Slides -- 2 of 4 (Supply Chain, Smarter Planet)

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Slides -- 2 of 4 (Supply Chain, Smarter Planet)

  1. 1. Smarter Supply Chain: Intelligence Through Advanced Analytics Tory Johnson – Director, Power Systems, System x and RSS Integrated Supply Chain Fulfillment Engineering 17 September 2009
  2. 2. Agenda <ul><li>A Smarter World – Driving the Need for a Smarter Supply Chain </li></ul><ul><li>Enabling a Smarter Supply Chain through the Process Excellence Initiative </li></ul><ul><ul><li>Integrated Supply Chain Engineering Transformation </li></ul></ul><ul><ul><li>Examples of Innovation Opportunities </li></ul></ul><ul><li>Closing Remarks </li></ul>
  3. 3. The World is Getting Smarter: Because it Must 40 - 70 percent of electrical energy is lost due to inefficiencies in the grid. In one small business district in Los Angeles alone, cars burned 47,000 gallons of gasoline just looking for parking. Consumer products and retail industries lose about $40 billion annually due to inefficient supply chains. In a world where 820 million people are undernourished, $48 billion worth of food is thrown away each year in the US. Our healthcare “system” can’t link from diagnosis to drug discovery, providers, insurers, employers and patients. Financial markets spread risk but can’t track it; this has led to undermined confidence and uncertainty.
  4. 4. IBM wanted to gain insight into the challenges facing supply chain executives around the world… to learn what strategies and initiatives they are undertaking. Supply chains continue to become more global and complex...
  5. 5. Global Chief Supply Chain Officer Study 2009 Cost Containment Rapid, constant change is significantly affecting this traditional area of strength and the ability of supply chain executives to adapt. Visibility Faced with more information than ever, supply chain executives still struggle to “see” and act on the right information. Risk CFOs are not the only senior executives urgently concerned about risk; risk management also ranks high on the supply chain agenda. Customer Intimacy Despite demand-driven mantras, companies are better connected to their suppliers than their customers. Globalization Contrary to initial rationale, globalization has proven to be more about revenue growth than cost savings.
  6. 6. Three Characteristics of a Smarter Supply Chain Interconnected Intelligent Automated Transactions & Smart Devices <ul><li>Use of sensors, actuators, RFID, & smart devices to automate transactions : inventory location, replenishment detection, transportation locations & bottlenecks </li></ul><ul><li>Supports real-time data collection & transparency from POS to manufacturing to raw material </li></ul><ul><li>Predict and Act through alert warning systems </li></ul>Optimized Flows <ul><li>ERP to ERP to ERP system integration across the network. Standardized data and processes. </li></ul><ul><li>Collaborative decision making through decision support and business intelligence – starting with the customer </li></ul><ul><li>Risk management programs for integrated financial controls with operational performance – monitored and measured </li></ul>Networked Planning, Execution & Decision Analysis <ul><li>Simulation models to evaluate trade-offs of cost, time, quality, service and carbon and other criteria </li></ul><ul><li>Probability-based risk assessment & predictive analysis </li></ul><ul><li>Networked planning/execution with optimized forecasts & decision support </li></ul>Instrumented
  7. 7. A Smarter Supply Chain: Synergies & Cognitive Models Globalization and growing supply chain interdependence have introduced a heightened level of information, volatility, complexity and uncertainty that is unlikely to subside. This new environment demands a different kind of supply chain – a much smarter one. Intersection of smarter dimensions opens opportunities for innovation Interconnected Intelligent Instrumented Improving crisis response time via global connections Dynamic pricing: based on inventory levels, predicted demand, pattern recognition, weather forecast Alert: airline arrival, library, weather, etc. “ If you bought this, then…” Google PowerMeter Automobile mileage range Customer Intimacy Globalization Risk Visibility Cost Containment
  8. 8. ISC Engineering: Enabling a Smarter Supply Chain <ul><li>Customer and Business requirements mandate the need for a Smarter Supply Chain </li></ul><ul><li>The Integrated Supply Chain (ISC) Engineering team has made a strategic investment in providing the tools and training needed to enable the Smarter Supply Chain Strategy </li></ul><ul><ul><li>Defining projects to target customer defined gaps and inhibitors , while balancing with strategic goals and financial value to the business </li></ul></ul><ul><ul><li>Developing the capability for process-led execution to deliver business results through a standardized approach which supports a data driven culture of decision making </li></ul></ul><ul><ul><li>Enabling employees and process owners to develop skills and competencies needed in order to positively impact their customers and the business </li></ul></ul>Interconnected Intelligent Instrumented
  9. 9. Integrated Supply Chain (ISC) Engineering - Process Excellence <ul><li>IBM ISC Engineering drives a globally integrated Design for Six Sigma (DFSS) and Lean Six Sigma (LSS) program in conjunction with IBM Process Excellence. </li></ul><ul><li>Both DFSS and LSS are leveraged for innovation and transformation to achieve Product and Process Excellence benefits and improvements. </li></ul><ul><li>This globally integrated effort minimizes cost to correct quality and reliability problems, and achieves a trained, skilled, and active work force with involvement at all levels of process execution. </li></ul>ISC Engineering owns a Lean Six Sigma Green Belt curriculum designed specifically for the engineering community. This curriculum is delivered via in-class training by our own internal Black Belts and Master Black Belts.
  10. 10. Lean Six Sigma vs. Design for Six Sigma <ul><li>Management philosophy implemented over past years </li></ul><ul><li>Common Roadmap (DMAIC) </li></ul><ul><li>Cost Reduction / Waste Elimination </li></ul><ul><li>Focus on variability reduction and defect elimination </li></ul><ul><li>Improving original design of product </li></ul><ul><li>Streamline production/business Transactional environment </li></ul><ul><li>DOE for reducing variations in process </li></ul><ul><li>Focusing on root cause analysis/corrective actions </li></ul>Lean Six Sigma Design for Six Sigma <ul><li>Next level of efficiency </li></ul><ul><li>No Common Roadmap (IDOV, DMEDI, DMADV, …) </li></ul><ul><li>Cost Avoidance </li></ul><ul><li>Elimination of Errors during design of new Product/Process </li></ul><ul><li>Robust Design optimizing performance </li></ul><ul><li>Designing Quality into product </li></ul><ul><li>Starts early in design cycle </li></ul><ul><li>Focusing on preventing errors </li></ul>Both LSS and DFSS are needed to solve business problems
  11. 11. Six Sigma and Lean Sigma – Complimentary Methodologies for Combined Lean Six Sigma Lean Methodology <ul><li>Increase efficiency </li></ul><ul><li>Simplify work flows </li></ul><ul><li>Focus on high-value steps </li></ul><ul><li>Eliminate waste </li></ul><ul><li>A Lean enterprise is one that delivers value to its stakeholders with little or no wasteful consumption of resources. </li></ul>Six Sigma TM Methodologies <ul><li>Increase consistency </li></ul><ul><li>Reduce variation </li></ul><ul><li>Eliminate defects </li></ul><ul><li>In a Six Sigma enterprise, everyone is focused on identifying and eliminating defects. </li></ul>Lean Six Sigma Product or Service Outputs Customer Driven Customer Driven
  12. 12. ISC Engineering: Lean Six Sigma Training and Tools DOE, Regression Control Charts / SPC Pareto Analysis Cause & Effect Diagram FMEA SIPOC Diagram Kano Analysis Project Charters Value Stream Map Process Capability Study Hypothesis Analysis DMAIC <ul><li>Implementing Statistical Process Control & Acceptance Sampling </li></ul>Implement C ontrol Strategies <ul><li>Design of Experiments </li></ul><ul><li>Solution Selection & Piloting </li></ul>I mprove Process Performance <ul><li>Measurement Systems Analysis – Gage R&R, Attribute Agreement Analysis, Baselines, Failure Modes & Effect Analysis </li></ul>A nalyze Improvement Opportunity <ul><li>Statistical Basics – Probability, Hypothesis Testing and ANOVA </li></ul>M easure Process Performance <ul><li>Introduction to program & methodology </li></ul><ul><li>Introduction to Lean Six Sigma & DMAIC </li></ul><ul><li>VOC (Voice of Customer) </li></ul><ul><li>Lean Sigma </li></ul>D efine Project Opportunity
  13. 13. Green Belt Lean Six Sigma Certification Process Candidate nominated for IBM LSS Training Class Project selected prior to the start of training Successful completion of IBM approved project Attend the full 5 day training session Training on proper tool use Candidate demonstrates competency via Toll Gates <ul><li>Follow-on Projects </li></ul><ul><li>Yield Improvement </li></ul><ul><li>Scrap reduction </li></ul><ul><li>Process optimization </li></ul><ul><li>Waste Reduction </li></ul><ul><li>Defect prevention </li></ul>Review Board reviews results and certifies Green Belt Successful completion of Green Belt exam Track project and record benefits <ul><li>Standard WW training curriculum </li></ul><ul><ul><li>“ Common language” for improving processes </li></ul></ul><ul><li>Training delivered by IBM Master Black Belts / Black Belts </li></ul><ul><li>>700 of the ISC Engineering Team is Green Belt certified </li></ul><ul><ul><li>Representing 3 Geographies and 12 Countries </li></ul></ul><ul><li>15 WW Suppliers participating in collaborative projects </li></ul>
  14. 14. Going Forward: Voice of Business / Voice of Customer Critical Requirements Delighters tend to become Satisfiers/Basic Needs Over Time Must Be Each Project Define/VOC Stage <ul><li>Targets per project </li></ul><ul><li>Aligned with strategic improvement goals </li></ul>Improved Quality Delighter Yes <ul><li>Recognize employees for reaching certification levels and delivery of project results </li></ul>Recognition Primary Satisfier (More is Better) Yes – ISC Vice President <ul><li>Project Value >100K </li></ul>Higher Value Projects Delighter -> Satisfier Yes <ul><li># of Supplier collaborations </li></ul>Supplier Integration Must Be Must Be Yes – ISC Vice President Yes - IBM Corporate <ul><li>% of trained Green / Black Belts </li></ul><ul><li>Strategically aligned with Corporate Process Excellence program </li></ul>Smarter Planet Strategy Primary Satisfier -> Must Be (More is Better) Yes – ISC Vice President <ul><li>$Ms by Year </li></ul>Cost of Quality Benefits Requirement: Must Be, Primary Satisfier, or Delighter Customer Validated? Metrics Critical Customer Requirement (CCRs)
  15. 15. From Pilot to Ongoing Transformation <ul><li>Steady growth in project benefits from concept through 2009 </li></ul><ul><ul><li>Stage 1: Establish Methodology Foundation </li></ul></ul><ul><ul><li>Stage 2: Build Capability through Project Experience </li></ul></ul><ul><ul><li>Stage 3: Responsive and Adaptive Organization focused on customer feedback </li></ul></ul><ul><li>100X Training Return on Investment </li></ul><ul><li>Integrated Leadership and Management System </li></ul><ul><ul><li>WW Black Belts meet on monthly basis and share results </li></ul></ul><ul><ul><li>WW Black Belts’ annual commitment includes training/coaching Green Belts and leadership of a committed number of projects </li></ul></ul><ul><li>Multi-year business transformation that requires persistence </li></ul><ul><li>Examples of innovation opportunities linked to the program </li></ul><ul><ul><li>“ Green” Packaging Optimization </li></ul></ul><ul><ul><li>Digitized Fulfillment </li></ul></ul><ul><ul><li>Intelligent Early Warning System (EWS) across the Supply Chain </li></ul></ul>
  16. 16. Packaging Optimization <ul><li>Business Problem: </li></ul><ul><ul><li>Currently, 3 to 4 different sets of packaging material are used across the supply chain – from chassis supplier through product shipment to the End Customers or Business Partners </li></ul></ul><ul><li>Standardized DOX Project Methodology Applied through Analyze Phase: </li></ul><ul><ul><li>Project Charter outlined the business problem, project objectives, costs & benefits </li></ul></ul><ul><ul><li>SIPOC analysis performed </li></ul></ul><ul><ul><li>As-is process mapping </li></ul></ul><ul><ul><li>Key Stakeholder Analysis & Management Plan defined </li></ul></ul><ul><ul><li>Voice of Customer – Voice of Business – Critical to Quality analysis </li></ul></ul><ul><ul><li>Established baseline and target metrics </li></ul></ul><ul><li>Chassis supplier ships 5 units to Fabrication supplier </li></ul><ul><li>IBM ships final assembly in single packs to End Customer or Business Partner </li></ul>Current Process <ul><li>Fabrication supplier d iscards packaging </li></ul><ul><li>Completes assembly operation and ships units to IBM, 4 per package </li></ul>Define Measure Control Implement Analyze
  17. 17. Packaging Optimization <ul><li>Opportunity: </li></ul><ul><li>Implementation of a process to reuse bulk packaging, multiple times, throughout the supply chain </li></ul><ul><li>Projected Results: </li></ul><ul><ul><li>77% Reduction in Packaging Costs </li></ul></ul><ul><ul><li>13% reduction in Shipping Costs </li></ul></ul><ul><ul><li>Elimination of approximately 100 tons of packaging entering the waste stream </li></ul></ul><ul><li>Upon completion of assembly, Fabrication supplier re-uses packaging & ships units to IBM, 6 per package </li></ul>Future Process <ul><li>IBM bulk ships to Business Partners </li></ul>OR <ul><li>IBM ships final assembly in single packs to End Customer </li></ul><ul><li>Chassis supplier ships 6 units to Fabrication supplier </li></ul>
  18. 18. Digitized Fulfillment Mixing Digitized Fulfillment with Physical Manufacturing <ul><li>New possibilities for digitized fulfillment with multiple delivery mechanisms </li></ul><ul><li>Reduce existing customer pain </li></ul><ul><li>Reduce IBM’s Carbon Footprint </li></ul>The Business Challenge <ul><li>Heritage of “required” hardcopy information </li></ul><ul><ul><li>Legal, Safety, User Experience </li></ul></ul><ul><li>Mixed Fulfillment controlling physical and digital content </li></ul><ul><li>Configured Orders – each order is customized, unique </li></ul><ul><li>Digitization that makes sense to the customer </li></ul>We design and ship “Green” products but…. we can further improve the “Green” customer experience Your Web IBM Web CD/DVD USB Build or Select Digitized Output for Digital PNs Organize for consistent Customer Experience Conversion Services / Libraries (e.g. setup guides) UI Patterns Customer Order Systems Manufacturing Execution Systems Assembly Process Merge/Validate Digital Actions And Physical Assembly Classify Parts Digital or Physical Assembly? Physical Assembly Digitized Fulfillment Customer Shipment Potential Benefits from “Green” Investment 1 1 12 8 2 QTY 22R1128 17P7716 07H6655 00G1268 OS SW key 1621842 Safety Insert 1621381 300 GB DRIVE. 21P4491 Screws 21P4437 Bracket 97P2372 Description Part No. Define Measure Control Implement Analyze
  19. 19. Intelligent Early Warning System What Needs to Change IBM Supply Chain <ul><li>The nature of SPC / Rate Based management is reactive </li></ul><ul><li>Unable to predict what “MAY” occur in the future </li></ul><ul><li>Does not rank warnings to focus on potential emerging issues </li></ul><ul><li>Need a “smarter” infrastructure to predict defect trends before evidence is available </li></ul>Business Challenge <ul><li>Rapid detection of emerging defects </li></ul><ul><li>True problems vs. false alarms </li></ul><ul><li>Manage complexity of the data through intelligent infrastructure </li></ul><ul><li>Mitigate volume variation through measures that account for variation </li></ul>Supply Chain Savings Supplier Mfg Field Traditional Quality Management Statistical Process Control (SPC) or Rate Based SPC Control Charting Cumulative Evidence Cumulative Defects <ul><li>Typical : </li></ul><ul><li>Set control limits </li></ul><ul><li>Apply statistical monitoring </li></ul><ul><li>“ Out of Control” when Cumulative Defects reach statistical significance </li></ul><ul><li>Business Implication : </li></ul><ul><li>Late and Reactive </li></ul><ul><li>% of Defects have escaped </li></ul>SPC Control Charting Cumulative Evidence Cumulative Defects <ul><li>Alternative : </li></ul><ul><li>Reduce Control Limits </li></ul><ul><li>Business Implication : </li></ul><ul><li>Earlier identification </li></ul><ul><li>Overflow of false alarms </li></ul><ul><li>Inability to find the real control issues </li></ul>Time Time “ Shewhart control charts” “ Out of Control” when Cumulative Defects reach “LESS” statistical significance <ul><li>IBM Hardware Environment </li></ul><ul><li>7 hardware brands </li></ul><ul><li>245 world wide suppliers </li></ul><ul><li>Configurable products </li></ul><ul><li>Volumes highly skewed to end of quarter / year </li></ul><ul><li>20 manufacturing facilities </li></ul><ul><li>> 70,000 unique part numbers </li></ul><ul><li>Distributed Global Supply Chain </li></ul>Define Measure Control Implement Analyze
  20. 20. Intelligent Early Warning System <ul><li>New Approach </li></ul><ul><li>Intelligent EWS Infrastructure </li></ul><ul><li>Apply multiple SPC / Control Methods at the same time </li></ul><ul><ul><li>Classic Shewhart/SPC charting, Actual vs. Target Rates, Predictive “Cumulative Sum” </li></ul></ul><ul><li>Intelligence to weight & apply methods most appropriate for the point in time in the defect lifecycle </li></ul><ul><li>Why Cumulative Sum (CUSUM)? </li></ul><ul><li>Non-traditional method : “Cumulative plot” summarized against a hypothesis that the process level is acceptable </li></ul><ul><li>Efficient in detecting small shifts </li></ul><ul><li>Detects shifts that Shewhart cannot </li></ul><ul><li>Works well with varied sample sizes </li></ul><ul><li>Predicts Future defects ! </li></ul><ul><li>Why Not Only CUSUM? </li></ul><ul><li>Ineffective during catastrophic events </li></ul><ul><li>Can miss wide variations that repeat over multiple periods </li></ul><ul><li>Ineffective at managing recovery </li></ul><ul><li>Benefits </li></ul><ul><li>Early Supply Chain Detection </li></ul><ul><li>Tangible project savings and improved customer sat </li></ul><ul><li>Reduction in Carbon Footprint </li></ul><ul><li>Auto-determines lifecycle “phase” </li></ul><ul><li>Determines weighting / priority of each measure </li></ul><ul><li>Prioritizes most likely alarms </li></ul><ul><li>Customized per Part Number </li></ul><ul><li>Over 70,000 Active Measures </li></ul>Intelligent EW System Defect Lifecycle Emerging Recovering Contain CUSUM Actual vs Target CUSUM Actual vs Target Shewhart SPC # Defects Define and Weight Methods “ Intelligence in the Engine” “ New Phase” Predicts defect trends before cumulative evidence is available Shewhart SPC Actual vs. Target CUSUM Subtle Shift Week 30 Statistically Out of Control Week 37 Poor Performance Prediction of Future Problem at Week 30 Dashboard Predictive Example Saved 7 Weeks of defect containment !!! Cumulative Evidence Time Cumulative Defects Rate based SPC Define Measure Control Implement Analyze
  21. 21. Closing Remarks <ul><li>Supply chains continue to become more global and complex </li></ul><ul><li>Strategic investment and senior leader commitment are key to enabling a process-lead, data-driven culture </li></ul><ul><li>Predictive analysis and evaluation of business trade-offs is fundamental to an “Intelligent” Supply Chain </li></ul><ul><ul><li>Leveraging disciplined methodologies such as LSS / DFSS drive innovative solutions which provide customer value, aligned with strategic business goals </li></ul></ul><ul><ul><li>Enabling employees with a standard methodology and tool set, across the global supply chain – not only builds employee morale through skill growth - but further leverages the capability of a globally integrated effort that rapidly responds to the need to transform and to be “smarter” </li></ul></ul>Interconnected Intelligent Instrumented
  22. 22. Minnesota Council for Quality: Lean Six Sigma Forum 17 September 2009

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