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© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 0 | 21 April 2014
SCC Global Member Meeting and
Supply Chain World North America
Nashville, Tennessee, USA
April 14-15, 2014
Trends in High Tech Supply Chain
Partha Bose - IBM
© 2014 IBM Corporation 1
THIS PRESENTATION COVERS 3 TOPICS
2 Role of Analytics in
Supply Chain
3 The Software-Defined
Supply Chain
1 Today’s High Tech
Supply Chain
© 2014 IBM Corporation 2
3 CHARACTERISTICS
OF HIGH TECH SUPPLY CHAINS
Economies of Scale BIG
Multi-Tier Supply
Chains COMPLEX
Low Cost Supply
Chains GLOBAL
© 2014 IBM Corporation 3
© 2014 IBM Corporation 4
See what others don’t
Exploit global efficiencies
Know the customer as well
as yourself
Source: IBM Institute for Business Value
Volatility
Value
Visibility
NEW VISION AND NEW RULES ARE NEEDED
© 2014 IBM Corporation 5
#1: KNOW THE CUSTOMER AS WELL AS YOURSELF
Predict demand and be in a position to react to demand variability and market volatility with rapid response and allocation of all global resources
Implementation of Smarter Supply Chain Capabilities
© 2014 IBM Corporation 6
CONSUMER ELECTRONICS MAJOR
S&OP as a globally integrated process
manages the Supply Chain globally on
a weekly basis
Global visibility of inventory levels and
replenishment needs
Model of Global SCM
Customer 1
Customer 2
Customer 3
Region Sales
Region Sales
Region Sales
Plant1
Plant2
Plant3
Unit of Planning
$XB
$YB
2003 2012
Over 3X
Achieved over 3X growth
for last 10 years
through pure organic growth
In major divisions, Global Operation
Center & HQ supply chain management
teams have maintained the same size,
supporting a business that has grown 3
times
© 2014 IBM Corporation 7
STRATEGIC INITIATIVES HAVE ENABLED THE COMPANY’S GLOBAL SCM ENVIRONMENT
Global Competition
Risk of Supply Chain Disruption
Lower Margin
Key Challenges Strategic Initiatives
Globally Integrated Supply Chain
Optimize global operation
Global Concurrent Launching
Get high profit in early market
Advanced Customer Collaboration
CPFR & Retail Channel Mgmt
Extended Supply Chain Flexible supply with less risk
Increased Market Uncertainty
© 2014 IBM Corporation 8
STRATEGIC MIX OF BUY & MAKE OF KEY COMPONENTS
Make
Buy
Buy Vs.
flexible
flexible
Strategy of Component
Supply
Strategy for key
components
In short term, there’s a
constraint to change
the Buy strategy
Mix Buy & Make for key components
to mitigate the risk of supply chain
disruption
In order to make key decisions for
new internal investment of component
plants, clear visibility on the
component demand-supply balance is
needed
© 2014 IBM Corporation 9
IBM’S GIVIEW PLANNER FUNCTIONALITY MET 4 KEY REQUIREMENTS
9
Plant A (Internal)
Purchase (External)
Warehouse
Purchase
Purchase
Purchase
Manufactur
e
Manufactur
e
Dummy
Transport 10%
90%
Transport
60%
40%
Transport
Demand
Demand
Demand
Warehouse
for Domestic/Export
Demand from
Final Assembly
Component Manufacturing
Or Purchasing
Proportional
Sourcing
Auto Build ahead (1
week)
No carryover @ Plant:
Push out all inventory to W/H
Consume Capacity by cycle time
1
2
3
4
© 2014 IBM Corporation 10
Collaborate with insight and visibility to events, with suppliers, service providers and customers in an open, action-oriented, environment.
Implementation of Smarter Supply Chain Capabilities
#2: SEE WHAT OTHERS DON’T
© 2014 IBM Corporation 11 11
What if you could accurately predict
which characteristics tend to lead to
a higher frequency of failures?
What if, when an asset is
scheduled for maintenance,
you could predict what
parts are likely to fail in the
near future?
What if you could identify the characteristics
that tend to increase ownership cost and
downtime over the life of a system?
What if you could replace
those parts that have not yet
failed and avoid further
unscheduled downtime?
What if you could quickly mine the
thousands of logs that describe the
maintenance performed on a system and
determine what important observations are
being logged by the maintenance team?
© 2014 IBM Corporation 12
Group cases that exhibit
similar characteristics.
Which parts tend to fail most
often? At what rate do they
fail?
Predict or Classify
behavior & characteristics.
What are the
characteristics of parts that
perform well versus parts
that fail often?
What events occur
together?
Given a series of part
failures, which parts are
likely to fail in the future?
Associate Classify
Cluster
DATA
MINING
Data Mining &
Predictive Modeling
unearths insights
PREDICTIVE ASSET OPTIMIZATION
© 2014 IBM Corporation 13
2. Predictive Maintenance
(Service Optimization)
1. Manufacturing Quality
3. Warranty Analytics
4. Remote Diagnostics
(Connected Equipment)
5. Business Model
Transformation
Predictive maintenance for plant equipment
Equipment repair and maintenance optimization
Optimization of service parts and engineers’ schedules
Production quality management
(PLC/MES/Quality inspection data)
Warranty monitoring and analysis
Field quality early warning using warranty claim data
Warranty accruals management
Equipment data analysis and early warning
Remote monitoring and diagnosis
Maintenance optimization
Business model transformation with extended warranty,
performance assurance, and operational excellence.
Transformation to analytics-driven organization
APPLIES TO 5 BUSINESS DOMAINS IN EQUIPMENT MONITORING.
© 2014 IBM Corporation 14
• Virtuous Cycle: Inflection point to
rapid change: at 15 percent of the
market, a sudden takeoff in the
proportion of spending is shifting
to managed print services
• Huge Value Proposition:
Compelling 30+ percent cost
reductions for customers, higher
margins for winning vendors
• Service Extension: Branching
beyond copying into printers,
processes, and other IT
infrastructure services
• Winner Takes All: Transformation
driving consolidation toward larger
vendors
THE MARKET FOR PRINTING SERVICES TRANSFORMED ITSELF IN 3 YEARS BETWEEN 2008 AND 2011
Source: Photizo Group, MPS Advisory Service, MarketWatch™
Huge Growth for Managed Print Services,
Represented by the Number of MPS Programs Announced 75%
50%
25%
0%
= Number of new MPS programs
= MPS program growth
1 1 1 1
10
31
11
2
1% 2% 3% 4%
14%
45%
56% 58%
2004 2005 2006 2007 2008 2009 2010 2011
© 2014 IBM Corporation 15
PAO ARCHITECTURE
Industrial Enterprise Services Bus
(Message Broker)
End User Reports, Dashboards, Drill Downs
High volume streaming data
(InfoSphere Streams)
Telematics, Manufacturing Execution Systems,
Legacy Databases, Distributed Control Systems
EAM System
(Tivoli Maximo Tririga or other)
Analytic Datastore
(Pre-built data schema for storing quality, machine and prod data, configuration)
DB2
Statistical Analytics
(SPSS Modeler)
Decision Management
(SPSS DM)
Business Analytics
(COGNOS BI)
© 2014 IBM Corporation 16
UK Utility Company
In Production Line
• Pro-active detection rate
increased by 90-100%
• Sustained 41% reduction
in production incidents
and unscheduled
downtime
• Reduced liability damage
by 30% in 2 years
Japanese Manufacturer
In Field Services
• Saved $1 million in repair
costs in under 2 weeks
• 12-14 times return on
investment in just 4
months
German Auto Manufacturer
In Warranty Services
• Proactive identification of
systematic error patterns
and their dependencies
• Reduced warranty cases
from 1.1 to 0.85 per
vehicle
• 5% reduction in warranty
cases
• Annual savings of €30m
CASE EXAMPLES
© 2014 IBM Corporation 17
Optimize pipeline inventory, the global network, and cost structures. Create cost-efficient, sustainable practices while hedging risks.
Implementation of Smarter Supply Chain Capabilities
#3: EXPLOIT GLOBAL EFFICIENCIES
© 2014 IBM Corporation 18
Globally Integrated Enterprise
Multinational Era
Homegrown IT
Multiple, separate supply
chains
Few common processes
ERP
Enterprise efficiencies
Streamlined global
processes
Information sharing
Analytics
Enterprise and multi-
enterprise optimization
Transparent SC
Predictive, Cognitive
Smarter Supply Chain
CASE EXAMPLE: IBM
© 2014 IBM Corporation 19
R&D
Marketing
Finance
TO FROM
Supply Chain
• 3 global procurement centers • 300 local procurement centers
• Outsourced non-core processes reduced costs 25-35%
• Integrated decision-support
• Multiple local organizations
• Non-integrated decision support
• 13 global standardized marketing programs leveraged locally
• Product- and geo-specific marketing
IT
• 1 global CIO
• 5 global data centers
• 4,790 applications
• 128 Local CIOs
• 155 local data centers
• 16,000 applications
• Fully integrated R&D
• Collaboration with 50 organizations to build IP marketplace
• Multiple international R&D centers
• Local specialization with duplication
HR
• Global HR planning
• Standardization
• Local systems and management
• Local resource skill-set definition
GLOBAL INTEGRATION
© 2014 IBM Corporation 20
IBM’S SUPPLY CHAIN TRANSFORMATION
Pain Points Transformation Approach
IBM’s supply chain was a fragmented cost center and not
critical to overall revenue.
Challenges included:
Pockets of integration in functional silos but no enterprise-
wide common process
Distributed and hard-wired to business units
‒ Non-electronic invoicing
Lack of shared measurements and end-to-end visibility
Non-consolidated transaction processing
Integrated supply chain together with shared measurements
to support end-to-end operation
Focused on client satisfaction along with operational results
Leveraged global scale by connecting suppliers online with
IBM’s international workforce
‒ Consolidated transaction processing in global delivery
centers
Introduced supply-chain business transformation outsourcing
capability
Integration Benefits
Business Operations Benefits Financial Benefits
Averaging $3.0 - 6.5B in procurement savings
every year for the last six years
Manages over $35B+ of spend for IBM across plus
over $20B spend on behalf of clients
Quality early Warning System saves $40M per year
Transformed from 36 plants and 300 Operations Centers to 9 plants and 5 Consolidated Global Operations Centers
35,000 suppliers connected online in 45 countries; 98% of invoices are electronic
Improved sales force productivity: now spending 38% more time with clients
100,000 Business Partners, 90+% of orders “touch-less”
Clients in 100 countries have self-service access to contract, order and inventory information
© 2014 IBM Corporation 21
SOFTWARE DEFINED
SUPPLY CHAIN
© 2014 IBM Corporation 22
3 NEW TECHNOLOGIES
3D PRINTING OPEN SOURCE INTELLIGENT
ROBOTICS
© 2014 IBM Corporation 23
HARDWARE CONSTRAINED
BUILD A
MOLD OR
CAST
HARDWIRE
PRODUCTIO
N LINE
DEVELOP
EMBEDDED
CHIP
SOFTWARE DEFINED
PRINT PARTS
DIRECTLY BY
SOFTWARE
RECONFIGURE
ASSEMBLY
THROUGH
SOFTWARE
DIGITAL
CONTROLS USING
SOFTWARE
© 2014 IBM Corporation 24
4 DIFFERENT PRODUCTS
COST
VOLUME
SIZE
COMPLEXITY
PERSONALIZATION
WASHING
MACHINE
INDUSTRIAL
DISPLAY
MOBILE
PHONE
HEARING
AID
© 2014 IBM Corporation 25
3 AMAZING RESULTS
COST
SCALE
CO2 IMPACT
© 2014 IBM Corporation 26
LOWER COST
23
% CHEAPER
AGGREGATE NORMALIZED UNIT COST
© 2014 IBM Corporation 27
LOWER SCALE
90
% LESS
VOLUME
REQUIRED
AGGREGATE NORMALIZED
MINIMUM ECONOMIC SCALE
© 2014 IBM Corporation 28
NOT NECESSARILY GREENER
100
89
33
100 9992
100 100 101100
120
109
0
20
40
60
80
100
120
140
2012 Traditional 2017 Digital 2022 Digital
AGGREGATE NORMALIZED
CO2 ANALYSIS
9% HIGHER
67
% LOWER
© 2014 IBM Corporation 29
BIG
COMPLEX
GLOBAL
SMALL
SIMPLE
LOCAL
© 2014 IBM Corporation 30
RECOMMENDATIONS FOR INDUSTRY
© 2014 IBM Corporation 31
ibm.com/electronics