Some thoughts from IBM GBS on the challenges and opportunities entailed in global supply chain integration

1. Mondher Ben-Hamida, CPIM, CSCP Associate Partner / Global Electronics SME IBM GBS Supply Chain Strategy Practice [email_address] +1.415.425.7184 A Tale of Ants, Humans and Chaos

4. OBJECTIVES Briefly discuss the challenges most companies face in optimizing the integration of their global supply chain operations Provide a critical analysis of the root cause(s) of these challenges Provide an Overview of IBM’s Approach and Competitive Differentiators 1 2 3

7. What are the key pain points of our clients? An Internal View Division / BU / Geo People Processes Systems Technology Measures Division / BU / Geo People Processes Systems Technology Measures Division / BU / Geo People Processes Systems Technology Measures People Processes Systems Technology Measures Lack of true Supply Chain organization Excessive customization, often for no reason, with limited, if any, synergies between divisions Too many systems and instances hindering data consolidation and sharing Disparate systems and supporting technologies hinder integration and collaboration Inconsistent and often conflicting set of measures Corporate HQ

9. Root Cause # 1 The Gap Between Business Needs And Business Models Phase 1 Phase 2 Phase 3 Business creation and local market establishment Aggressive Global Growth Saturation Reputation Matters Growth Matters Execution Matters Suitability of Supply Chain Models and Tools Low High Elapsed Time / Supply Chain Planning Complexity High Low ABC, Inc. Tier 1 Tier 2 ABC, Inc.

10. Root Cause # 2 – The Challenge Of Internal Integration “Tell Me How You’ll Measure Me, And I’ll Tell You How I’ll Behave” Corporate HQ Low High High Low CEO CSO* (*) – Global Chief Supply Chain Officer EMEA Division CEO CSO* BU XYZ CEO CSO* A desire to grow rapidly (Phase 2) provided divisions with a great deal of independence which led to the proliferation of overly localized supply chain processes and solutions While the division-level supply chain officer might listen to the corporate-level officer, his/her performance/bonus is decided by the Division/BU head The tendency to promote local performance has greatly diminished the scope and impact of corporate supply chain officers

11. Root Cause # 3 – The Challenge Of External Integration Integration is about Collaboration; However, Are We Wired For It? http://www.newsweek.com/id/170380 The Idea: Unlike ants and bees, humans aren't hard-wired for cooperation; we tend to act out of self-interest. That inclination repeatedly draws us into "social dilemmas" where, in an attempt to gain more for ourselves, we ultimately fare worse than we would have by cooperating. The evidence: The trick is to establish an agreement where everyone's self-interest is best served by cooperating. That means removing incentives to violate the agreement. The Conclusion: Businesses are nothing but federations of human beings. We think we’re different and unique and we behave in ways that protect and promote that uniqueness. We need to overcome some innate apprehensions to build a winning value proposition for key supply chain partners

12. Root Cause # 4 – The Issue of Asymmetric Benefits What’s in it for me? Many Supply Chain Integration Efforts failed because the incentives were not properly defined and established

13. Lessons Learned and Tools to Leverage

14. Our Approach – A High Level Overview Electronics Industry – Globally Integrated Enterprise Supply, Demand & Global Integration eGIE / CBM / Shared Service Design Global Supply Chain Planning Supply Chain Visibility (VMI/CPFR) Master Data Mgmt Supply Chain Mgmt ERP Green Supply Chain (enabling IBM’s Smarter Planet) Global Financial System Consolidation “ Solar Fab In A Box”

15. Consulting Guideline # 1 Build the Right Model Define the End State Ensure that the Supply Chain Strategy is Aligned with the Corporate Strategy The End State Supply Chain vision should be aligned with the corporate strategy and goals The supply chain working model needs to be built with as much commonality as possible. Core Capabilities Core Competency Extended Capability 1 Extended Capability 2 Extended Capability 3 Customer Stream A Customer Stream B Customer Stream C Supporting Processes High Low Time to Accomplishment Value Chain Total Performance High Today “ Incremental” Approach “ Vision / Backward” Approach World Class Performance Hurdle Ideal State

18. Why Is IBM Uniquely Positioned To Help With Global SCI? The Three Dimensions Of Our Offering By leveraging innovative ideas from our research division and proven best practices from our internal supply chain group , we are uniquely positioned to help our clients improve their supply chain strategy and operations Advisory Services Research Internal Supply Chain Supply Chain Strategy Practice

19. Why Is IBM Uniquely Positioned To Help With Global SCI? A Rich Portfolio of Tools to lead the Field of Supply Chain Analytics and Enable Smart Design Decisions (1) – ‘Recent Acquisitions’ refer only to ILOG and Cognos (2) – ILOG can be seen as the Intel Inside of most SCM/APS Solutions (1) Some of our Existing Assets Recent IBM Acquisitions (2) SCPM (Supply Chain Process Modeler and Simulator) SNOW (Supply Chain Network Optimization Workbench) WSP (Warehouse Site Planner) VCC (Virtual Command Center)