2012 IBM Technology Symposium Business Update · Building the smarter supply chain. The Top Five Supply Chain Challenges. Five trends define the Chief Supply Chain Officer (CSCO)

© 2012 IBM Corporation

2012 IBM Technology Symposium Business Update

Bob Murphy V.P. – IBM Integrated Supply Chain, Global Supply Management

13 November 2012 Yorktown Heights , NY

© 2012 IBM Corporation2


Innovation….

3

“If you always do what you always did, you will always get what you always got.”

(A. Einstein).


Our Values

IBMers Value:


IBM’s Growth Initiatives

Opportunity:The emerging market GDP growth rate- expected to be 5 percent through2015 - is more than double that ofmajor markets.

Economic expansion in emerging markets (middle class growth & economies joining global marketplace)

IBM expanding branch locations in BRiC countries

Other growth markets (Africa) leveraging our clients

Opportunity:Cloud is a new, highly efficient model for consuming and delivering IT-basedservices. It is made possible by virtualizingresources, automating processes, and standardizing tasks so they can be offered as easy-to-use services.

Supporting diverse clients (banking, healthcare, & government) to build their own clouds or securely tap into IBM cloud-based business services

Clouds enable our clients to better service their clients and business partners

Opportunity:Global data volumes are predicted to increase by 29 times over the next 10 years to 35 zettabytes.* (A zettabyte is a 1 followed by 21 zeros)

Enable Enterprises to manage and mine the deluge of potentially valuable information

Opportunity:The infusion of digital intelligence intoindustries, infrastructures, processes and cities can make them more productive, efficient and responsive.

Smarter Cities initiative (integrating real-time information and processes across many city departments)

Instrumented, Interconnected, Intelligent


IBM 100th Anniversary as a Corporation of Innovation and Invention

Reinventing the modern corporation

Pioneering the science of innovation

1911 Progressive Hiring

1953 Equal Opportunity Policy

2006

2011 Centennial Day of Service

Making the world work better

1937 Social Security

IBM 077 Collator

1962 SABRE Airline

Reservation System

1969 Apollo on the Moon

In our second century, as in our first, IBM’s business model is based on continuous Innovation

2010 Smarter Cities - Stockholm

1956 Hard Disk Drives

1964 DRAM

1973 / 1986 / 1987 Nobel Prizes

2011 Watson Computing

System & Jeopardy !


2011 US Patents Issued – 19th Year of Leadership

127282676

9181,2441,308

2,312

6,180

>4X >9X76% Software and Services

7Source: IFI Claims Patent Services


Information & Communication Technologies R&D Expenditures

8 Source: Battelle/R&D Magazine and Company Information; (e) = estimated


First Of A Kind• First-of-a-Kind (FOAK)

• Building new prototype solutions• “Cutting edge”

innovation

Research expertise to solve today’s critical business challenges

Application of advanced analytics,

mathematics, science and fresh thinking to

find innovative solutions

Research Services

Application

Inno

vatio

n

Vision and Invention

Bleeding Edge

Leading- edge

Innovation

Standard Solutions

Business As Usual

Tomorrow’s Technology

Today

On The Horizon

2-10 Years to Practical Application

Research• Science & basic

research• Supports IBM brands

or OEMs• Global Technology

Outlook (GTO)• Licensing & Joint

Development

(2 to 10 years)

(on the horizon)

(Tomorrow’s Technology today)

(Business as usual)

Research

Brands Standard Solutions

System Integration

Driving Innovation Into The Marketplace

9


Best Use of Procurement Technology

2011Gene Richter, Inside

Supply Management (ISM)

Sustainable Excellence in Supply Chain Management

IBM (Sustainability award)

IBM Poughkeepsie: Assembly Plant

of the Year

By focusing on continuous improvement, the ISC has become an IBM Showcase recognized by the industry

Recognized as a Supply Chain leader every year

No. 1 in The Diversity Inc Top 10 Companies for Global Diversity

IBM ranked #1 on all categories of IDC’s BPO vendor perception study

“IBM leads by a huge margin” in vendor recognition for Procurement Outsourcing” – IDC, Feb. 2009

2009: Top BPO Provider

2011 Finalist

Industry recognition

2012 – European Community awards IBM for energy-efficient data

centres

No. 1 in The Diversity Inc Top 10 Companies for Global DiversityIBM, No.1

2011 Finalist

2 ML100 Awards Next Generation Leadership and Culture AwardManufacturing Entrepreneur Award

7 ML100 Awards Operational Excellence, Global Value Chain, Innovation, and Information Leadership

http://www.ism.ws/pubs/ISMMag/ismarticle.cfm?ItemNumber=21485


Integrated Supply Chain’s transformation evolution is positioned to deliver value and contribute to IBM’s smarter supply chain

2000 2005

Global Sourcing Councilsestablished

Purchasing Medal of Excellence

Launch of IBMProcurementServices

Procurement Transformation (Centralization / Consolidation)

e-Business electronic collaboration

Integrated Supply Chain established 2003

2009

Global Procurement Centers established

Logistics / SPO & EngineeringIntegration

Hardware Product & Services Labor Management Transformation

GEODIS Divestiture

Static with unit / geographic ‘silos’

Smarter

Integrated ^ Supply Chain

20101990 2015

Cost Containment

Visibility

Risk Management

Customer Intimacy

Globalization

Assessed, integrated and balanced our competencies

Develop ment of better functiona l skills and increased inter- business unit communi cations (ongoing)

Outsourcing of Manufacturing

Customer Fulfillment Geographic Centers established

Customer Fulfillment initial globalization

Customer Fulfillment Strategic Building Blocks

Global Demand / Supply Planning Centralized

E2E Brand Advocate Role Established

Geography Forecasting & Field Inventory Centralized to Serve Globally

11

Presenter

Presentation Notes

It didn’t happen overnight. We’ve been transforming both IBM and the supply chain for the past 10 years or more. A decade ago the supply chain was a cost center -- It was fragmented -- Pieces were spread throughout the company, in various business units and operating structures. Just as the Internet was transforming the way individuals, corporations and others work around the world, we began to make important changes to the piece parts. Our functional skills became more focused on higher value vs. administrative tasks. Example: In 1995, 70% of procurement resources were spent on administrative and transaction processing work. Today, 85% of procurement resources are doing high value tasks, such as: -- Procurement engineering -- Strategic cost management -- International trade and risk analysis -- Advanced Intellectual Property law -- Competitiveness and collaboration -- Strategic Supplier relationship management We began to extend electronic links for collaboration between IBM, suppliers, partners and clients. Example: Thanks to on-going automation over the last 10 years, 99 percent of Purchase Orders are now processed electronically -- We cut the time to process a PO from a month to less than a day -- We reduced contract length from approximately 40 pages to an average of 7 pages. The result? Savings in the form of better prices, paperless processes, consolidated volumes to leverage contracts, headcount efficiencies, higher value rebates in price masking operations, speed, and accuracy. The IBM supply chain has become a profit driver – primarily by saving money. GLOBAL SUPPLY Following our initial success and recognition with the medal of excellence, we launched our commercial Procurement Services with the signing of a long-term procurement outsourcing contract with United Technologies Corporation. This pioneering contract (which continues today) is the longest running, large successful procurement relationship of its kind. IBM has continued to invest and grow our capabilities to perform business transformation outsourcing through our acquisition of PriceWaterhouse Coopers Consulting and procurement specialist KeyMRO. In 2009 IDC stated that “IBM clearly dominates all four value categories of transformation, integration, innovation, and cost optimization across all eight market segments ranked.” In 2010 IBM/ISC won Four 2010 Progressive Manufacturing 100 Awards from Managing Automation Media. The Progressive Manufacturing Awards program recognizes best-in-class manufacturers from around the world who are using advanced technologies to achieve business transformation. (Only manufacturers are eligible to win the PM100 award.) A world-class panel of manufacturing industry experts evaluated the nominations to determine the 100 winners. The IBM/ISC won four PM100 awards based on the following projects: 1. Non Traditional Demand Supply Integration-Economic Optimization MRP 2. IBM Procurement Engineering/Supplier Tech Product Collaboration 3. Globally Integrated Integrate Design for Six Sigma (DFSS) and Lean Six Sigma 4. Best People -- Talent in the IBM Globally Integrated Supply Chain We offer a full scope of procurement capabilities to clients and our flexible regarding the scope and types of solutions offered. CUSTOMER FULFILLMENT 2003 – 2005 Pan Geo Country skill leverage Geographic Centers established Geographic process tools, applications Local language support in Geo Centers 2005 – 2007 Initial Globalization Skill optimization between competency center and in-country E2E Fulfillment processes begin shifting to Centers Geographic process tools, applications Local language support in Geo Centers 2007 – 2008 Global Integrated Enterprise Continue global skill optimization E2E fulfilment processes transition to Competency Centers Robust in-country relationship and complex business solution management Selected global standard ops. moved to Single Source Global Center (Proof of Concept ) Moving toward consolidated process, tools, applications and capabilities Local language support remains in Geo Centers 2009 – 2015 O2C Transformation / Community Model Recognized as the premier global client advocate Drives integrated business growth Transformed thru the next wave of skills/technology/process Global integration of modular processes / resources - vs – a Country / COE based model Global talent connected & employee identity is Global Community


What is a smarter supply chain?Building the smarter supply chain

The Top Five Supply Chain Challenges

Five trends define the Chief Supply Chain

Officer (CSCO) agenda

According to our extensive study of 400 Supply Chain Executives, we’ve found imperatives among visibility,

customer demands, cost containment, risk, and globalization.

The smarter supply chain has three new characteristics. Firms across the globe

are beginning to see the benefits of building a new vision of supply chain

excellence.

The Smarter Supply Chain

Instrumented

Interconnected

Intelligent

Instrumented, Interconnected, & Intelligent

Building the Supply Chain of the Future

Building the supply chain of the future will require the emergence of a new kind of CSCO and a comprehensive

set of new capabilities.

A new role for the CSCO and a map to the future

Visibility is vital

Risk must be managed systemically

Customer input should permeate the supply chain

Flexibility will counteract cost volatility

Global supply chains require integration & optimization

Visibility is vital

Risk must be managed systemically

Customer input should permeate the supply chain

Flexibility will counteract cost volatility

Global supply chains require integration & optimization


13

ISC evolution to the smarter supply chainBuilding the smarter supply chain

Smarter Supply Chain

FutureExternal Collaboration &

Integration

Instrumented

Interconnected

IntelligentHorizontal Process Integration

Functional Excellence

Divisional Excellence

CUSTOMER INTIMACY

knowourselves

GLOBALIZATION

capabilities &transform economies

VISIBILITYWe will see without being there

RISK MANAGEMENT

clientvalue

TALENTWewill lead with unmatched skills &experiences

CLIENT INTIMACY

GLOBALIZATION

VISIBILITY

RISK MANAGEMENT

EXPENSE & COST OPTIMIZATION

TALENTWewill lead with unmatched skills &experiences

TALENT –We will lead with unmatched skills and

experiences


Supplier Partnership

14

• Superior Quality• Top quality management system • Root Cause Failure Analysis

• Continuous efficiency and cost optimization

• Demand responsiveness based on a flexible and resilient supply chain.• Further collaboration with 2nd tier 3rd tier suppliers

• Social & Environmental Responsibility

• Higher assembly levels

• Differentiation thru innovation


Questions & Answers


BACK UPBusiness Update


Supply chain visibility was identified by supply chain executives as the top challenge on their global agenda

RISK MANAGEMENT

GLOBALIZATIONINCREASING CUSTOMER DEMANDS

60%56%

43%

Customers have increased demand

for more: right product, right place,

right time, right price, sooner.

Process, data, & technology are identified as the

roadblocks to good risk management,

yet they are the key enablers.

Lead times, delivery, and quality are top challenges,

but overall globalization has been a positive

boon for the leaders.

SUPPLY CHAIN

VISIBILITY

70%

Supply chain visibility is

inhibited by a lack of timely data AND too much data to

digest

COST CONTAINMENT

55%

Fighting integral costs as such as might be futile,

but being flexible can identify cost

savings elsewhere

Source: IBM Institute for Business Value1717


Integrated Supply Chain at IBM

18

…to Predict & Act

Sense

& Respond

From Sense & Respond …

ActCut Costs

Reduce RiskIncrease Profit

Predict

Optimized Business

Competitive Advantage

Predictive AnalyticsAnalyzes patterns in data to predict potential future outcomes

Agility: pervasive visibility, networked synergy

Analytics: dynamic optimization, predictive

synchronization

18


Supply Chain Risk Management

Build Smarter Processes– Integrated process controls in logistics and operations– Compliance programs with suppliers (Product Environmental Compliance)– Supplier Financial Risk Assessment

Become an optimized flexible Smarter Value Chain– Integrated risk strategies & mitigation policies in supply chain planning– Single / Dual sourcing plans– Pandemic Contingency Planning

Enable pervasive predictive analytics– IT enablement to monitor and act on disruptive events (Cognos Technology)– Impact Likelihood Model– IBM ILog based instantaneous alert functionality and process

Financial Risk

Regulatory Risk

Environmental Risk

Strategic Risk

Operational Risk

Documents

2012 IBM Technology Symposium Business Update · Building the smarter supply chain. The Top Five Supply Chain Challenges. Five trends define the Chief Supply Chain Officer (CSCO)