Microsoft PowerPoint - H_IBM_Pat_presentation

Integrated Supply Chain

Confidential | October 12, 2004 © 2004 IBM Corporation

Building the on demand supply chain: Innovation that Fuels Growth

An IBM Case Study

Patrice Knight, vice president, ISC Business Transformation PortfolioOctober 12, 2004


Building the on demand supply chain | An IBM Case Study © 2004 IBM Corporation2

An enterprise whose business processes–integrated end-to-end across the company and with key partners, suppliers and customers–can respond with flexibility and speed to any customer demand, market opportunity or external threat.

On Demand Business–A Definition

RESPONSIVE VARIABLE FOCUSED RESILIENTKEY ATTRIBUTES

A robust supply chain is essential for an on demand business.



ReinventionCost Cutting

True external electronic collaboration withsuppliers and partners

Development of better functional skills and increased inter-business unit communication

Static supply chains with business unit andgeographic “silos”

2002200120001999199819971996199519941993

We’ve been transforming both our company and our supply chain for the last ten years from a cost center to an engine of innovation and growth.

Revenue: $64B Net income: $3B

Profit DriverCost CenterDrives value primarily by saving money and increasing cash conversionStill primarily product focused

SUPP

LY C

HA

INJO

UR

NEY

SUPP

LY C

HA

INEV

OLU

TIO

NR

ESU

LTS

Fragmented and not mission criticalDistributed & hard-wired to business unitsPockets of integration in functional silos No client-facing processes No common processes or leveraging experience A corporate staff function



Financial Results

OperationalResults

Client Facing Results

GENERATED

$700M+ CASH

$7BCOST ANDEXPENSESAVINGS

20%IMPROVEMENTIN SALES FORCEPRODUCTIVITY

INVENTORY AT THELOWEST LEVELS IN

YEARS3095% ON TIME

DELIVERY

CUSTOMER USE OF WEB-BASED SERVICES RESULTED IN

$207ME-SUPPORT COSTREDUCTION IN 3Q03

DSO REDUCEDBY NEARLY

DAYS2

IBM: $89B REVENUE $33B PROFIT $7.6B FREE CASH FLOW #2 IN CUSTOMER SATISFACTION

And we achieved some impressive 2003 results.



Single aligned objectives•Sales agreement to sell available supply•Supply chain provides visibility to shortfalls•Shared accountability for customer service

Contention from competing objectives (sales / supply chain)

Capability to balance world-wide cross-brands

Supply locked in local buckets

Rapid resolution of short term imbalances – Sense and Respond

Long-term supply imbalance focused – slow to identify

Single aligned decisionMultiple points of risk-taking decision-making

One trusted view of demand and supply by all participants

Limited shared visibility

ToFrom

Applied to the demand/supply process, on demand requires changing fundamental behaviors within the enterprise.



Automate web-based self-service systems

Virtual teams support sales teams improved productivity by 20%

Regional competency centers support of common, global business processes

Integrate end-to-end order fulfillment processes and systems

Optimized SourcingVariable cost structureAssets owned by partner50% reduced mfg. sites, sqft

IBM continues to:• Interface with customer•Develops products•Manages strategic suppliers•Maintain quality stds

Centralized D/S planning

Balance Demand and Supply with Sense and Respond Conditioning

Lowest inventory levels ever/improved turnover

On time delivery best in history

Maintain margins in competitive environment

Industry-standard products to create on demand ops for IBM’s supply chain:

Selectica: Cross-brand and platform configuratorSiebel: Standardized CRMWebSphere Business Integration: ties together legacy applications & dataSAP R3: Cross-brand, touchless order flowB2B: Seamless supplier & client relationshipsi2: Integrated supply and demand planningDB2: Trusted data sourcesSaR: Sense and Respond

Global operations across all IBM

50% fewer suppliers;10 strategic partners

Include e2e total supply chain HW/SW/Services

e-Procurement infrastructure extends beyond enterprise for seamless data mgmt

Professionals spend majority of time on supplier evaluation and market intelligence

Fulfillment Manufacturing Procurement Enabling Technology

Competitive advantage comes with integration and having a focus on Integrated Demand/Supply Conditioning.



Provide supply-side early visibility to customer demands

• Linked to IBM Signature Selling process

• Recognizes order progression: opportunity=>order

• Support IBM and joint supplier decisions for supply

• early risk/opportunity management

Sales Process Alignment links demand conditioning visibility to essential customer order indicators.



Shift from many machine types and models to fewer common sales building blocks

• Aggregate more accurate demand forecast at Sales Building Block level

• Order backlog visibility in Sales Building blocks

Customer order fulfillment flexibility• Configure to order

• Custom configurations for enterprise customers

• Supply substitutions defined between Sales Building Blocks to maximize• Demand conditioning efficiency (shift market to available supply)

• Customer satisfaction (shift order to available supply)

Demand side activities reconfigure product structures for supply.



Demand decisions include Procurement visibility to supply shortages / excesses

Procurement and supplier engage development to introduce industry and supplier technology roadmaps

Product early life and emerging technology supply visible within demand planning and generation

Supply side activities ensure early and on-going involvement of procurement and suppliers in demand decisions.



Shorten distance between supply chain events and resolution• Focus on end-to-end processes with shared objectives

• Sense and respond to synchronize demand and supply

Integrate supply chain participants – customers to suppliers

Reduce fixed costs and drive flexibility in infrastructure

Implement common global processes & technology• Effective enterprise transformation and return on investment

Realize returns on Labor-based component of the supply chain

Tend to the culture, emphasize talent and improve skills

In the on demand world, competitive supply chains must deliver on the promise of market value.



Core demand planning enhancements increase overall forecast quality

Key innovations in monitoring actual demand trends

• Statistically-based trend analysis – objective event identification

• System-level trending and commodity/Sales Building Block views

Sense and respond to unanticipated demand and supply events

Analytics and data mining provides capability to monitor and assess demand trends.



Event-driven behavior

Based on defined business rules

Automated event detection

Monitoring and notification

Event / effect data management

Decision and learning analytics

Automated response

Workflow management

IT architecture and framework

Sense & Respond requires critical changes to culture and behaviors. It’s not just about technology.

Sense & Respond considers dimensions and how they work together within a business context to improve supply chain performance.



Demand and Supply integration provides business value.



When we did this, we improved synchronization across the supply chain and drove business results.



Greater efficiency– Server volume growth contained with minimal spending increases yielding ~10%

productivity gains– Procurement "hands free" transactions up from 78% to 90%– Logistics volumes up 31%, costs down 21%

A more variable cost structure– Fixed spending for high volume systems manufacturing down 33% over 3 years – Logistic warehousing from 100% owned to 100% vendor managed

Improved responsiveness and flexibility– Ability to respond to shifts of hardware demand inside quarterly lead time by up to 50%– Customer fulfillment e-Applications reduced annual calls from clients by over 600,000,

saving 2.9M– Reduced number of non-strategic suppliers by 80%

Better business process controls– Reduced escapes (maverick buying) from a high of 35% to less than 0.2%– Acceptable business controls (audits) from 85% to 95%+

The on demand model is giving us:



1. Procured Parts/ServicesYear-to-Year price take downsCost efficiency/avoidance actionsIndustry cost takedowns

2. Design EfficienciesUtilizing industry standard partsCommon across system platformsUsing IBM semiconductor tech

3. Manufacturing EfficienciesOutsourcing flexibilityLow cost / tax jurisdictionsProcess improvementsLeveraging fixed capacityReduce inventory & warranty costs

4. Services & General ProcurementInternal software v purchaseConsolidation of supply baseMigration to core suppliersLeverage globallyE2E travel managementServices labor cost managementOptimize outsourced (contractor) skills vs. internal supply; Manage IBM "bench" skillsPreferred suppliers/rates

5. Customer FulfillmentCommon processes and tools“Touch less” processesFreeing up sales reps from process tasks

6. Integration of Acquisitions

At the same time, we continue to drive down costs. Cost “take outs”for us are a daily way of life.



Reinvention

One integrated and fully-enabled organization (ISC) that hasre-invented IBM operations

Revenue: $89B Net income: $7.6B

Business OptimizationProfit DriverGoes beyond products to servicesExtends success past financial metrics

Impacts customer satisfactionImpacts sales team productivity

Fully synchronizes supply and demandIgnite growth

SUPP

LY C

HA

INJO

UR

NEY

RES

ULT

S

Future2003

SUPP

LY C

HA

INEV

OLU

TIO

N

What’s Next?



Date post:	27-Jan-2015
Category:	Documents
Upload:	thesupplychainniche
View:	115 times
Download:	4 times

Microsoft PowerPoint - H_IBM_Pat_presentation

Documents