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Journal of Supply Chain Management

"One on One: An Interview with William S. Schaefer" By Julie S. Roberts, A.P.P., Spring 2004, Vol. 40, No. 2, p. 2

One on One: An Interview with William S. Schaefer

Journal of Supply Chain Management Copyright © May 2004, by the Institute for Supply Management, Inc.


Julie S. Roberts, A.P.P.
Interview by Julie S. Roberts, A.P.P., writer for Inside Supply Management®

As vice president, procurement services for IBM Global Services, Bill Schaefer is the global leader of IBM's Business Transformation Outsourcing (BTO) services for procurement. He was an original member of IBM's procurement executive council during IBM's successful transformation of procurement in the 1990s. Schaefer joined IBM in 1982 and has extensive experience in procurement and manufacturing operations. He has provided leadership for IBM's Production Procurement Commodity Sourcing Councils and IBM General Procurement Operations for North America. Schaefer is active in the Institute for Supply Management™ (ISM) and Manufacturers Alliance Purchasing Council. He is a frequent speaker at industry conferences, has been featured in numerous publications including Supply & Demand Chain Executive magazine's "Top 50 Pros to Know" and is a recipient of the IBM Chairman's Award for procurement transformation. Schaefer has B.S. and M.S. degrees in industrial engineering from Georgia Institute of Technology and an MBA from Duke University.

The Journal of Supply Chain Management: What are some of the factors required for successful supplier relationships?

William S. ("Bill") Schaefer: Successful supplier relationships must be founded on twin pillars of trust and respect. That's not at the exclusion of sound business practices such as good contracting or sensible sharing of data with suppliers, but we depend heavily on suppliers to provide critical goods and services. Those suppliers have to feel as much commitment about our business as they do about their own. At the same time, however, we have a responsibility to make sure that the supplier is still competitive and financially viable. Forcing suppliers into a situation that is not sustainable is not good for either party in the long run.

The Journal: What has IBM and its supply organization done to make its supplier relationships strong?

Schaefer: The most significant thing that we've done to strengthen our supplier relationships is to listen to our suppliers and to provide the tools to collaborate more effectively. In our procurement transformation journey, one of the first tasks that we undertook was asking our suppliers what we did well and, more important, what we were doing wrong. We asked those questions in a variety of ways ranging from anonymous, independently run surveys to supplier forums, but we also educated our supply managers on how to collaborate with suppliers to obtain feedback, and today, suppliers are very much a part of the IBM team. With regard to providing tools to collaborate more effectively, we implemented an application that's called e-collaboration supply chain interlock (eSI). This is a customizable, secure collaborative environment for suppliers, supply managers and engineers to interact and share information such as technical specs, drawings, information about forecasts and volumes.

The Journal: What obstacles might an organization encounter as it seeks to strengthen its supplier relationships?

Schaefer: If you look at a procurement transformation as a long journey, most of the obstacles revolve around the mind-set of the people involved or the differences in the cultures of the buying organization and the suppliers. Systems, tools and processes meant to facilitate change only become effective when the attitudes of the people involved change. The traditional view of the procurement role is to run competitive bids, award business and move on to the next purchase, but this traditional role neglects the real value proposition of long-term supplier relationships and the potential to integrate suppliers into the fabric of the supply chain. Interestingly, this traditional view also applies to suppliers.

The Journal: How do organizations overcome this obstacle?

Schaefer: The change has to start within the supply management group. Everyone, from supply management executive leadership to the buyers, needs to change their mind-sets to be more collaborative. As the agents of change for the transformation, supply management must develop the value proposition, demonstrate a vision of where it's going, provide the education, and conduct the internal marketing and selling to make the change. To offset any resistance from internal users, executive sponsorship is another critical success factor. Lastly, outside the organization, supply managers must seek supplier input. It is critical to defining the extent and depth of the transformation required. Concurrently, supply management must be concerned with rationalizing the supply base. This can be done with a migration plan for suppliers that can't fit or accommodate the long-term vision. The plan should be based on respect, fairness and, above all, sound business practices. It is vital that supply managers remain respectful and fair throughout the migration process.

The Journal: What actions or conditions are harmful to supplier relationships?

Schaefer: The most damaging action to supplier relationships is dishonesty. However, I think what happens more often is a lack of fairness. The strongest complaints from suppliers don't really come from losing business; they result more from the perception of unfairness or that the playing field was not level. While they're often issues of perception, the root cause is usually a poor supplier relationship and poor communication.

The Journal: After a relationship is developed, what can be done to maintain it over time?

Schaefer: It may sound repetitive, but I think communicate, communicate, communicate and then communicate a little bit more. This doesn't mean going out to lunch with suppliers once a week, but there should be an established regular program where real business information is gathered and shared, where performance is discussed, issues are brought up and resolved, and plans are discussed. Those discussions between the buyer and the supplier need to be open and honest. Technology, like the eSI tool, helps, but it doesn't replace communication. It facilitates providing technical information, specifications and performance information in a clear fashion.

The Journal: How has the ability to develop and maintain strong supplier relationships benefited IBM?

Schaefer: In any business relationship between a supplier and a supply manager at IBM, the value of the relationship is reflected as the value to the bottomline. Through strong supplier relationships, we've been able to reduce costs by involving suppliers more deeply in our processes. They've provided ideas and input that have directly reduced costs as well as reducing the costs of interface. An indirect financial benefit is continuity of supply. For some parts of our business, the supply market vacillates up and down. At one time, the parts we're procuring may be subject to a buyer's market, and then two years later, the balance of power may have shifted to a supplier's market. So, our long-term supplier relationships help smooth the peaks and valleys.

The Journal: Do you have any advice for others looking to build better supplier relationships?

Schaefer: There's really no quick and easy answer. Supply transformation is a journey, and better supplier relationships are a clear and critical part of that journey. Organizations that are embarking on a journey to transform business and especially supplier relationships have to start with a clear vision of what they're trying to accomplish, where they're trying to go and, probably most important, an accurate picture of where they are today.

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