IBM today introduced the worlds first supply-chain business transformation outsourcing (BTO) capability. The new offering will tap into IBMs rich internal supply chain experience and deep consulting expertise, as well as new IBM analytics technologies, to optimize and help businesses operate end-to-end supply chain processes, from procurement and logistics to strategy and planning.
Just as IBMs supply chain transformation has generated millions in cash, reduced inventory to historic lows and improved sales productivity by 25 percent the new services will provide companies with supply chain efficiencies that will allow them to become On Demand businesses, breeding unprecedented improvements in business flexibility and performance.
Each year, roughly $3 trillion is spent globally on supply chains, and most CEOs recognize that a responsive, on demand supply chain is key to optimizing business performance, said Bill Ciemny, Vice President for Global Supply Chain BTO Solutions at IBM. To maximize supply chain value, these companies are considering new partnerships to take advantage of emerging expertise, technology assets, and outsourcing capabilities, and IBM, through its own supply chain overhaul, is in a unique position capture this new market opportunity.
Supply chain optimization and management represents an approximate $23.5 billion market, larger than any traditional business process outsourcing market opportunity. As such, it represents a major component of the Business Performance Transformation Services market, above and beyond the traditional IT market, that IBM is targeting.
Supply chain is anything but a commoditized, non-core competency, added Mr. Ciemny. Building a responsive supply chain that is integrated in real time with the rest of the enterprise, is a complex proposition that requires a range of consulting, technology and services skills. Our clients understand that while running a world-class supply chain may not be their core competency, building that kind of capability is fundamental to their success. This is a completely new growth opportunity for IBM, bringing with it a different kind of competitive landscape.
Technologies, processes and global partner networks developed by IBM to renovate its own supply chain as part of the company's transformation to an On Demand Business, will be incorporated into the new offerings, as well as design support and expertise provided by IBM consultants who have both deep supply chain and industry expertise. This consulting capability includes the team of logistics experts from Maersk Data, which IBM acquired in 2004.
As part of this new practice, IBM will offer transformational outsourcing services in a range of key supply chain areas, including:
- Logistics IBM will run logistics and global trade functions, working with clients to orchestrate and manage a highly reliable, responsive and complex global network and deliver consistent and sustainable savings through a variable cost structure. Solutions components include: Strategy, Network Design and Optimization; Procurement; Operations Management; and Global Trade Management.
- Direct Materials Sourcing Leveraging IBMs world-class procurement processes and expertise, highly skilled IBM logistics professionals develop disciplined, seamless logistics processes and supplier management systems to improve supplier performance, orchestrate a highly reliable and responsive global network, and deliver consistent and sustained logistics savings.
- Supply Chain Optimization - addresses the value chain management process from supply chain planning, fulfillment to optimization of manufacturing for worldwide real-time collaboration. Clients will benefit from the ability to make quick, well-informed decisions and sense and respond more effectively to supply and demand fluctuations
In 2004, IBMs supply chain efficiencies reduced IBM inventories to their lowest level in 30 years, generated $285 million dollars in cash.and improved sales force productivity by 25%.
IBM has the worlds largest supply-chain management consulting practice in the world, with over 8,000 experts. These consultants will draw on the collective knowledge of IBMs 15,000 additional supply chain experts across the company to deliver the new BTO services to clients. IBMs new offering will further enable the company to expand its presence in the business performance transformation services marketplace.