Smarter Supply Chain The Role of Advanced Analytics in Optimizing Supply Chain and Managing Complexity Donnie Haye, Vice President Smarter Supply Chain Analytics IBM Integrated Supply Chain
Agenda Point of View: Supply chain complexity, big data, advanced analytics Key analytics solutions at IBM Practitioner s note: lessons learned from initial idea through global implementation Vision for the future
The multi-enterprise SC challenge A highly complex operational environment makes effective & timely supply chain planning & execution very difficult Typical multi-enterprise supply chain complexity at each tier & compounded across tiers Clients, channel partners Customers Suppliers Owners, stakeholders Tier N.. Tier 1 Tier 0 Business Partners End users 3
Supply chain visibility as challenge and enabler Top challenges from recent research reveal that supply chain complexity is driving the need for visibility, analytics, collaboration Visibility is both a challenge and a key enabler 4 Source: IBM Institute for Business Value (IBV)
Value of smarter supply chains To address these challenges, Visionaries & Planners are investing to build strategic, smarter supply chain capabilities with financial rewards VISIONARIES 3 year average ROIC PLANNERS OPERATORS 3 year average revenue growth 5 Source: IBM Institute for Business Value New Rules For A New Decade Study 2010. Analysis based upon IBM study and on publicly available data from Thomson Financial.
Smarter supply chain analytics Big Data: complexity & proliferation of supply chain data both demand and facilitate a smarter approach Volume Velocity ---- ---- Variety INCREASING Purchase Orders Intelligent buildings Late shipments Tracking Outbound Shipments Hub Inventory Invoices Statistical Process Control Tracking Inbound shipments Customer Records Warranty Claims Overnight Batch Processing Real Time Data Order Drops End User sell through Warranty Returns Channel Pulls Inventory status 6
Advanced analytics Business intelligence & advanced analytics generates real value from big data Align / Anticipate / Act Prescriptive 7 Descriptive What happened? Get in touch with reality, a single source of the truth - Standard reporting - Ad hoc reporting - Query/drill-down - Dashboarding, visualization How many, how often, where? Predictive What will happen? Understand the most likely future scenario, and its business implications - Simulation - Advanced forecasting models - Predictive modeling How are market or business trends likely to change? Can we develop a better forecast? What should we do about it? Collaborate for maximum business value, informed by advanced analytics - Multi-factor optimization - Trade-off analysis - Automated, collaborative business process execution - Role-based alerting Given best information and predictive models, what actions should we employ to manage multiple constraints, variability, risk?
Focus on supply chain analytics Supply Chain Management analytics is at the core of IBM Integrated Supply Chain (ISC) strategy ISC Strategic Priorities 8
Focus on supply chain analytics Supply Chain Management analytics is at the core of IBM Integrated Supply Chain (ISC) strategy ISC Strategic Priorities Driving the IBM transformation cost to value 9 Multinational Era Globally Integrated Enterprise Smarter Supply Chain
Smarter supply chain analytics We employ analytics on an evolving platform of Big Data and multi-enterprise supply chain visibility IBM Supply Chain Examples Business Analytics Descriptive Predictive Prescriptive Volume Velocity Variety Big Data Platform IBM Buy Analysis Tool Critical Parts Management Tool Quality Early Warning System Supplier Risk Management More than 25 Supply Chain Analytics and Visibility solutions are deployed or under development in ISC 10
Solution profile: ibat IBM Buy Analysis Tool (ibat) is a visibility and analytical platform to enable better channel management The Solution Channel collaboration solution with advanced analytical modeling of daily demand signals to supply pipeline. Optimized replenishment decisions under price protection Key Benefits Price protection expense reduce by 80% Inventory reduced by 30% Returns reduced by over 50% ibat enabled System X recognized by the industry with multiple awards; Tech Data 2010 Inventory Optimization award, CRN Channel Champion award 11
Solution profile: CPMT Critical Parts Management Tool provides upstream multi-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 12 Comprehensive network visibility, 60K SKUs, 100+ suppliers Resource savings of 10%+ of costs associated with managing shortages Higher levels of Customer Satisfaction Allowed significant agility in handling supply constraints in Asia during 2011 Critical Parts Issues Industry awards in 2012 Excellence in Supply Mgt award from Institute of Supply Mgt / MSU ML100 Manufacturing Leadership award
Solution profile: QEWS The Quality Early Warning System (QEWS) identifies trends before traditional Statistical Process Control (SPC) 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 Results from QEWS POC at external client Key Benefits Cost savings $50M (2015 Financial Roadmap period), approximately $10M per year in hard warranty savings, with additional soft savings and benefits in other areas Proactive quality mgt identify and resolve issues before they become problems, weeks or even months earlier than traditional SPC Improved quality processes improves quality process efficiency and effectiveness 13
Solution profile: Risk Management Supplier total risk tool & process provides systematic approach to understand & mitigate supply chain supplier risk The Solution Supplier Total Risk Tool & Process Provides comprehensive risk assessment and ongoing mitigation, protecting against loss of revenue and profits by minimizing the likelihood and severity of supply chain disruption Risk Assessment Catalogue full supplier risk exposure across multiple risk categories Perform probability-based risk assessment Implement automated tool Risk Mitigation Planning Develop risk mitigation strategies with process for executive approval Establish control limits for each risk element Drive new business processes, escalation pathways On-going Risk Monitoring and Control Monitor risks against specified threshold limits Update proactive risk mitigation strategies as risk exposure evolves Work within sourcing community to handle crisis situations Key Benefits Uncovers multiple risks, assesses likelihood and impact of each Addresses risks with formal mitigation plans Provides consistent risk management approach across brands/commodities Trends and patterns are revealed by systematic risk analysis Industry Recognition CSCMP finalist for Supply Chain Innovation award Highest accolades from Business Insurance Risk Management 2012 Summit 14
Making change real, building business value Critical success factors for successfully building value through advanced analytics Business Alignment Strategy Readiness To Change Operation Teams must be willing and able to change.. As critical as the math is, process leadership and execution expertise is even more important.. Iterative Approach Incentive Alignment It is OK to start small and build towards major impact.. Iterative approach allows you to improve your capabilities along the way and build progressively stronger stakeholder support.. Design Compelling business benefits for each supply chain participant (win/win/win).. Reflect benefits in terms and conditions.. AWARE Alert, observant, informed and perceptive Smarter Analytics ALIGNED Collaboration across business objectives 15 FOCUSED Clear understanding of what s important PREDICTIVE Able to anticipate, look forward and set expectations AGILE Highly responsive to changing priorities
Evolving supply chain Across the industry, the application of analytics is transforming supply chain from cost center to value center Multinational Era Globally Integrated Enterprise Smarter Supply Chain Homegrown IT ERP Analytics Point solutions to cost & serviceability issues Enterprise-wide effectiveness & efficiency End-to-end, multi-enterprise visibility & optimization Source of competitive advantage Client satisfaction and bottom line performance Advanced Analytics key to thriving in an ever more complex world 16
Point of Contact Donnie Haye, Vice President Smarter Supply Chain Analytics IBM Integrated Supply Chain dhaye@us.ibm.com 17