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Integrated Supply Chain © 2006 IBM Corporation Where is the C-Level in Supply Chain?
Integrated Supply Chain © 2006 IBM Corporation 1 Objectives: 1) Introduce IBM 2006 Global CEO Study 2) Demonstrate IBM’s Supply Chain Transformation 3) Show examples of current Supply Chain Initiatives
Integrated Supply Chain © 2006 IBM Corporation 2 Global CEO Study 2004 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 focus on strengthening financial performance 2006
Integrated Supply Chain © 2006 IBM Corporation 3 Areas of Innovation PRODUCTS, SERVICES, AND MARKETS BUSINESS MODELSOPERATIONS 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
Integrated Supply Chain © 2006 IBM Corporation 4 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)
Integrated Supply Chain © 2006 IBM Corporation Case Study: IBM’s Integrated Supply Chain
Integrated Supply Chain © 2006 IBM Corporation 6 Cost CuttingReinvention Static supply chains with business unit and geographic “silos” Development of better functional skills and increased inter-business unit communication True external electronic collaboration with suppliers and partners The ISC Transformation began over 10 Years ago Revenue: $64B Profit: $3B Profit Driver Cost Center Drives value primarily by saving money and increasing cash conversion Still primarily product focused SUPPLY CHAIN JOURNEY SUPPLY CHAIN EVOLUTION RESULTS Fragmented and not mission critical Functional silos Heavy asset based logistics No common processes Large number of legacy applications
Integrated Supply Chain © 2006 IBM Corporation 7 Increased Inter-Business Unit Communication BREADTH DEPTH CUSTOMER FULFILLMENT GLOBAL LOGISTICS MANUFACTURINGPROCUREMENT TECHNOLOGY COMMON DATA & GOVERNANCE OPERATIONS TEAM STRATEGY TEAM TALENT TEAM Previously ‘Functional Silos’ were brought together under the ‘Integrated Supply Chain’
Integrated Supply Chain © 2006 IBM Corporation 8 93% 95% 96% 93% 97% 97% 97% 98% 98% 99% 99% Many….to some….to few… M Dollars Cost-To-Revenue Global Logistics Savings - $1.2B Over 10 Years IT ApplicationsInternal Customer Value IBM Global Logistics continues to deliver significant business value... 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 GL HW Cost ($M)IBM HW Revenue ($B)
Integrated Supply Chain © 2006 IBM Corporation 9 INVENTORY AT THE LOWEST LEVELS IN YEARS 30 Financial Results Operational Results Client Facing Results $6B COST AND EXPENSE SAVINGS 25% IMPROVEMENT IN SALES FORCE PRODUCTIVITY 32% IBM: $91B REVENUE NET INCOME $10.6 #2 IN CUSTOMER SATISFACTION Another $580M CASH GENERATED AVERAGE PAYMENT TERMS IMPROVED BY 2 DAYS = $166M CYCLE TIME PERFORMANCE +6% IMPROVEMENT IN OVERALL CLIENT SATISFACTION +1% TURNING ORDERS FASTER And achieved impressive 2005 results * * * * Accomplished in 2004, but held steady for 2005
Integrated Supply Chain © 2006 IBM Corporation 10 What’s next One integrated and fully- enabled organization that has re-invented IBM operations Revenue: $91B Net Income: $10.6B SUPPLY CHAIN JOURNEY SUPPLY CHAIN EVOLUTION RESULTS Business Optimization Profit Driver Goes beyond products to services Extends success past financial metrics Impacts customer satisfaction Impacts 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
Integrated Supply Chain © 2006 IBM Corporation How the ISC is continuing to drive Innovation
Integrated Supply Chain © 2006 IBM Corporation 12 Paperless Logistics Processing Export Invoice International Shipping Documents Import Brokerage Documents Payables Documents Bank Documents 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 users Paperless Document Repository
Integrated Supply Chain © 2006 IBM Corporation 13 Cargo Security TREC Ocean Carrier Distribution Centre Manufacturer Distributor Port Authority “A” Customs Port Authority “B” Customs Ocean Carrier Freight Forwarder = 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
Integrated Supply Chain © 2006 IBM Corporation 14 Supply Chain BTO – In Response to Customer Needs Continuous Strategic Change while Outsourcing Process Enhancement Process Improvement while Outsourcing Cost Reduction Cost Take Out Extended Enterprise Process Change Return 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
Integrated Supply Chain © 2006 IBM Corporation 15 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 the Supply Chain to drive Business Value
Integrated Supply Chain © 2006 IBM Corporation 16 Contact Information: Dipan Karumsi Business Consulting Services Logistics Practice Ph:
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