Initial White House SupplierPay observations

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As I sat in the room of Titans at the latest SupplierPay session in D.C., the key question running through my mind was what role do we want the feds to play dictating payment terms? I think the U.S. Small Business Administration and National Economic Council really want to create a win-win here, and recognize the importance of small business to the economy (as well as how extended terms can destroy a small business).

Right now, the White House does not what to define what “small” business means. The SBA certainly has definitions related to headcount and revenue, and the Federal Reserve measures small business loans. But defining means excluding, and that is not their goal.

The session started at 1 p.m., and all of us arrived during a torrential downpour. No, make that a torrential Pacific Northwest rainforest downpour. So we all arrived feeling a bit damp, especially the brave souls who did not have an umbrella.

The afternoon started with opening remarks by both Jeff Zients, director of the National Economic Council and Maria Contreras-Sweet, head of the SBA. I was impressed with Sweet’s ability to call up details about specific companies, and she was certainly proud of the fact that the SBA helped FedEx (in attendance) and the likes of Under Armour get their start with guaranteed SBA loans. She mentioned her personal goal is to sign up 100 pledges, and so far they are almost half way there (47), although I must admit, some of the companies have a relative small procurement spend compared to the likes of Coke, Siemens, 3M, etc. Given her background as the founder of ProAmerica Bank, a commercial bank focusing on small to mid-sized businesses with a specialty in the Latino community, I would not discount her acumen and ability to get things done.

We next moved into 4 case studies from Siemens, Intuit, Coke and Lockheed.

Coke kicked off first and talked about its Toolkit project. Basically, the Toolkit stands for 4 activities: 1) Shorter terms 2) Making the process of doing business with Coke easier 3) Launching a partnership with a few vendors (Taulia being one) for tail suppliers to discount cash and 4) Working with JPMorgan to help small businesses on the edge of being big to grow.

Scott Beth, VP of operations at Intuit spoke about 2 initiatives.The press release sums it up nicely: “After taking the pledge, Intuit surveyed its supplier base and offered 10-day payment terms to 320 small businesses. Intuit also moved all of its 80+ independent contractors to contracts that committed to pay them within 10 days. Intuit’s actions will impact an estimated $40 million in payments this year, and an estimated $80 million in annual payments when more small and medium-sized suppliers are brought on board.” The challenge Intuit has is they are a service company, and as such, do not have big spend on direct materials.

Scott briefly touched on what QuickBooks is doing with small business loans as well – see QuickBooks sitting on 5 million customers That Need Finance

Next, Katherine Kerchner, who runs Lockheed Martin’s Shared Service Center, spoke about how Lockheed sources more than 60% of its work through its supply chain, which includes more than 15,000 companies across all 50 states and spent almost $4.9 billion on small business in fiscal year 2014. They use a portal to flag small business invoices to accelerate payment to 15 days.

Finally, Siemens focused on its Supply Chain Finance program implemented 5 years ago and talked about how they moved suppliers to 90-day payment terms but offered them Libor rate financing (they do this via their Orbian solution). They have about 2,000 participating suppliers, of which two-thirds are in the US.

About this time, Obama’s Press Secretary Dennis Mcdonough made an appearance to say how important this initiative is for the Obama Administration.

Next, we had a working session on the metrics to track SupplierPay’s impact. I will have some thoughts on that in another post.

The event was attended by a mixture of procurement people, but many had supplier diversity titles. I felt that this missed the mark, and more procurement finance and even treasury titles should have attended. While it’s great to focus on paying minority businesses faster, and many of these organizations do big government contracts and diversity is important to be able to bid, SupplierPay is about all small business.

I think we need to be careful of not trying to ask SupplierPay to be more than it is. Keep it simple. I like that it’s a pledge. I like sharing best practices. There will come a time, hopefully soon, to start really sharing execution and implementation stories, and opening the kimono to the pain of implementing various vendor solutions.

There are certainly pros and cons working with the government. I personally found the people in the room wanting to do the right thing but coming from very different supply chains and very different spend categories. It should be interesting to monitor progress, which will be the focus of my next post.

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p.s. sign up for Trade Financing Matters weekly digest here - See more at: http://spendmatters.com/tfmatters/the-unintended-consequences-of-legislating-late-p-ayments/#sthash.eNsiPm3J.dpuf

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