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    Microsoft PowerPoint - H_IBM_Pat_presentation Microsoft PowerPoint - H_IBM_Pat_presentation Presentation Transcript

    • Integrated Supply Chain Building the on demand supply chain: Innovation that Fuels Growth An IBM Case Study Patrice Knight, vice president, ISC Business Transformation Portfolio October 12, 2004 Confidential | October 12, 2004 © 2004 IBM Corporation
    • Integrated Supply Chain A robust supply chain is essential for an on demand business. On Demand Business–A Definition 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. KEY ATTRIBUTES RESPONSIVE VARIABLE FOCUSED RESILIENT 2 Building the on demand supply chain | An IBM Case Study © 2004 IBM Corporation
    • Integrated Supply Chain 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. 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 RESULTS Revenue: $64B Net income: $3B SUPPLY CHAIN JOURNEY Static supply chains Development of better functional True external electronic with business unit and skills and increased inter-business collaboration with geographic “silos” unit communication suppliers and partners Cost Center Profit Driver Fragmented and not mission critical Drives value primarily by saving money Distributed & hard-wired to business units and increasing cash conversion SUPPLY CHAIN EVOLUTION Pockets of integration in functional silos Still primarily product focused No client-facing processes No common processes or leveraging experience A corporate staff function Cost Cutting Reinvention 3 Building the on demand supply chain | An IBM Case Study © 2004 IBM Corporation
    • Integrated Supply Chain And we achieved some impressive 2003 results. IBM: $89B REVENUE $33B PROFIT $7.6B FREE CASH FLOW #2 IN CUSTOMER SATISFACTION Financial Operational Client Facing Results Results Results ON TIME $7B INVENTORY AT THE LOWEST LEVELS IN YEARS 95% DELIVERY COST AND EXPENSE SAVINGS 30 DSO REDUCED CUSTOMER USE OF BY NEARLY WEB-BASED SERVICES RESULTED IN 2 DAYS GENERATED $700M $207M + CASH 20% E-SUPPORT COST REDUCTION IN 3Q03 IMPROVEMENT IN SALES FORCE PRODUCTIVITY 4 Building the on demand supply chain | An IBM Case Study © 2004 IBM Corporation
    • Integrated Supply Chain Applied to the demand/supply process, on demand requires changing fundamental behaviors within the enterprise. From To Contention from competing Single aligned objectives objectives (sales / supply chain) •Sales agreement to sell available supply •Supply chain provides visibility to shortfalls •Shared accountability for customer service Limited shared visibility One trusted view of demand and supply by all participants Multiple points of risk-taking Single aligned decision decision-making Long-term supply imbalance Rapid resolution of short term focused – slow to identify imbalances – Sense and Respond Supply locked in local buckets Capability to balance world-wide cross-brands 5 Building the on demand supply chain | An IBM Case Study © 2004 IBM Corporation
    • Integrated Supply Chain Competitive advantage comes with integration and having a focus on Integrated Demand/Supply Conditioning. Fulfillment Manufacturing Procurement Enabling Technology Automate web-based Optimized Sourcing Global operations Industry-standard products self-service systems Variable cost structure across all IBM to create on demand ops Assets owned by partner for IBM’s supply chain: Virtual teams support 50% reduced mfg. sites, sqft 50% fewer suppliers; Selectica: Cross-brand sales teams improved IBM continues to: 10 strategic partners and platform configurator productivity by 20% • Interface with customer Siebel: Standardized CRM Regional competency • Develops products Include e2e total supply WebSphere Business centers support of • Manages strategic suppliers chain HW/SW/Services Integration: ties together common, global • Maintain quality stds legacy applications & data business processes e-Procurement SAP R3: Cross-brand, Centralized D/S planning infrastructure extends touchless order flow Integrate end-to-end Balance Demand and Supply beyond enterprise for order fulfillment B2B: Seamless supplier & with Sense and Respond seamless data mgmt processes and client relationships Conditioning systems i2: Integrated supply and Professionals spend Lowest inventory levels demand planning majority of time on ever/improved turnover DB2: Trusted data sources supplier evaluation and On time delivery best in history market intelligence SaR: Sense and Respond Maintain margins in competitive environment 6 Building the on demand supply chain | An IBM Case Study © 2004 IBM Corporation
    • Integrated Supply Chain Sales Process Alignment links demand conditioning visibility to essential customer order indicators. 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 7 Building the on demand supply chain | An IBM Case Study © 2004 IBM Corporation
    • Integrated Supply Chain Demand side activities reconfigure product structures for supply. 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) 8 Building the on demand supply chain | An IBM Case Study © 2004 IBM Corporation
    • Integrated Supply Chain Supply side activities ensure early and on-going involvement of procurement and suppliers in demand decisions. 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 9 Building the on demand supply chain | An IBM Case Study © 2004 IBM Corporation
    • Integrated Supply Chain In the on demand world, competitive supply chains must deliver on the promise of market value. 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 10 Building the on demand supply chain | An IBM Case Study © 2004 IBM Corporation
    • Integrated Supply Chain Analytics and data mining provides capability to monitor and assess demand trends. 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 11 Building the on demand supply chain | An IBM Case Study © 2004 IBM Corporation
    • Integrated Supply Chain Sense & Respond considers dimensions and how they work together within a business context to improve supply chain performance. 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. 12 Building the on demand supply chain | An IBM Case Study © 2004 IBM Corporation
    • Integrated Supply Chain Demand and Supply integration provides business value. 13 Building the on demand supply chain | An IBM Case Study © 2004 IBM Corporation
    • Integrated Supply Chain When we did this, we improved synchronization across the supply chain and drove business results. 14 Building the on demand supply chain | An IBM Case Study © 2004 IBM Corporation
    • Integrated Supply Chain The on demand model is giving us: 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%+ 15 Building the on demand supply chain | An IBM Case Study © 2004 IBM Corporation
    • Integrated Supply Chain At the same time, we continue to drive down costs. Cost “take outs” for us are a daily way of life. 1. Procured Parts/Services 4. Services & General Procurement Year-to-Year price take downs Internal software v purchase Cost efficiency/avoidance actions Consolidation of supply base Industry cost takedowns Migration to core suppliers Leverage globally 2. Design Efficiencies E2E travel management Utilizing industry standard parts Services labor cost management Common across system platforms Optimize outsourced (contractor) skills vs. Using IBM semiconductor tech internal supply; Manage IBM "bench" skills Preferred suppliers/rates 3. Manufacturing Efficiencies Outsourcing flexibility Low cost / tax jurisdictions 5. Customer Fulfillment Process improvements Common processes and tools Leveraging fixed capacity “Touch less” processes Reduce inventory & warranty costs Freeing up sales reps from process tasks 6. Integration of Acquisitions 16 Building the on demand supply chain | An IBM Case Study © 2004 IBM Corporation
    • Integrated Supply Chain What’s Next? 2003 Future RESULTS Revenue: $89B Net income: $7.6B SUPPLY CHAIN JOURNEY One integrated and fully-enabled organization (ISC) that has re-invented IBM operations Profit Driver Business Optimization Goes beyond products to services Extends success past financial metrics SUPPLY CHAIN EVOLUTION Impacts customer satisfaction Impacts sales team productivity Fully synchronizes supply and demand Ignite growth Reinvention 17 Building the on demand supply chain | An IBM Case Study © 2004 IBM Corporation
    • Integrated Supply Chain 18 Building the on demand supply chain | An IBM Case Study © 2004 IBM Corporation