IBM, supply, chain, procurement, manufacturing, logistics, fulfilment

The Practitioner as Salesman

IBM’s chief procurement officer soon hopes to spend as much of his time earning money for the company as he does on spending it.

In 1993, International Business Machines’ spectacular fall from grace led it to report a loss of $8 billion. Its turnaround under the leadership of CEO Lou Gerstner, who was appointed in the same year, is one of the most celebrated in recent business history. Today, IBM remains the world’s largest IT company and is the tenth biggest in the US. Last year it earned revenues of over $96 billion, almost half from its relatively young services business, and made a net profit of $8 billion.

In 2002, Sam Palmisano, Gerstner’s successor, announced that to support his strategy of turning IBM into an “on-demand business”, all of the company’s supply chain functions – procurement, manufacturing, logistics and fulfilment – were to be brought together into a single organisation called the Integrated Supply Chain (ISC), led by senior vice-president Bob Moffat. The aim was to provide a faster, more responsive service to IBM customers.

A recent report by Forrester Research, IBM Transforms its Supply Chain to Drive Growth, awarded the ISC a B grade overall in meeting its strategic objectives and said that, three years after its creation, IBM was “only midway in its journey to supply chain excellence”.

The global procurement division of the ISC is led by its CPO, John Paterson, a 36-year IBM veteran who has held the position since April 2000. The company spends around $45 billion a year on goods and services and has more than 3,700 staff in over 80 countries, including France, China, Japan, Canada, the UK and the US.

CPO Agenda caught up with him recently to discuss what the new structure means for procurement and how his own role is changing as a result.

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