Where is the C-Level in Supply Chain?

Integrated Supply Chain

© 2006 IBM Corporation

Where is the C-Level in Supply Chain?


© 2006 IBM Corporation2

Objectives:

1) Introduce IBM 2006 Global CEO Study

2) Demonstrate IBM’s Supply Chain Transformation

3) Show examples of current Supply Chain Initiatives



Global CEO Study 2004

83%

68%

40%

39%

0% 20% 40% 60% 80% 100%

RevenueGrowth

Cost Reduction

AssetUtilization

RiskManagement

While growth and cost reduction remains a priority, the 2006 study reveals a shift in thinking – and cites Innovation as a key

priority

While growth and cost reduction remains a priority, the 2006 study reveals a shift in thinking – and cites Innovation as a key

priority

Global CEO Study: 2004

In 2004, growth was a top priority, with a In 2004, growth was a top priority, with a focus on strengthening financial performancefocus on strengthening financial performance

In 2004, growth was a top priority, with a In 2004, growth was a top priority, with a focus on strengthening financial performancefocus on strengthening financial performance

20062006



Areas of Innovation

PRODUCTS, SERVICES, AND MARKETSBUSINESS MODELS OPERATIONS

Innovation to restructure and extend the enterprise

Innovation to improve effectiveness and efficiency of functional areas

Enhancing communication & collaboration Eliminating redundancy Increasing organizational effectiveness

Improving functions and processes

Integration with partners

Innovation is about Business Models and Operations, as well as Products, Services and Market



Sources of Innovation

‘Two of the three most significant sources of innovative ideas now lie outside of the organization’

Global CEO Study 2006: Sources of New Ideas and Innovation

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Academia

R&D (internal)

Sales or service units

Associations, trade groups, conference boards

Competitors

Consultants

Customers

Business partners

Employees (general population)



Case Study: IBM’s Integrated Supply Chain



Cost Cutting Reinvention

Static supply chains with business unit and geographic “silos”

Development of better functional skills and increased inter-business unit communication

True external electronic collaboration withsuppliers and partners

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

The ISC Transformation began over 10 Years ago

Revenue: $64B Profit: $3B

Profit DriverCost Center

Drives value primarily by saving money and increasing cash conversion

Still primarily product focused

SU

PP

LY

CH

AIN

JO

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YS

UP

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Y C

HA

INE

VO

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TIO

NR

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UL

TS

Fragmented and not mission critical Functional silos Heavy asset based logistics No common processes Large number of legacy applications



Increased Inter-Business Unit Communication

BREADTH

DE

PT

H

CUSTOMER FULFILLMENT

GLOBALLOGISTICS

MANUFACTURING PROCUREMENT

TECHNOLOGY

COMMON DATA & GOVERNANCE

OPERATIONSTEAM

STRATEGYTEAM

TALENTTEAM

Previously ‘Functional Silos’ were brought together under the ‘Integrated Supply Chain’



93% 95% 96% 93% 97% 97% 97% 98% 98% 99% 99%

0

10

20

30

40

50

60

70

80

90

100

4Q99 2Q00 4Q00 2Q01 4Q01 2Q02 4Q02 2Q03 4Q03 2Q04 4Q04

Sat

Very Sat

350320

263

164

110 10180 78 69 60

0

50

100

150

200

250

300

350

# o

f IT

Ap

plic

atio

ns

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Many….to some….to few….

0

200

400

600

800

1000

1200

1400

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

59193

348

632763

8861037

11591252

510

M

Dol

lars

Cost-To-Revenue Global Logistics Savings - $1.2B Over 10 Years

IT Applications Internal Customer Value

IBM Global Logistics continues to deliver significant business value...

1Q012Q01

3Q014Q01

1Q022Q02

3Q024Q02

1Q032Q03

3Q034Q03

1Q042Q04

3Q044Q04

GL HW Cost ($M) IBM HW Revenue ($B)



INVENTORY AT THELOWEST LEVELS IN

YEARS

30

Financial Results

OperationalResults

Client Facing Results

$6BCOST ANDEXPENSESAVINGS

25%IMPROVEMENTIN SALES FORCEPRODUCTIVITY

32%

IBM: $91B REVENUE NET INCOME $10.6 #2 IN CUSTOMER SATISFACTION

Another

$580MCASH GENERATED

AVERAGE PAYMENTTERMS IMPROVED BY 2 DAYS =

$166M

CYCLE TIMEPERFORMANCE

+6%IMPROVEMENT IN OVERALL CLIENT SATISFACTION

+1%

TURNING ORDERS

FASTER

And achieved impressive 2005 results

*

**

* Accomplished in 2004, but held steady for 2005



What’s next

One integrated and fully-enabled organization that has re-invented IBM operations

2003 2004 2005

Revenue: $91B Net Income: $10.6B

SU

PP

LY

CH

AIN

JO

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UP

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NR

ES

UL

TS

Business OptimizationProfit Driver

Goes beyond products to services Extends success past financial metrics

Impacts customer satisfactionImpacts sales team productivity

Fully synchronizes supply and demand Sharing ISC best practices with clients

Reinvention

Global Integration: Leveraging Our Multi-national Presence for Operational Advantage

2006



How the ISC is continuing to drive Innovation



Paperless Logistics Processing

Export Invoice

International Shipping

Documents

Import Brokerage Documents

Payables Documents

BankDocuments

• Greater paperless visibility • Faster transmission times• Supply Chain Partners can pull/post documents• Can scan directly from IT interface, or Scanner/Printer

Other Documents

Shared Access for all usersShared Access for all usersShared Access for all usersShared Access for all users

Paperless Document Repository



Cargo Security

TREC

Ocean Carrier DistributionCentre

ManufacturerDistributor

Port Authority “A”Customs

Port Authority “B”CustomsOcean Carrier

FreightForwarder

= accredited entity

= various sensors

signed evidence,

documentation, location

TREC: Tamper Resistant Embedded Controller

• Location tracking• Door lock tampering• Humidity and temperature • Radiation• Dropped container sensors



Supply Chain BTO – In Response to Customer Needs

Continuous Strategic Change while Outsourcing

Process Enhancement Process Improvementwhile Outsourcing

Cost Reduction Cost Take Out

Extended Enterprise

Pro

cess

Ch

ang

eP

roce

ss C

han

ge

Return on InvestmentReturn on Investment

BTO

BPO

Business Process Outsourcing Targets cost reduction for specific process

Business Transformation Outsourcing Addresses tactical and strategic initiatives

The Integrated Supply Chain has introduced a new offering to help clients transform their businesses through outsourcing



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 theSupply Chain to drive Business Value



Contact Information:

Dipan Karumsi

Business Consulting Services

Logistics Practice

[email protected]

Ph: 614.537.4575