Smarter Supply Chain – IBM Case Study in Supply Chain Transformation and Innovative Use of Analytics

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Steve Bayline

Senior Manager, Smarter Supply Chain Analytics

Smarter Supply Chain – IBM Case Study in Supply Chai n Transformation and Innovative Use of Analytics

© 2014 IBM Corporation

June 12, 2014

IBM Supply Chain Transformation & Role of Analytic s


Select Supply Chain Analytics Solution Profiles

Lessons Learned and Skills

2 © 2014 IBM Corporation

The ISC is undergoing an analytics led, technology- enabled supply chain transformation

Globally Integrated Enterprise Smarter Supply Chain

New Era Supply Chain Reinvention


� Enterprise efficiencies

� Streamlined Global processes

� Information sharing

�Advanced Analytics, Optimization, Big Data Management

� Supply Chain Transparancy

�Multi-enterprise supply chain transformation

Evolving Supply Chain Management from cost center to value center…

� Watson Enabled analytics

� Network Orchestration

� Agile / Resilient

� Visibility / Transparency

� Data Driven /Digitally Executed

Business Impact

� 2013 Cash Collected : $99B� 2013 Managed Spend : $53B� >20K Employees in 70 countries� $7B in procurement saving annually

� 18K+ suppliers connected online� >96% of invoices are electronic� 32 Smarter Analytics projects�Over 3.9M visits to eTools

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Integrated Supply Chain Strategy in the New Era

New era workstreams

Analytics + ExpansionSystems of

Engagement


Expand Cloud Capabilities

Differentiated Sales Support

ISC Supply Chain Footprint

Manage Opportunity� Lead

generation� Pricing� Salesforce

mgt

Source/Buy (Direct, Indirect)

Collect� Rev

accounting� Invoicing� AR� Align with

GA

Make Fulfill

IBM supply chain is broader than the traditional SC OR model


Asset Management (Software & Hardware)

HardwareServices

Software Solutions

Plan

Asset Management (Software & Hardware)Traditional SCOR domain

Expanded ISC domain

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Cos

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xper

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BUSINES

�Centralized organization &

�Pervasive supply chain visibility

�Extended supply chain .. Opportunity to Order, Client engagement (including upstream, downstream)

Our current focus for innovation is driving towards critical Supply Chain 2020 capabilities


Opportunistic Orchestrated Interconnected Solutions

Cos

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xper

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SS

IMPACT

�Point Solutions

�Decentralized

�Traditional Supply Chain applications

organization & strategy

�Formal prioritization process

� Initiate service and labor projects

� Initiate training programs for users

20102005 2011 2012 2015

�Solutions integrated into & execution processes

�Point solutions integrated across multiple analytics solutions and processes

�Widespread use of labor analytics

�Cloud enablement

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PrescriptiveCollaborate for maximum business

CognitiveDeeply analytical computing systems that

learn & interact naturally with people

What should we do about it?

Watson Analytics

We rely on several types of supply chain analytics to leverage Big Data

How do we optimize a dynamic, Big Data environment?


DescriptiveGet in touch with reality, a single

source of the truth, visibility

PredictiveUnderstand the most likely future

scenario, and its business implications

Collaborate for maximum business value, informed by advanced analytics

What happened?

What will happen?

Volume (data at rest)

Velocity (data in motion)

Variety (many forms of data)

Veracity (data in doubt)

Big Data = All Data (structured, unstructured, internal, partner, publi c)

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Clients are investing in solutions for visibility a nd business intelligence

Predictive Asset Performance

Predictive Maintenance

Mobile Workforce Management

© 2014 IBM Corporation8

A mining company uses analytics to improve asset performance and predict $3B of extra profit

Car manufacturerdevelops a “Battery Traceability System” to predict and improve hybrid and EV battery performance

Water Utility, integrates mobile workforce management solution with existing processes to provide real time two-way communication and access to inventory management for stock counts

We have built & deployed over 30 value-adding suppl y chain analytics solutions

Manage Opportunity

Request for Quote

Design Solution

Develop Proposal

Develop Contract

Manage Contract

Manage Order

Plan Demand Supply

Manufacture Deliver

Invoice & Accounts

Receivable

Post Sales

Support

2 4 4 4 4 4

5 13

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30

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2425 3132

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Quote to CashSupply Chain Business Process Framework

12 1215 15 15 15 3 2020 20 2021 2622

Source to Pay

13 1515

15 28


SourceManage

Suppliers Commodities

Manage Supply

Execution

Procurement Engineering

Manufacture Engineering

Governance & Risk

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1215 15 15 15 3 2020 20 2021

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2622

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IBM Price Analysis Tool

Odds to Win

Shipped but uninstalled

Transaction Center Optimization

Global client dashboard

AR Optimization (NBA)

AR Optimization (DM7)

IBM Buy Analysis Tool

Forecast Accuracy Initiative

New Product Planning

Supply Capability Engine

Critical Parts Mgt Tool

Smarter Demand Shaping

Inventory Optimization

Transparent Supply Chain

Progile

Fuel Sur-charge Hedge

Global Logistics L&D

Client Value Assessment Tool

Supply Risk Management Tool

Advanced Airline Analytics

Catalog Data Optimization

Pipeline Yield Assessment

Quality Early Warning System

Asset Re-utilizatioin

Product Mgt Transform

Environmental reporting tool

Global Logistics Carbon Mngmt

Green Sigma

Proposal Text Analytics

PO Dispute Avoidance

CSP Propensity to Buy

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Implemented or extending

Development

Key

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Lessons Learned and Skills


We harness advanced analytics to generate sustained value for IBM and our clients

Transaction Center Optimization

Quality Early Warning System� Predictive quality mgt

� Cost savings, brand protection

� Predict required staffing

� Reduce costs and improve service

Early detection

Staff Planning

Reduce Inventory

IBM use cases

� Collaboration platform with analyticsIBM Buy Analysis Tool


� Radical transparency

� Synchronized analytics, mobileTransparent Supply Chain

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IBM Buy Analysis ToolIBM Price Analysis Tool

� Price optimization

� Advanced analytics, speed

Best pricing

Total visibility

analytics

� Right product, right place

IBM Buy Analysis Tool

Critical Parts Management Toolset � Multi-enterprise transparency

� Predictive analytics

Supply assurance

QEWS identifies trends before traditional Statistic al Process Control

Results from QEWS POC at

external client

The Solution

Software system using proprietary IBM technology to detect & prioritize quality problems earlier with fewer false alarms, coupled with push alert functionality for IBM & suppliers to proactively detect & manage quality issues at any stage of product lifecycle


external client

Key Benefits

�Cost savings – $50M (2015 IBM Financial Roadmap period), approximately $10M per year hard warranty savings, additional soft savings and benefits in other areas

�Proactive quality mgt – identify & resolve issues before they become problems, weeks or even months earlier than traditional SPC. Improved quality mgt processes overall

� Improved brand value – preserves customer satisfaction through maintenance of high quality standards, protects high-stakes product launches, protects brand image

Industry Recognition

� Recognized by the Publication ‘Information Week’ as leading innovator for 2012 in the Electronics Industry

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Commercialization

� QEWS in Predictive Quality & Maintenance (PMQ) SWG product, client engagement underway

The Solution

Uses advanced analytics to balance workload and workforce, taking into consideration different skill sets and job requirements. Enables improved workforce planning, data-driven decision making, and insight into performance of dynamic

Transaction Center Optimization uses advanced analyt ics to manage the sales support workforce from opportunity identifica tion thru cash collection

Transaction Centers Optimization

Regional ForecastRegional Forecast

Local ForecastsLocal Forecasts

Team A Team B


into performance of dynamic delivery environment.

Key Benefits

� Improves operational efficiency by aligning staff availability with predicted workload

� Optimizes workload by pooling capacity across teams and identifying cross skill opportunities

� Reduces overtime and variable labor contracting while improving delivery performance and services provided to sales force and business partners

� Integrated visibility

Capacity Analysis

Request Assignment and Prioritization

Executive Dashboard

TransactionForecasting

Key Features

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IBM Buy Analysis Tool (iBAT) is a visibility and an alytical platform to enable better channel management & optimization

Industrial OEM

Contract Manufacturer

Value Added Reseller (VAR)

Tier 2 Distribution

Tier 1 Distribu-tion

Manufacturing Tier(s) Distribution Tier(s) End Custom ers

The Solution

Channel collaboration solution with advanced analytical modeling of daily demand signals to supply pipeline. Optimized replenishment decisions under price

Scope of iBAT

� Predictive analytics � Collaboration platform & data modelDSR


iBAT enabled System X recognized by multiple awards

� Tech Data 2010 Inventory Optimization Partner of the year

� CRN Channel Champion award

� IBM Research “Outstanding Accomplishment” 2011

decisions under price protection constraints.

Key Benefits (accrue to both IBM & channel)

� Price protection expense reduce by 80%� Inventory reduced by 30%, aged inventory by 25%� Returns reduced by over 50%� Serviceability increase by 10%� Significant enhancement of visibility to channel

inventory, sales, other metrics � optimization opportunity

� Predictive analytics

� Incentive alignment� Channel collaboration & support processes

� Collaboration platform & data modelDSR

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IBM Price Analysis Tool provides insight into “Profi t Optimized” winning prices on transaction requests

The Solution

Financial evaluation, simulation and win probabilities of multiple price points using recent, specific customer and general industry transaction and order histories.

Segmentation of bid win histories along numerous transactional characteristics enhance accuracy of optimal price recommendation

Gross Profit at Price Win Probability at Price

Optimal Price for Maximum Gross

Profit

Client pipeline opportunities

� Client: Transportation/cargo


� Competitor solutions focus on off-the-shelf, retail products

� Patents granted on IBM solution

– Profit optimization of complex, variable and solutions

– Optimal win strategy for all elements of a multi-commodity solution

� Expanding roll-out at IBM across IBM products & geos

recommendation

Ability to price complex configurable products is first of its kind

Key Benefits

� Proven incremental revenue and profit

� Approved price responses delivered within three seconds – speed

� Smart service which can be interfaced to any system of engagement– Currently implemented with web and mobile

platforms

� Client: Industrial products , with complex configuration

� Profit max: Global footprint, local sources of supply, additional objective is capacity maximization

� Client: Transportation/cargo� Optimize profits given capacity of containers &

time element of fixed schedule. Further constraint is variable competition by transport lane

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Critical Parts Management Tool provides upstream mu lti-tier visibility with analytics & optimization

The Solution

Advanced analytical tool provides visibility, management & optimization of critical parts across all upstream tiers of supply chain

Key Benefits

�Comprehensive network visibility,


�Comprehensive network visibility, 75K+ SKUs, 100+ suppliers

�Resource savings of 50%+ of costs of managing shortages (expedites, personnel, etc)

�Higher levels of Customer Satisfaction, on order of 20%+

�Allowed significant agility in handling supply constraints in Asia during 2011 and 2013

Industry awards in 2012

� Institute Supply Mgt: Excellence in Supply Mgt

� ML100 Manufacturing Leadership award

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Days to close an issueCritical parts issues

2010 20132010 2013

The Solution

• The solution consolidates events across the end-to-end value chain, and applies advanced analytics for optimized cost, service levels and client experience

• provide visibility across existing applications and data sources to create a predictive and smarter supply chain

Our Transparent Supply Chain approach will provide 360 degree visibility to many KPIs, and an analytical platform to manage them

Key early functionality� Visualization, multi-

enterprise, cross functional

� Order tracking, progression

� Supply prediction

� Point analytics synchronization


Global Consolidated

View

Brand/BU

Site

Partner/Client

Key Benefits

� Consolidated information framework – one version of the truth, actionable alerts, drill-down capability

� Initiates recovery either automatically (self-healing, resilient SC) or through decision feedback loops

� Advanced analytics and optimization – synchronized and ubiquitous

� Predict and act to optimize client experience� Collaborate continuously in real-time across IBM and

with partners

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Lessons Learned, Skills, and the Future

Project deployment & readiness to change

Iterative approach

Lessons learned – how to establish momentum & succes s with analytics

� Start with a business pain point� Have a visualization and user interface strategy

� As critical as the math and analytics expertise are, transformation leadership and execution/ operations expertise is even more important (3-in-the-box management system)

� It is OK to start small and buildstart small and build towards major impact

�� Iterative approachIterative approach allows you to improve your capabilities along the way and build progressively stronger stakeholder support


Incentive alignment

� Design Compelling business benefitsCompelling business benefits for each supply chain participant (win/win/win)

� Reflect benefits in terms and conditionsterms and conditions

�� Encourage utilization with Encourage utilization with PBCsPBCs

� Incorporate cycles of learning into the analytics solution

19 Smarter Analytics

Three in the Box Management System and Skills

Analytics Team(Data Scientist)

Transformation Team(Change Agent)

Operations Leader(Domain Expert)

•Statistics & Math


•Statistics & Math

•Analytics Software & Modeling

•Scripting

•Analytics Architecture

•Data Technology• Data Base

• Big Data

•Visualization

•Project Management

•Change Management

•Application Development

•Application Architecture

•Business Process Development

• Implementation

•Business Knowledge

•Contextual data knowledge

•Execution management

•Business Metrics

•Training

Cloud

Attain Supply Chain Transparency

Leverage Big Data & Advanced Analytics

IBM supply chain network – 2020 vision

Analytics

Mega trends influence the development of key strategic SC capabilities


Extend Multi-enterprise Supply Chain Transformation End-to-End

MobileSocial

Mega trends in Computing Critical 2020 SC Capability21

Risk RoverQuality Quasar Procurement Prognosticator

The ISC expansion to Watson for development of Smar ter SC Analytics with cognitive capabilities

Understands: natural language and human communication

Adapts and learnsfrom user selections and responses

1 2Ask Discover

Investigate ways Watson to can help solve supply chain problems using analysis of unstructured data


• Diagnosing client reported HW, SW and services problems.

• Monitoring client quality and issues and proactively recommend actions based on quality patterns

• Propose total risk management based on multiple factors

Prognosticator

• Recommend sources for product/service/ solution at best cost, quality, delivery & risk based on requisition or RFx/proposals needs

Generates and evaluatesevidence-based hypothesis3Decide

…built on a massively parallel

architecturePossible ISC Uses & IBM Showcase

opportunities

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Questions & answers… and thank you

© 2014 IBM Corporation23