1. THE SMARTER SUPPLY
CHAIN OF THE FUTURE
IBM Global Chief Supply Chain Officer Study
(C) 2008 asbl Atomium / Artists Rights Society (ARS), New York / SABAM, Brussels
Photo Number: WC6D8959
© Copyright IBM Corporation 2009

2. IBM Global Business Services
We wanted to gain insight into the challenges facing supply chain executives around
the world… to learn what strategies and initiatives they are undertaking.
2 IBM Global Chief Supply Chain Officer Study – Executive Summary © Copyright IBM Corporation 2009

3. IBM Global Business Services
Summary and overview
The Top Five Supply The Smarter Building the Supply
Chain Challenges Supply Chain Chain of the Future
Visibility is vital
Visibility is vital
Instrumented Intelligent Risk must be managed systemically
Risk must be managed systemically
Customer input should permeate the supply chain
Customer input should permeate the supply chain
Flexibility will counteract cost volatility
Flexibility will counteract cost volatility
Interconnected
Global supply chains require integration & optimization
Global supply chains require integration & optimization
Five trends define the Instrumented, Interconnected, A new role for the CSCO
CSCO agenda & Intelligent and a map to the future
3 IBM Global Chief Supply Chain Officer Study – Executive Summary © Copyright IBM Corporation 2009

4. IBM Global Business Services
The collective insights from 400 Supply Chain Executives identify five major
challenges that comprise the CSCO agenda
70%
60% 55%
56%
43%
SUPPLY RISK INCREASING COST GLOBALIZATION
CHAIN MANAGEMENT CUSTOMER CONTAINMENT
VISIBILITY DEMANDS
Based on responses of “to a very great extent” and “to a significant extent”
4 IBM Global Chief Supply Chain Officer Study – Executive Summary © Copyright IBM Corporation 2009

5. IBM Global Business Services
Visibility: Supply chain visibility leads the CSCO’s agenda
To what extent have you
adopted the following practices?
75% 70%
As #1 Challenge – Why are we
NOT integrating & collaborating 15% 18%
more to increase visibility? Real-time information Event
transparency inside management &
and outside the alert notification
enterprise
Widely adopted Somewhat adopted
How significant are the following barriers to visibility & collaboration?
(respondents answered very to moderately significant)
Organizational silos inhibit collaboration 75%
Individuals are too busy to assist others
across the organizational supply chain 75%
Performance measures not aligned to
reward individuals for collaboration
68%
Technological tools do not effectively
support visibility & collaboration 63%
Collaboration not viewed as important 52%
Concerns about intellectual property limit
effective collaboration 31%
Very Significant Greatly Significant Moderately Significant
5 IBM Global Chief Supply Chain Officer Study – Executive Summary © Copyright IBM Corporation 2009

6. IBM Global Business Services
Future Outlook: The Smart Supply Chain will require more connectivity,
collaboration, and integrated processes to improve visibility among
network partners as demonstrated by leaders
Extent of implemented Integration Practices
Leaders vs. Others
7% Largest gap
Sum:
86%
extensive
& some 11% 19%
79%
extent
72% 72% 1%
61% 63% 62%
53%
Extensive 30% 16% 24% 19% 24% 9% 11% 16%
Planning with Continuous Customer Shared, real-
Suppliers Replenishment Inventory Planning time electronic
with customers & Deployment data
Leaders: Extensive Some Implementation
Others: Extensive Some Implementation
* Leaders determined based on respondents’ ranking in AMR Research Supply Chain Top 25 for 2008
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7. IBM Global Business Services
Risk Management: Managing risks, both operational and financial, is
a top concern of supply chain executives world-wide
What are the obstacles for implementing risk
management programs?
Process 46%
Data 42%
Enabling
technology 34%
Culture 26%
Organization 23%
Access/Process
controls 15%
Financial 6%
69% manage risk
in some fashion,
but the processes
& tools are not
integrated
7 IBM Global Chief Supply Chain Officer Study – Executive Summary © Copyright IBM Corporation 2009

8. IBM Global Business Services
Future Outlook: Leaders have more integrated risk management
strategies and compliance programs
What types of and risk management practices have/are you
implementing?
96% 92%
82% 80%
79%
76% 72%
57%
Integrating Incorporating risk Using supply chain
Compliance
process strategies and event management
programs with
controls in mitigation policies in techniques with
suppliers and
logistics and supply chain tolerances to monitor
service providers
operations planning disruptions
Leaders Others
Currently implemented/Implementing Currently implemented/Implementing
Plan to implement in next 3 years Plan to implement in next 3 years
* Leaders determined based on respondents’ ranking in AMR Research Supply Chain Top 25 for 2008
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9. IBM Global Business Services
Customer intimacy: Rising customer demands ranks as the third
highest supply chain challenge
Almost Half (47%) FAIL to Collaborate Extent of external demand collaboration with customers
with Customers! Very great extent
No extent
What are the most significant Significant extent
5%
challenges in bringing new
products and services to market? 19%
15%
67%
28% 33%
Little extent Moderate extent
Correct identification of
customer needs
9 IBM Global Chief Supply Chain Officer Study – Executive Summary © Copyright IBM Corporation 2009

10. IBM Global Business Services
Future Outlook: The Smart Supply Chain will require further integration of
customer demands from inception to delivery – the entire global network focused
on the end consumer.
To what extent do the following statements describe
your planning process?
19%
96%
24%
81% 10%
77%
Gaps 73% 10%
63% 63%
57%
53%
30% 18% 19% 11% 12% 4% 7% 5%
Sales & Integrated Demand and External Supply External Demand
Operations Planning Supply Planning Collaboration with Collaboration with
Applications Suppliers Customers
Leaders: Very great extent Significant extent Some extent
Others: Very great extent Significant extent Some extent
* Leaders determined based on respondents’ ranking in AMR Research Supply Chain Top 25 for 2008
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11. IBM Global Business Services
Cost containment: Constant cost containment pressures and
fluctuating costs require a comprehensive view of the tradeoffs.
11 IBM Global Chief Supply Chain Officer Study – Executive Summary © Copyright IBM Corporation 2009

12. IBM Global Business Services
Future Outlook: Responding to new cost pressures will always be a
challenge. What will tomorrow bring?
Most have adopted these practices
widely/comprehensively
89%
81% 81%
77%
CSCOs create flexibility
to control the cost
equation where they can
37% 22% 22% 20%
Agile Supply Chain Maximizing variable
(Rapid Response to supply chain costs to be
changes in market aligned with revenues
conditions)
Leaders: Extensively adopted Somewhat adopted
Others: Extensively adopted Somewhat adopted
* Leaders determined based on respondents’ ranking in AMR Research Supply Chain Top 25 for 2008
12 IBM Global Chief Supply Chain Officer Study – Executive Summary © Copyright IBM Corporation 2009

13. IBM Global Business Services
Globalization: Low cost country sourcing and operations have caused
lead time, cost, quality and service level issues
What are the major challenges that you have in regard to global sourcing & global
operations?
Delivery issues and reliability of commitments 80%
Lead times are greater than expectations 76%
Quality issues 75%
Capacity issues for new / unproven sources or 76%
operations supply
Difficulty evaluating / managing new sources 73%
Regulatory / legal issues in sourcing or 65%
manufacturing country contract
Have experienced issues Future concern
13 IBM Global Chief Supply Chain Officer Study – Executive Summary © Copyright IBM Corporation 2009

14. IBM Global Business Services
Future Outlook: The positive advantages of globalization of markets &
operations, outweigh the negatives
Average percentage of direct materials sourced
Central or South America
19%
13%
43%
Africa
Eastern Asia or Asia
Europe 2%
6% Pacific
61%
20%
United States, 38%
Mexico, or
Canada
-15%
33%
-30% Western Europe (EU
15)
What is the anticipated three year change in sourcing to the
following regions?
Bar indicates respondents average response to increase
or decrease
14 IBM Global Chief Supply Chain Officer Study – Executive Summary © Copyright IBM Corporation 2009

15. IBM Global Business Services
The Smarter
Supply Chain
We Must be Instrumented Intelligent
Smarter Interconnected
Instrumented, Interconnected,
& Intelligent
The smarter supply chain has three new
characteristics. Firms across the globe
are beginning to see the benefits of
building a new vision of supply chain
excellence.
15 IBM Global Chief Supply Chain Officer Study – Executive Summary © Copyright IBM Corporation 2009

16. IBM Global Business Services
The Supply Chain of the Future must be SMARTER...It will be
Instrumented, Interconnected & Intelligent
Automated Transactions & Smart Devices
• Use of sensors, actuators, RFID, & smart devices to automate
transactions: inventory location, shelf-level replenishment detection,
Instrumented transportation locations & bottlenecks
• Supports real-time data collection & transparency from POS to
manufacturing to raw material
• Sense-and-respond demand/supply signals allow “predict and act”
Optimized Flows/Performance Management
• System integration across the network. Standardized data and
processes.
Interconnected
• Collaborative decision making through decision support and
business intelligence – starting with the customer
• C-Suite risk management programs for integrated financial controls
with operational performance – monitored and measured
Networked Planning, Execution & Decision Analysis
• Simulation models to evaluate trade-offs of cost, time, quality,
service and carbon and other criteria
Intelligent
• Probability-based risk assessment & predictive analysis
• Networked planning/execution with optimized forecasts &
decision support
16 IBM Global Chief Supply Chain Officer Study – Executive Summary © Copyright IBM Corporation 2009

17. IBM Global Business Services
Case study: Nuance optimizes inventory to serve customers on the move
The Nuance Group is one of the world’s top airport retailers with operations spread
across five continents.
• Drastically reduced time required to replenish
stock
Business • Enabled more accurate demand forecasts What’s
Results Next?
• Realized inventory reductions of 10 to 15
percent
• Increased sales.
17 IBM Global Chief Supply Chain Officer Study – Executive Summary © Copyright IBM Corporation 2009

18. IBM Global Business Services
Case study: At Airbus, it’s clear skies and high visibility
Airbus is one of the world’s largest commercial aircraft manufacturers, producing
over half of all new airliners with more than 100 seats.
• Significantly reduced the incidence and severity of parts delivery
errors – and the costs associated with correcting them. What’s
Business
Results • Increased the overall efficiency of its parts flow, cutting time spent Next?
physically handling parts in its warehouses by 75 percent.
• Reduced safety stock and avoid significant carrying costs.
18 IBM Global Chief Supply Chain Officer Study – Executive Summary © Copyright IBM Corporation 2009

19. IBM Global Business Services
The Smarter Supply Chain of the Future
19 IBM Global Chief Supply Chain Officer Study – Executive Summary © Copyright IBM Corporation 2009