Integrated Supply Chain
Where is the C-Level in
Supply Chain?
© 2006 IBM Corporation
Integrated Supply Chain
Objectives:
1) Introduce IBM 2006 Global CEO Study
2) Demonstrate IBM’s Supply Chain Transformation
3) Show examples of current Supply Chain Initiatives
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© 2006 IBM Corporation
Integrated Supply Chain
Global CEO Study 2004
Global CEO Study: 2004
Risk
Management
39%
Asset
Utilization
40%
Cost Reduction
68%
Revenue
Growth
83%
0%
20%
40%
60%
80%
100%
In 2004, growth was a top priority, with a
focus on strengthening financial performance
2006
2
While growth and cost reduction remains a priority, the 2006 study
reveals a shift in thinking – and cites Innovation as a key priority
© 2006 IBM Corporation
Integrated Supply Chain
Areas of Innovation
Innovation is about Business Models and Operations,
as well as Products, Services and Market
BUSINESS MODELS
Innovation to restructure and extend
the enterprise
 Improving functions and
processes
 Integration with partners
3
OPERATIONS
PRODUCTS, SERVICES, AND
MARKETS
Innovation to improve effectiveness and efficiency
of functional areas
 Enhancing communication & collaboration
 Eliminating redundancy
 Increasing organizational effectiveness
© 2006 IBM Corporation
Integrated Supply Chain
Sources of Innovation
Global CEO Study 2006: Sources of New Ideas and Innovation
Employees (general population)
Business partners
‘Two of the three most
significant sources
of innovative ideas
now lie outside of
the organization’
Customers
Consultants
Competitors
Associations, trade groups,
conference boards
Sales or service units
R&D (internal)
Academia
0%
4
5%
10% 15% 20% 25% 30% 35% 40% 45%
© 2006 IBM Corporation
Integrated Supply Chain
Case Study: IBM’s Integrated
Supply Chain
© 2006 IBM Corporation
Integrated Supply Chain
The ISC Transformation began over 10 Years ago
SUPPLY CHAIN
JOURNEY
RESULTS
1993
1994
1995
1996
1998
1999
2000
2001
2002
Revenue: $64B Profit: $3B
Static supply chains
with business unit and
geographic “silos”
Development of better
functional skills and
increased inter-business unit
communication
Cost Center
SUPPLY CHAIN
EVOLUTION
1997
 Fragmented and not mission critical
 Functional silos
 Heavy asset based logistics
 No common processes
 Large number of legacy applications
Cost Cutting
6
True external electronic
collaboration with
suppliers and partners
Profit Driver
 Drives value primarily by saving money
and increasing cash conversion
 Still primarily product focused
Reinvention
© 2006 IBM Corporation
Integrated Supply Chain
Increased Inter-Business Unit Communication
Previously ‘Functional Silos’ were brought together under the
‘Integrated Supply Chain’
BREADTH
OPERATIONS
TEAM
GLOBAL
LOGISTICS
MANUFACTURING
TALENT
TEAM
PROCUREMENT
DEPTH
CUSTOMER
FULFILLMENT
STRATEGY
TEAM
TECHNOLOGY
COMMON DATA & GOVERNANCE
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© 2006 IBM Corporation
Integrated Supply Chain
IBM Global Logistics continues to deliver significant business value...
Global Logistics Savings - $1.2B Over 10 Years
Cost-To-Revenue
1400
IBM HW Revenue ($B)
1159
1200
M Dollars
GL HW Cost ($M)
1252
1037
1000
763
800
632
510
600
348
400
200
886
193
59
0
1995
1Q01
3Q01
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
2Q01
4Q01
2Q02
4Q02
2Q03
4Q03
2Q04
4Q04
IT Applications
350
350
1997
1998
1999
2000
2001
2002
2003
2004
Internal Customer Value
93% 95% 96% 93% 97% 97% 97% 98% 98% 99% 99%
320
100
90
300
# of IT Applications
1996
263
80
250
Sat
Very Sat
70
200
60
164
150
50
110
101
100
40
80
78
69
60
50
30
20
10
0
0
1995
1996
8
1997
1998
1999
2000
2001
2002
2003
2004
4Q99 2Q00 4Q00 2Q01 4Q01 2Q02 4Q02 2Q03 4Q03 2Q04 4Q04
© 2006 IBM Corporation
Integrated Supply Chain
And achieved impressive 2005 results
IBM: $91B REVENUE
NET INCOME $10.6
Financial
Results
Operational
Results
#2 IN CUSTOMER SATISFACTION
Client Facing
Results
Another
$6B
COST AND
EXPENSE
SAVINGS
$580M
CASH GENERATED
INVENTORY AT THE*
LOWEST LEVELS IN
YEARS
30
$166M
32%*
FASTER
CYCLE TIME
PERFORMANCE
+6%
25%
*
AVERAGE PAYMENT
TERMS IMPROVED BY 2
DAYS =
TURNING
ORDERS
IMPROVEMENT
IN SALES FORCE
PRODUCTIVITY
+1%
IMPROVEMENT IN
OVERALL CLIENT
SATISFACTION
* Accomplished in 2004, but held steady for 2005
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© 2006 IBM Corporation
Integrated Supply Chain
What’s next
SUPPLY CHAIN
JOURNEY
RESULTS
2003
2004
2006
2005
Revenue: $91B Net Income: $10.6B
One integrated and fullyenabled organization that
has re-invented IBM
operations
Profit Driver
Global Integration: Leveraging Our Multi-national
Presence for Operational Advantage
Business Optimization
SUPPLY CHAIN
EVOLUTION
 Goes beyond products to services
 Extends success past financial metrics
Impacts customer satisfaction
Impacts sales team productivity
 Fully synchronizes supply and demand
 Sharing ISC best practices with clients
Reinvention
10
© 2006 IBM Corporation
Integrated Supply Chain
How the ISC is continuing to drive
Innovation
© 2006 IBM Corporation
Integrated Supply Chain
Paperless Logistics Processing
•
•
•
•
Export
Invoice
Greater paperless visibility
Faster transmission times
Supply Chain Partners can pull/post documents
Can scan directly from IT interface, or Scanner/Printer
International
Shipping
Documents
Import
Brokerage
Documents
Bank
Documents
Payables
Documents
Other
Documents
Paperless Document Repository
Shared Access for all users
12
© 2006 IBM Corporation
Integrated Supply Chain
Cargo Security
TREC: Tamper Resistant Embedded Controller
•
•
•
•
•
Location tracking
Door lock tampering
Humidity and temperature
Radiation
Dropped container sensors
= accredited entity
TREC
= various sensors
Manufacturer
Distributor
13
Freight
Forwarder
Port Authority “A”
Customs
Ocean
Carrier Port Authority “B”
Ocean Carrier
Customs
Distribution
Centre
© 2006 IBM Corporation
Integrated Supply Chain
Supply Chain BTO – In Response to Customer Needs
The Integrated Supply Chain has introduced a new offering to help
clients transform their businesses through outsourcing
Process Change
BTO
Extended Enterprise
Continuous Strategic Change
while Outsourcing
Business Transformation Outsourcing
Addresses tactical and strategic initiatives
Process Enhancement
Process Improvement
while Outsourcing
Cost Reduction
Cost Take Out
BPO
Business Process Outsourcing
Targets cost reduction for specific
process
Return on Investment
14
© 2006 IBM Corporation
Integrated Supply Chain
Summary: Where is the C-Level in Supply Chain
Myth: Innovation is too critical and proprietary to involve outsiders
Collaborative innovation is indispensable
Myth: Innovation means inventing new products and services
Business model innovation matters
The C-Level is increasingly looking to the
Supply Chain to drive Business Value
15
© 2006 IBM Corporation
Integrated Supply Chain
Contact Information:
Dipan Karumsi
Business Consulting Services
Logistics Practice
dkarumsi@us.ibm.com
Ph: 614.537.4575
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© 2006 IBM Corporation