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A recent IBM survey¹ of nearly 400 supply chain executives listed visibility—the process of collecting, integrating, analyzing and responding to information about the movement of goods throughout a business ecosystem—among the top five challenges they are facing today. At the same time, mounting concerns over global warming have led to a new focus on smarter technologies and sparked an increased awareness of the environmental impacts of supply chain choices. As a result of these issues, organizations are under mounting pressure to improve visibility and sustainability throughout the supply chain.

Increasing supply chain visibility

The results of the recent IBM Global Chief Supply Chain Officer Study: The Smarter Supply Chain of the Future¹ underscore the importance of improved global supply chain visibility. The issue is not that there’s a dearth of information available—in fact there’s more information than ever before. That’s created a situation of information overload, and in response to overwhelming volume, proportionally less is being effectively captured, managed, analyzed and made available to people who need it. Supply chain executives interviewed for the study cited organizational silos that inhibit collaboration, ineffective tools for sharing and lack of priority and reward system as some of the underlying causes.

To help improve visibility both within the organization and with external vendors and suppliers, IBM has developed the IBM Virtual Command Center (VCC)—an SOA-based solution that visualizes and manages real-time supply chain events to provide a steady stream of useable information as events are unfolding. VCC builds on many of the supply chain tools already mentioned, combining them to provide supply chain executives with a solution that promotes collaboration and information-sharing both within the enterprise and with suppliers and vendors around the globe. In addition, VCC’s real-time analytical capabilities give executives the information they need for on-the-spot strategic decision-making.

VCC is composed of three major hubs that synchronize and analyze supply, demand and logistics information to facilitate effective decision making in a sense and respond environment. The Supply Hub consolidates Inventory Optimization, Supplier Collaboration, KPI Visibility And Dynamic Supply Demand Balancing features, while the Demand Hub incorporates Demand Driven Replenishment, Demand Forecasting, Inventory Optimization, Proactive Buy-Sales Decision and Event Management. The Logistics Hub offers Track and Trace tools, Route Optimization and KPI Visibility. The combination of these tools provides an end-to-end solution for organizations seeking to improve visibility while streamlining and optimizing supply chain processes.

IBM is currently using the VCC Demand Hub—dubbed IBM Buy Analysis Tool (iBAT)—in its own supply chains to manage the collaboration with channel partners and support smart alignment of demand and inventory supply decisions and execution. iBAT provides a service oriented architecture approach to improve the visibility and collaborative inventory management processes between IBM and its channel partners. The collaboration system allows business partners to receive earlier, more accurate forecasts of sales trends and product mix changes. The tool also provides a relational data warehouse and extraction, transformation and loading modules that extract up-to-date demand and supply information from channel partner transactional systems.

iBAT has helped IBM business partners determine the amount of IBM products they must purchase to cover future demand, subject to demand uncertainty and variable supply lead times. And through more accurate supply and demand modeling, IBM has been able to reduce supply chain expenses related to aged inventory incentives and price protection expenses. Since the launch of iBAT in mid-2008, aged inventories have dropped by over 50 percent, saving IBM the cost of payments made to business partners to run promotions on inventory held six weeks or longer. Additional (soft) benefits include improved cash flow and budgeting for IBM due to reduced price protection expenses, a smoother manufacturing flow and reduced manual maintenance triggered by exception-based handling.

Going “green” through supply chain sustainability

The issue of supply chain sustainability is gaining increased attention as businesses are pressured to adopt environmentally sound technologies and processes. In response, many forward-looking companies are beginning to realize that going “green” is good business, not just as a PR promo but from a dollars-and-cents perspective. With some countries in the process of putting a “cap and trade” system in place to control carbon emissions, the environmental impact of manufacturing, shipping and distributing goods is becoming an important consideration in managing supply chains.

The IBM Supply Chain Sustainability Modeling solution reflects IBM’s “smarter planet” focus by addressing these concerns for clients seeking to go “green.” One significant component is the Carbon Tradeoff Modeler, which helps companies include carbon output – footprinting – as a key variable when optimizing the supply chain. In a recent pilot, a collaborative effort between IBM GBS, Research, Sales & Distribution and Software Technology Group used advanced modeling tools and integration expertise to address emerging environmental management opportunities for a client.

IBM delivered two significant pieces of work in this project. First, IBM Research customized its Carbon Analyzer Tool to provide a tool that the client could use to identify best actions for carbon reduction in its logistics activities. Second, GBS delivered a quantitative assessment of opportunities in the client’s end-to-end supply chain. In addition, IBM worked with the client to broaden its perspective and understand how carbon modeling can be used to transform the way it thinks about doing business. Using the IBM Supply Chain Sustainability Modeling solution helped the client make strategic decisions with regard to the minimization and management of emissions, water, waste and energy by quantifying the tradeoffs between sustainability metrics and other supply chain performance metrics.

Moving forward, it is anticipated that organizations that adopt greener operational procedures will have a better chance at gaining new market share from the environmentally sensitive segment of the consumer market, while at the same time complying with stricter environmental regulations. At the same time, businesses may be able to generate additional revenue through the sale of carbon credits on carbon exchanges.

More information on IBM resources for smarter supply chains

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References

     ¹IBM Global Chief Supply Chain Officer Study: The Smarter Supply Chain of the Future, IBM Global Services, February 2009.