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© 2011 IBM Corporation What Differentiates The IBM ILOG Strategic Network Planning Solution

Ibm log differentiators for strategic network planning 2011 v6

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Page 1: Ibm log differentiators for strategic network planning 2011 v6

© 2011 IBM Corporation

What Differentiates The IBM ILOG Strategic Network Planning Solution

Page 2: Ibm log differentiators for strategic network planning 2011 v6

© 2011 IBM Corporation2

Network Optimization with Multiple Objectives

Only software solution with the unique ability to optimize multiple objectives simultaneously

Better Route and Backhaul Planning 10+ years of routing optimization experience:

5% better routes than other routing tools

All-in-one inventory planning and integration

Continuous improvements through rapid ERP integration and automated workflows

IBM ILOG Supply Chain Solutions

Link to Execution

IBM’s complete suite includes TMS, Supply Chain Visibility, WMS, Distributed Order Management, SPSS, and Cognos

Page 3: Ibm log differentiators for strategic network planning 2011 v6

© 2011 IBM Corporation3

IBM Has a Complete Strategic Supply Chain Planning Suite

HD200D-TU CG40CD-BA G248754-TU G248739-TU HD200D-WO G459950-BA PD300D-WO G248754-WO G248739-WO G248730-TU PD758KD-WO G248730-WO G182638D-BA G182665D-BA PD210CD-BA CG42CD-BA HD400D-TUG182649D-BA WD962KCD-BA

PD612D-WO G248735-WO PD612CD-BA PD752CD-BA G248735-TUWD822KCD-BA G182671D-BA

HD900D-TUWD832KD-WO HD600D-WO PD432D-WO HD175D-TU HD600D-TU

($100K)

$0K

$100K

$200K

$300K

$ Optimized $ Target - Hist Avg

"Optimized Target Inv - Historic Avg Inv" for each SKU

IBM ILOG Inventory and

Product Flow Analyst for Enterprise multi-echelon inventory optimization and strategic analysis: integrated inventory planning within your ERP system.

Value : 10-30% reduction in inventory costs, better fill rates. And fo analysis to determine strategic shifts in your inventory policies and practices.

IBM ILOG Transportation

Analyst for Transportation optimization: routing analysis, backhaul, mode selection, and fleet sizing.

Value: 10-30% decrease in trans costs

IBM ILOG LogicNet Plus XE for Network and sourcing optimization: location of facilities, assignment of stores, managing seasonality, and carbon foot printing.

Value: 5-15% reduction in supply chain costs, better service to stores and for on-going multi-plant production sourcing and capital investment decisions; Enhanced S&OP capability; 2-5% reduction in ongoing manufacturing costs

Page 4: Ibm log differentiators for strategic network planning 2011 v6

© 2011 IBM Corporation4

How Leading Firms Get Value from Network Design

Pepsi – $6M reduction in inventory; 2% reduction in growth of transportation miles; increase in the return on invested capital

from 7.6% to 7.8%; and less out-of-stock leading to 12.8m cases available to be sold

3M– Speaking with IBM at SCOPE East (2011) about how they are organized to deploy network modeling capability

MillerCoors– Mention $750m in synergies from merger; spoke at CSCMP (2010) and about ½ synergies come from supply chain;

using modeling to make seasonal sourcing decisions

The Home Depot– Annual report (released in early 2010) mentioned progress towards significant supply chain transformation

Fonterra (one of the world’s largest Dairies)– Reduction in transportation costs (removing 4,000 trucks annually), removed 12 warehouses from network, analysis of

supply chain risk

Whirlpool– Used LogicNet Plus to help quickly manage the merger with Maytag; $40M savings per year from the logistics and

supply chain

Walgreens– Discussed importance of correctly locating highly automated warehouses

Mars/Wrigley– Spoke at CSCMP (2009), mentioned $10M savings in initial modeling alone, ability to test for results for impact on

carbon emissions and oil price risks

Dow– Spoke at LogicTools symposium (2008) and mentioned rapid modeling approach and connecting to capital expense

justification– Recently won an award for reducing $5M in costs with the support of LogicNet Plus XE

Page 5: Ibm log differentiators for strategic network planning 2011 v6

© 2011 IBM Corporation5

Complimentary Tools Have Complete Functionality Ensuring Credibility of Your Results to Experts in these Areas

All-in-one strategic as well as tactical. You can implement the inventory results

– Web based interface to give access to multiple inventory planners and provide true integration

– Built-in work flows, data maintenance, auto review– Different views for different users– Planners have a

home page and a 1-page view of the results

Full set of inventory features and multiple optimization– Multi-echelon, buffer location, mix optimization, and

flow path

HD200D-TU CG40CD-BA G248754-TU G248739-TU HD200D-WO G459950-BA PD300D-WO G248754-WO G248739-WO G248730-TU PD758KD-WO G248730-WO G182638D-BA G182665D-BA PD210CD-BA CG42CD-BA HD400D-TUG182649D-BA WD962KCD-BA

PD612D-WO G248735-WO PD612CD-BA PD752CD-BA G248735-TUWD822KCD-BA G182671D-BA

HD900D-TUWD832KD-WO HD600D-WO PD432D-WO HD175D-TU HD600D-TU

($100K)

$0K

$100K

$200K

$300K

$ Optimized $ Target - Hist Avg

"Optimized Target Inv - Historic Avg Inv" for each SKU

IBM ILOG Inventory and Product Flow Analyst IBM ILOG Transportation Analyst

Routing problems are not trivial to solve well. ILOG has an optimization advantage that allows us to solve these problems better

– Better routes and fleet sizing– Backhauls and Continuous moves– Sophisticated mode selection– Multiple pick-ups and deliveries

Allows for full range of features– Detailed time windows and availability

calendars, Rest requirements, multiple capacity measures, etc.

Links to Sterling TMS and uses the same optimization engine

Page 6: Ibm log differentiators for strategic network planning 2011 v6

© 2011 IBM Corporation6 6

IBM Has a Full Offering of Analytics Solutions

ILOG ODME and CPLEXILOG ODME and CPLEX

Page 7: Ibm log differentiators for strategic network planning 2011 v6

© 2011 IBM Corporation7

More Firms are taking Optimization Deeper into their Organizations

A recent book discusses the value of optimization:– “"One of [the book’s] most interesting arguments is that a great deal of

the effort spent on information gathering and analysis is wasted — or, at least, used sub-optimally — when it’s used to feed business intelligence systems that produce reports that ultimately wind up with being fed into spreadsheets and PowerPoint slides. Managers then sit around in a conference room listening to presentations and debating what the data means and what decisions should be made about it — when, in many cases, good software could make the decision itself."

– David F. Carr, Forbes

The value of optimization is proven– A U.S. Bank reduced its outstanding cash balance by $2B by optimizing

the replenishment of ATMs– Netherlands Railway reduced cost by $30M USD and captured $57M

USD by using optimization to improve efficiency and improve customer service

– Indeval, Mexico's Central Security Depository, clears $250B a day with optimization, saving $240M in interest payments

– MillerCoors used optimization to help with their $750M in savings from the merger of the two organizations

– Mars and Wrigley talked about the value of optimization and supply chain modeling, savings $10M just in the initial modeling, and much more with detailed modeling

Page 8: Ibm log differentiators for strategic network planning 2011 v6

© 2011 IBM Corporation8

LogicNet Plus: Built to be Easy for Business Users to Get Results Clean Design

– Menu’s organized to facilitate understanding of the model– Easy to build simple models and add complexity– Easy to move scenarios between models

Tight Integration with Excel and Access– Import wizards that pull data from Excel or Access files– Edit in Excel within the application– Edit multiple scenarios at one time– Easy to compare and merge forms from different scenarios– Easy to get data back out to Excel and Access for analysis

Robust Product with Helpful Feedback – Backend SQL Server database– Ability to run in multiple scenarios in parallel; Ability to run a single scenario on

multiple threads– Robust Referential Integrity– Advanced error messages with strong partial solution analysis

Good Visualization – Detailed mapping with the ability to add views– Site sizing, site coloring, ability to shade map– Quickly change between a number of graphical displays

Links to Other Systems– CZAR LITE, UPS– PC*Miler

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© 2011 IBM Corporation9

Ribbon Control with Navigation Tree Expanded Access

Parent form Icons are now displayed within Category Ribbons along the top of the application. An Associated Navigation Tree then shows in the bottom left hand corner for quick access to all other related data forms within.

NOTE: These can be moved around the interface or hidden from view by users.

Interface and Usability

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© 2011 IBM Corporation10

Data Forms now in Tab Format

Data forms are now in tab format and align themselves directly below the Ribbons. Each form maybe be dragged to the right or the left according to user preference.

NOTE: Forms maybe enlarged to a single full screen view by clicking on the ‘Maximize Button’ in the upper right hand corner.

Interface and Usability

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© 2011 IBM Corporation11

Data Forms now in Tab Format

Interface and Usability

Tabs may then be dragged and dropped around the interface using the crossbar in the middle to dock them according to user preference.

NOTE: Users may also edit forms from within other scenarios in this format while the optimization runs for a previous scenario.

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© 2011 IBM Corporation12

Lane Visualization

Lane Visualization now allows users to create all allowable flows visually by dragging and dropping icons representing Site and Product Groupings around the visualization screen and then connecting as appropriate.

Note: Users may also edit these lanes below in the heritage Lanes form in Table Format below the visualization.

Interface and Usability

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© 2011 IBM Corporation13

In-depth functionality with Innovative Features

Multi-time period for multi-year or seasonal planning

Unlimited network echelons with detailed transportation modeling including min/max volumes on lanes for groups of sites

Unlimited BOM, including multiple recipes and by-products

Detailed sourcing rules for customers and warehouse (single source, dual source, grouped single sourcing, etc)

Detailed process modeling including lot sizes, overtime, yield, tooling, tanks, and production moves

Tax modeling and currency exchange rates

Economies-of-scale modeling

Carbon footprint modeling:– Report on supply chain carbon emissions– Set carbon emission constraints– Set costs/credits for carbon trading

integrated Tableau® configurable reporting:– Configure customized reports with simple drag

and drop functionality– Create and Save report setup for instant updated

display after each new ‘what if’ analysis

China - Line 1 China - Line 2 China - Line 3 Mexico - Line 2 Mexico - Line 3 Mexico Line 1Month 2 Month 4 Month 6 Month 8 Month 10 Month 12 Month 2 Month 4 Month 6 Month 8 Month 10 Month 12 Month 2 Month 4 Month 6 Month 8 Month 10 Month 12 Month 2 Month 4 Month 6 Month 8 Month 10 Month 12 Month 2 Month 4 Month 6 Month 8 Month 10 Month 12 Month 2 Month 4 Month 6 Month 8 Month 10 Month 12

0K

20K

40K

60K

80K

100K

120K

140K

160K

180K

Line Production by Comp Product

Plant Scenario

0M 20M 40M 60M

RT Production Cost

0M 10M 20M 30M

OT 1 Production Cost

0M 5M 10M 15M

OT 2 Production Cost

Mfg 1 - China Baseline

Optimal

Mfg 2 - Mexico Baseline

Optimal

Overall Comp Capacity Utilization

Product / Scenario

Prod 60 Prod 61 Prod 62 Prod 63 Prod 64 Prod 65 Prod 66 Prod 67 Prod 68 Prod 69 Prod 70

BaselineOptimal BaselineOptimal BaselineOptimal BaselineOptimal BaselineOptimal BaselineOptimal BaselineOptimal BaselineOptimal BaselineOptimal BaselineOptimal BaselineOptimal

0

500

1000

Units Produced

1,1491,2591,215 1,2151,254 1,254

936

1,285

350

1,030

188

1,2181,189 1,1891,130 1,130

536

1,275

739

701

404

1,105

468

794

1,2631,270 1,270

FG Product Source Comparison

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© 2011 IBM Corporation14

Multi-Objective Optimization - Breakthrough in Network Modeling

LogicNet Plus XE 7.2

• Solve multiple objectives at once• Examine entire trade-off curve and

see all possible solutions

Traditional Approach

• Solve only one objective at a time• Approach better solutions only by

trial and error

What’s New in LNP XE 7.2?

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© 2011 IBM Corporation15

Multi-Objective Optimization - Breakthrough in Network Modeling

15

Automatically create trade-off curves and explore the solutions

User-Defined Primary Objective

User-Defined Secondary Objective

What’s New in LNP XE 7.2?

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© 2011 IBM Corporation16

Gain more insight and develop better business plans by directly balancing critical objectives

Trade-off Examples:

– Total Cost vs. Service Level

– Service to Top Customers vs. Overall Service

– Variable Cost vs. Capital Investment

– Paid Freight Cost vs. Customer Pick-up Cost

– Internal Manufacturing Cost vs. 3rd Party spend

– Manufacturing Cost vs. Transportation Cost

– Parent Company Cost vs. Acquired Company Cost

What’s New in LNP XE 7.2?

Page 17: Ibm log differentiators for strategic network planning 2011 v6

© 2011 IBM Corporation17

Output Data

© 2010 IBM Corporation

Scenario Set 1 – Best 1, 2 and Regional DCs

Optimal 1 DC

18

Additional 5% Cost Decrease

Indianapolis, IN

Optimal 2 DCs

Rockford, MI (Current)Salt Lake City, UT

Regional DCs

Indianapolis,INCharlotte, NC

Salt Lake City, UT

Output data can be analyzed and displayed in many different formats after solutions are created….

Page 18: Ibm log differentiators for strategic network planning 2011 v6

© 2011 IBM Corporation18

Output Data

High level Summary Reports

Scenario

1 - Baseline

2 - Mexican plant

3 - Best 5 DCs

Scenario

1 - Baseline 2 - Mexican plant 3 - Best 5 DCs

0M

20M

40M

60M

($) Cost

25,654,53526,879,53521,279,535

19,200,45617,798,86019,170,917

21,045,01418,247,85829,152,077

Totals Across Scenarios Description (group)

Transportation Costs

Production Costs

Warehousing Costs

1 - Baseline 2 - Mexican.. 3 - Best 5 D..

Production CostsFixed Costs

Line Fixed Costs

Production Cost

Line Item Cost

Tooling Cost

Series Set Up Cost

Set Up Cost

Tank Cost

Total

Warehousing CostsFixed Costs

Holding Cost

Inbound Variable Cost

Outbound Variable Cost

Storage Variable Cost

Total

$19,200,456

$0

$0

$0

$0

$0

$19,200,456

$0

$0

$17,798,860

$0

$0

$0

$0

$0

$17,798,860

$0

$0

$19,170,917

$0

$0

$0

$0

$0

$19,170,917

$0

$0

$25,654,535

$0

$7,957,727

$0

$6,821,807

$10,875,000

$26,879,535

$0

$7,957,727

$0

$6,821,807

$12,100,000

$21,279,535

$0

$7,957,727

$0

$6,821,807

$6,500,000

Summary Table

2 - Mexican plant

Map Solution

Warehouse

Dallas

Des Moines

Dover

Orlando

Phoenix

Sacramento

Page 19: Ibm log differentiators for strategic network planning 2011 v6

© 2011 IBM Corporation19

Output Data also provides unique features like the landed cost visualization

Scenario

Best 1 DC

Best 2 DCs

Regional DCs

Warehouse

Charlotte

Indianapolis

Salt Lake City

Wolverine WarehouseBaltimore-Line 1 Baltimore-Line 2 Baltimore-Line 3 Baltimore-Line 4 Chicagoland-Line 1 Chicagoland-Line 2 Chicagoland-Line 3 Chicagoland-Line 4 Juarez Mexico-Line 1Juarez Mexico-Line 2Juarez Mexico-Line 3

7a 7a 7a 7a 7a 7a 7a 7a 7a 7a 7a0K

100K

200K

300K

400K

500K

600K

700K

Units Produced

Line Production by top 50 Agg Prod

Product

Product 0006

Product 0008

Product 0015

Product 0016

Product 0018

Product 0022

Product 0025

Product 0031

Product 0032

Product 0033

Product 0037

Product 0042

Product 0044

Product 0045

Product 0049

Product 0051

Product 0059

Product 0064

Product 0066

Product 0069

Product 0075

Product 0076

Product 0077

Product 0078

Product 0079

Product 0090

Product 0092

Product 0094

Product 0095

Product 0097

Product 0099

Product 0102

Product 0104

Product 0105

Product 0108

Product 0111

Product 0112

Product 0115

Product 0117

Product 0122

Product 0124

Baltimore-Line 1 Baltimore-Line 2 Baltimore-Line 3 Baltimore-Line 4 Chicagoland-Line 1 Chicagoland-Line 2 Chicagoland-Line 3 Chicagoland-Line 4 Juarez Mexico-Lin.. Juarez Mexico-Lin.. Juarez Mexico-Lin..

7a 7a 7a 7a 7a 7a 7a 7a 7a 7a 7a0K

100K

200K

300K

400K

500K

600K

Units Produced

49,890

64,266

97,072

180,645

166,569

32,893

72,576

42,848

70,139

187,975

28,394

32,259

136,491

58,412

32,884

32,929

77,160

44,551

168,312

296,498

140,135

77,457

61,704

58,002

232,660

56,190

36,528

144,125

68,920

140,652

53,994

114,585

152,027

37,233

40,195

67,535

114,469

114,497

143,612

145,849

65,061

67,157

79,868

108,520

309,930

58,213

243,145

156,599

32,912

75,936

86,317

179,280

203,190

97,779

91,845

64,213

Line Production by BU

Product Grouping by Bus..

Bus Unit 1

Bus Unit 2

Bus Unit 3

Bus Unit 4

Bus Unit 5

Bus Unit 6

Bus Unit 7

Bus Unit 8

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© 2011 IBM Corporation20 20

How does optimization work?

Targets

Limits

Data

Choices

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© 2011 IBM Corporation21

Importance of a world-class optimization engine

Strategic Supply Chain planning has huge implications for the organization.

Decisions based on the optimization will impact profits, costs, customer service and more

The business needs to trust the optimization engine produces results that are:– Accurate– Consistent– Robust– Scalable – Optimal

IBM ILOG CPLEX is the gold standard in optimization– Used by over 50% of the world’s largest companies– 1000s of Universities– 1000s of application providers

Page 22: Ibm log differentiators for strategic network planning 2011 v6

© 2011 IBM Corporation22

Modeling and Optimization

CPLEX’s History of Performance Enhancement

CPLEX 7 (2000): 60% on “hard mixed integer problems”

CPLEX 8 (2002): 40% overall, 70% on “difficult problems”

CPLEX 9 (2003): 50% on “difficult customer models”

CPLEX 10 (2006): 35% overall, 70% on “particularly difficult models”

CPLEX 11 (2007): 15% under one minute, 3X on 1-60 minutes, 10X on one hour and up

IBM ILOG CPLEX 12.0 (2009): 30% overall, 2X on 1000 seconds and up

IBM ILOG CPLEX 12.2 (2010): 50% overall, 2.7X on 1000 seconds and up

IBM ILOG CPLEX 12.3 (2011): 20% overall, 2X on 1000 seconds and up

IBM’s continuing commitment to performance leadership

Drivers:– Improved

heuristics– Improved cuts– Reduced parallel

overhead– General software

engineering

Upgrade to CPLEX 12.3 at the core of Optimization

Page 23: Ibm log differentiators for strategic network planning 2011 v6

© 2011 IBM Corporation23

IBM ILOG is the only software vendor that provides a network optimization solution and creates the industry leading mathematical engine

Why is this an advantage to you?

– Direct development coordination: LogicNet Plus XE development team and ILOG CPLEX development team work side-by-side within IBM

• LogicNet Plus XE always benefits from the latest & greatest version of CPLEX• Work directly with CPLEX team to “tune” the engine to address supply chain network

problems• Work directly with CPLEX team to increase scalability & performance• Directly report any problems and ensure quick resolution

– Single vendor responsibility• Any issues with optimization can be addressed directly by IBM and fall under IBM

service agreements• Best and brightest minds in optimization directly available to you• No finger pointing between application provider and mathematical engine provider

– Access to greater ILOG Optimization Solutions as needs may arise• ILOG’s experience and depth in optimization is without peer in the industry• As your organization faces additional business problems that optimization can

address, you have a trusted partner to work with–

Page 24: Ibm log differentiators for strategic network planning 2011 v6

© 2011 IBM Corporation24

IBM Continues to Invest in LogicNet Plus:Plays a Critical Role in Smarter Commerce Initiative

Major IBM Releases of LogicNet Plus XE– LogicNet Plus XE 7.0 Released in June 2009– LogicNet Plus XE 7.1 Released in June 2010– LogicNet Plus XE 7.2 will ship on Dec 9, 2011

The LogicNet Plus XE development philosophy remains the same– Continue to improve the speed and increase model size– Add additional modeling capabilities– Continue to invest and leverage new technology to make the too easier to use

• Ensure that people can build simple models without having to touch advanced modeling capabilities

LNP XE works on either 32 or 64 bit machines

LNP XE continues to leverage CPLEX engine

LNP XE allows parallel optimization runs and multiple threads

R&D continues to improve memory consumption for model footprint and reporting

LNP XE 5.0 to 6.0– Significant jump in the run times--- 3 hour models down to 45 minutes– Significant improvement in memory footprint– allowing you to solve models not solved before

LNP XE 7.0 and 7.1– Another increase in run time– 30 minute models in 5 minutes, 2 hours models in 1 hours, etc

Page 25: Ibm log differentiators for strategic network planning 2011 v6

© 2011 IBM Corporation25

We also provide services within our team. Our Services expertise is a key component of our overall supply chain solutions offering

Expertise– Leader in supply chain strategic planning with a focus on how to maximize leverage from client’s

assets (both capital and inventory)– Unparalleled experience across various industries – CPG, Chemical, Retail, Hi-Tech, Pharma,

Government, Automotive– Over 100 large projects in last 3 years – all around the world

Experienced Consultant base– 100% of our consultants have a Master’s degree or above– Strong industry / logistics background– In-depth knowledge of ILOG technology suite, with core focus on supply chain planning problems– Provide subject-matter expertise to other consulting firms on their engagements

Time to Value– Our consultants’ experience and knowledge enables us to deliver quick time-to-value– Enable client teams on software and help build modeling expertise

TechnologyTechnology ServicesServices

Supply Chain Planning & Optimization SolutionsSupply Chain Planning & Optimization Solutions

Page 26: Ibm log differentiators for strategic network planning 2011 v6

© 2011 IBM Corporation26

Value of IBM to Your Business

Ability to address business problems– Used by hundreds of companies in every industry– Provide solutions that can be validated by experts in different areas– Provides all-in-one strategic and tactical inventory solution for implementation

Ability to achieve return on investment– Well documented high ROI’s for numerous customers

User acceptance– Highly satisfied customer base– Monthly user group events regularly attended by 75-100 users

Low risk– Quality

• IBM employs the highest standards of support for all software products.• IBM has high standards for preventing un-authorized code (reducing your risks)

– Support• 24 hour local support throughout the world. Experienced professionals to answer your questions

with defined service agreements and performance tracking.– Company stability

• Publicly traded company celebrating 100th anniversary

Vendor long-term relationship– IBM can support your business in numerous ways in addition to network design. Within our group we

offer additional supply chain planning applications as well as optimization solutions tailored specifically to your business. In addition, IBM is a world leader in commerce solutions, analytics solutions, and solutions for IT. Finally, IBM’s deep, diverse, and experienced professional services resources can support your team to drive business results.