Corporations like the ones supporting Supplier Connection can provide real leadership and innovation. Government can certainly provide stimulus funds, tax breaks and better access to capital. But small businesses need access to both capital and new markets. And we think a bottleneck in accessing new markets is in the supply chain processes. For small businesses, there is no more stable or significant market than the supply chains of large businesses.
Q: What you’re describing sounds like a specific smarter system, but what’s the implication for building a smarter planet?
Paterson: Smarter planet is about addressing the problems and challenges gripping the world. One of those challenges is creating a smarter supply chain. Supplier Connection will help do that by allowing small businesses to connect with one another to work to meet the goals of the large companies.
But you’re right, smarter planet isn’t just about making the world’s systems instrumented, interconnected and intelligent. It isn’t just about making a system smarter; it is also about what you do next to unlock the full potential of those smarter systems. What are the issues and responsibilities that arise from that? Things like security, sustainability, transparency and job creation. Smarter planet is about using smarter systems to make economic activity more efficient, productive and nimble and to create new business and employment opportunities.
Q: You’ve been speaking with the Center for an Urban Future about those issues. What are some of the findings from their research, and how did those findings inform IBM’s plans for Supplier Connection?
Paterson: Their work highlighted the fact that becoming a supplier to large, multinational corporations is the engine of growth for small businesses, and that small businesses are, in turn, the engine of growth for the overall economy. The Center for an Urban Future’s study found that small firms can double their revenues and significantly increase their workforce after becoming a supplier to a large corporation. And their study confirmed that small businesses almost single-handedly sparked economic recovery during previous recessions.
Q: More specifically, what are the benefits small businesses can achieve through Supplier Connection? And what about large corporations like IBM?
Paterson: For small businesses, what we’re talking about is one-stop-shopping, enabling them to sell goods and services to a significant number of large companies. They can also take advantage of collaboration tools to work with other small and mid-size companies, and get on-line training, technical assistance and support.
Large companies will gain access to a broader and more cost-effective group of suppliers. And we think this exposure to new small and innovative suppliers will also help the larger companies to embrace innovation and change.