Imagining Supply Chain Processes Outside-in. Building Value Networks at IBM to Improve Channel...

1. Donnie Haye IBM Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.1

2. Agenda IBM Analytics-led Transformation, Lesson Learned IBM Buy Analysis Tool (iBAT) Overview Collaborating for the Future Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.2

3. ISC transformation: analytics-led, technology-enabled 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 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 Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.3

4. We rely on different types of analytics to leverage Big Data How do we optimize a dynamic, Big Data environment? Deeply analytical computing systems that learn & interact naturally with people What should we do about it? Prescriptive Cognitive Collaborate for maximum business value, informed by advanced analytics What will happen? Understand the most likely future scenario, What happened? Descriptive Predictive and its business implications Get in touch with reality, a single source of the truth, visibility Watson Analytics Velocity (data in motion) Variety (many forms of data) Volume (data at rest) Veracity (data in doubt) Big Data = All Data (structured, unstructured, internal, partner, public) Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.4

5. We have over 30 analytics solutions working across our extended enterprise IBM supply chain Enterprise Process Framework with Analytics Solutions Portfolio of analytics driving significant top- and bottom-line value Focus on iBAT Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.5

6. Lessons learned establishing momentum, success with analytics Project deployment & readiness to change Iterative approach Incentive alignment 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 modestly and build towards major impact Iterative approach allows you to improve your capabilities along the way and build progressively stronger stakeholder support Incorporate cycles of learning into the analytics solution Design Compelling business benefits for each supply chain participant (win/win/win) Reflect benefits in terms and conditions Encourage utilization with incentive alignment Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.6

8. IBM struggled to manage its channel demand & inventory planning to control channel stockouts & overages Case Background: IBM Systems and Technology Group Manufacturing Channels End Customers Industrial OEM Contract Manufacturer Overage Shortage Challenges Tier 1 Distribution DeXmand SalXes out SalXes out Lack of channel demand visibility Non optimized channel inventory Tier 2 Distribution Value Added Reseller [VAR] Lack of visibility to demand factors and sales-out by partners inhibited IBM from making accurate buy recommendations to the channels IBM inventory was not optimized in the channel leading to overages (with price protection exposure) and underages (with lost sales and customer service issues) Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.8

9. IBM Buy Analysis Tool (iBAT) is a visibility & analytical platform to enable better channel management & optimization Manufacturing Tier(s) Distribution Tier(s) End Customers Value Added Reseller (VAR) Tier 2 Distribution Scope of iBAT Collaboration platform & data model Channel collaboration & support processes Incentive alignment Demand Signal Repository iBAT is recognized by multiple awards: Tech Data 2010 Inventory Optimization Partner of the year CRN Channel Champion award IBM Research Outstanding Accomplishment 2011 Industrial OEM Contract Manufacturer Tier 1 Distribu-tion The Solution Channel collaboration solution with advanced analytical modeling of daily demand signals to supply pipeline Optimized replenishment decisions under price protection constraints. Automated terms & conditions, payment/reconciliation Key Benefits (accrue to both IBM & channel) Predictive analytics 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 Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.9

10. Data & collaborative decision making with channels is key to producing viable buy recommendations Utilizing iBAT to collaborate with channels to drive better buy recommendations 1. Receive daily channel partner information [sales out, inventory positions] 2. Receive internal manufacturing data [product lifecycle, backlog] 3. Transform data into channel forecast 4. Generate optimized min-max buy recommendations with alerts 5. Channel partners and channel reps collaborate on weekly buy decisions 6. Place purchase orders based on iBAT generated buy quantities iBAT calculates Qualified Price Protection Qtys and Summary Report Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.10

11. iBAT handles IBMs diverse channel partner landscape Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.11

12. Channel incentive linkage: iBAT enables channel price protection and automated business processes for ease of doing business Price protection is a financial incentive offered to distributors via contractual terms & conditions Protects a distributor against price reductions within a specified time, e.g. 45-60 days from invoice date Qualified Price Protection (QPP) offers distributors enhanced price protection based on compliance to iBAT Not all part numbers are in QPP; we select those part numbers which represent 70-80% of revenue Qualification occurs weekly, part number by part number If the distributor maintains their actual supply within the iBAT range of the recommended supply, their inventory will be price protected up to the maximum recommended supply line quantity, regardless of the age of the inventory iBAT automatically summarizes QPP status and results weekly in the tool iBAT is interlocked with the price protection rebate process; QPP results transmitted weekly Regular use of iBAT & QPP is proven to be financially beneficial to IBM and Business Partners Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.12

13. iBAT: Web-based, collaborative dashboard to track market demand changes, inventory visibility & to provide buy/sell alerts Rich analytics capabilities Descriptive Predictive Prescriptive Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.13

14. What do our channel partners say about iBAT? iBAT provides a stable and consistent platform to manage my business I no longer have to refer to 20 different bookmarks for product data US Distributor, VP Materials, Operations its more than inventory management iBAT is integrated into our strategic mgt. and sales cadence Netherlands Distributor Weve been struggling for months to develop something similar, iBAT is amazing! Multi-country European Distributor French Distributor Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.14

16. Extensive collaboration inside & outside of IBM Representative Clients Global Business Services (GBS) Software Group (SWG) Systems & Tech Group (STG) IBM Channel Partners IBM Suppliers Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.16

17. IBM supply chain capabilities future vision Cloud Mega trends influence the development of key strategic SC capabilities Attain Supply Chain Transparency Analytics Leverage Big Data & Advanced Analytics Extend Multi-enterprise Supply Chain Transformation End-to-End Social Mobile Mega trends in Computing Critical 2020 SC Capability Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.17

18. Thank you Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.18

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