Transparency in Supply Chains

Transparency in Supply Chains Rob Allan January 13, 2015 2014 IBM Corporation

What is transparency Why is transparency so difficult How to achieve transparency Benefits of transparency IBM s road to transparency 2

What is transparency Concept of supply chain transparency began in 1904 Upton Sinclair spent two months uncovering details about the meatpacking industry, which he portrayed in the classic book The Jungle Food and Drug Act and Meat Inspection Act set stage for early transparency More than a century later; multi national, complex supply chains face massive risks associated with transparency: supplier labor practices, corruption, environmental, quality, etc California Transparency in Supply Chains Act of 2010 Definition of transparency: driving visibility of information across the extended supply chain for the purposes of improved efficiency and compliance 3

Importance of Supply Chain Visibility The collective insights from 400 Supply Chain Executives identified five major challenges and Visibility was No.1 IBM CSCO Survey Based on responses of to a very great extent and to a significant extent 4

Importance of Supply Chain Visibility Visibility is the keystone of Smarter Supply Chain, driving analytics & collaboration, and enabling resolution of major challenges facing today s supply chains 70%* 55% 60% 56% 43% SUPPLY CHAIN VISIBILITY Supply chain visibility is inhibited by a lack of capabilities and an unwillingness to collaborate. COST CONTAINMENT Fighting integral costs as such might be futile, but being flexible can create cost savings elsewhere. RISK MANAGEMENT Process, data and technology are identified as the roadblocks to good risk management, yet they are the key enablers. INCREASING CUSTOMER DEMANDS Customers are continuing to demand more: right product, right place, right time, right price, sooner. GLOBALIZATION Lead times, delivery and quality are top challenges however, globalization has been a benefit for the leaders. Orchestration (instrumented) Execute seamlessly across internal supply chain processes Share information to optimize joint responses to changing conditions Collaboration & Analytics (intelligent) Analyze and predict the trends and risks that impact your supply chain Determine the optimal response to changing conditions Visibility (interconnected) Expose supply chain information from multiple disparate systems Identify and respond to the events that impact your operations or your trading partners 5 * Percentage of Supply Chain Leaders who report this challenge impacts their supply chains to a significant or very significant extent. Source: IBM CSCO study

Companies need to manage constantly changing conditions & visibility across fragmented and multi-partner enterprises will help Lack of visibility inhibits effective supply / demand synchronization Lack of visibility into supplier inventory leads to stock outs, late/expedited shipments, quality issues, etc. Lack of timely information on forecast, supply, or customer orders results in additional costs such as premium routing or redistribution Source: Line56 2003 Lack of visibility into changing supplier commits can lead to inaccurate customer commitments or financial projections 6 Sales & Operations Planning Process Lack of visibility and timely information lengthens the cash-tocash cycle, reducing profitability Inability to receive timely, accurate demand signals leads to stock outs, excess/obsolete inventory, higher cost, lost revenue, and poor customer satisfaction.

Features of a Transparent Supply Chain Source: IBM Institute of Business Value 7

Why is Transparency so difficult Cultural Hurdles Organizational silos are not comfortable sharing information Providing real time visibility across supply chain will affect a corporate management system Data Rare to find a business with enterprise applications that include data structures to support transparency Assessing >50 companies to examine potential for implementation, significant data effort necessary to enable a transparency initiative Less control over external parties Suppliers resellers Business Case Subtle benefits and longer lead times counter to attractive business cases 9

Transparency among all stakeholders will require change [shift] in cultural paradigm and renewed team work Together we will have to develop the willingness to share data that will enable the use of information as a collaboration tool and not a power tool We will have to undergo a culture shift to stop spending time to manipulate data before consumption of others 10 We will have to unite and work as ONE team as TSC will necessitate working across traditional process boundaries If you believe in TSC, you will have to believe in this culture [shift] We will need support from our senior leadership team to cascade this message through your entire teams to increase the speed of TSC implementation

How to achieve transparency Lay a foundation for success Metric alignment Data integrity Understand the predictive and responsive objectives of transparency Organizational Change Management Secure stakeholders and define objectives Alignment on project mission and requirements Select a platform and tool that aligns with objectives Enterprise wide solutions Point solutions Supply side and demand side Implementation Start small and build on lessons learned from initial deployments Focus on high profile business issues Leverage early wins to start breaking down cultural obstacles 12

How to achieve transparency 13

While challenging to quantify, improved transparency will yield benefits across the entire supply chain Real time order status visibility and exception alerts Credibility and reliable information Increased customer satisfaction levels as they have better access to order status Clients Transparent operations management Issues / risks identification Assess impact to supply chain Next best action initiation Alert / exception driven Single version of truth Global Level KPIs with drill downs Business Partners IBM Mobile App for alerts Improved visibility finished goods inventory Better service level commitments Order status notifications Suppliers Effective supplier collaboration Reduced inventory levels and operations cost Improved sharing information and collaboration Geo spatial & other visualizations 15 2014 IBM Corporation

Benefits of transparency 16

IBM 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 Mgt Supply Chain Visibility Multi-enterprise supply chain transformation Watson-enabled cognitive analytics Supply Chain Transparency Data Driven /Digitally Executed Cloud, Mobile, Social Evolving Supply Chain Management from cost center to value center 18 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 2014 IBM Corporation

TSC is the system of engagement initiative that will leverage data, apply automation & analytics and drive business insights Intelligent Operations & Resolution Center Get data from manufacturing, procurement, fulfillment, logistics, operational management systems Leverage Systems of Record, unstructured data, and automate manual processes. Visualize, analyze Key Performance Indicators, statistics to see the trends, report on different performance metrics Manage exceptions from the Supply Chain. Order churn, forecast inaccuracy, supplier shortage, as well as prioritize capacity and available supply Automate, notify automated alerts, facilitates intra- and inter-company business process and data collaboration Get the right information to the right people at the right time. Enable optimized decision making. 19

IBM s vision is to provide visibility across existing applications and data sources to create a predictive and smarter supply chain Global Level SC IOC* CPMT Detect Analyze Decide Act Brand & Site Level SC IOC* Global Control Tower IBM Buy Analysis Tool (ibat) Brand Control Tower QEWS Site Control Tower Supplier Window Client Window (OSOL) Business Partner Window Client Window * Intelligent SC Operation Center 20

New SC Transparency FROM To Manually query data from multiple sources and consolidate information Spend time on data gathering and data preparation Access information through single framework receiving Need-to-know (alerts) & Want-to-know (drill down) Focus on working issues & opportunities Measure results after the fact Pre-selected & filtered information Communicate with colleagues, suppliers & partners in predefined schedules Predict and act to optimize client experience One version of the truth Collaborate continuously and in real time across business units, with suppliers and partners 21

TSC will provide a feature-rich operations center to enable visibility & collaboration among all major stakeholders Key Benefits Visibility into real time order status will build credibility and drive higher client satisfaction Alert-driven model will provide clients key order information to manage their critical operations Consolidated information framework one version of the truth, actionable alerts, drill-down capability Initiates recovery either automatically (self-healing, resilient SC) or through next best action and decision feedback End to end data visualization, streamlined operations, workflow with automated alerts will help with higher response speeds and reduce overall risk Creation of a cross brand smarter value chain with predictive and prescriptive business intelligence Tracking & prediction of order progression will improve quality and client satisfaction levels ROI between 3X to 5X Intelligent Operations Center Ability to provide better service levels to IBM and clients Improved order forecast and sales visibility to effectively manage finished goods inventory Frequently updated and accurate demand forecast Effective collaboration and SC management Lower cost of operations Global Consolidated View Brand/BU Site 22 Partner/Clie nt

Transparent Supply Chain Demand Prediction Real Time Order Information Crit Sit Alerts Partner Collaboration Business Rules & Intelligence to direct people to critical Information Supply Chain Big Data in the Cloud Plug & Play Transparency Framework Demand Mgmt Demand Shaping Online Order Progression Control 23 Supply Chain Visibility for informed Clients, Partners, & Suppliers Alerts sent onto mobile devices T-shaped Supply Chain skills Deep Analytics skills New Roles in an E2E Supply Chain Control Tower Hub Health Analysis Analytics & Automation SC Risk Alerts Quality Alerts Clear to Build Prediction

ISC supply network: 2020 future vision collaborative, end-to-end, intelligence focused on client value and cash conversion Transparent Supply Chain Advanced Analytics Social & Mobile Predictive Risk Management 24

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