This deck was presented at the Supply Chain Council Meeting in Nashville, TN. It talks about the role of Analytics in the High Tech supply chain.

1. © 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 0 | 21 April 2014
SCC Global Member Meeting and
Supply Chain World North America
Nashville, Tennessee, USA
April 14-15, 2014
Trends in High Tech Supply Chain
Partha Bose - IBM

2. © 2014 IBM Corporation1
THIS PRESENTATION COVERS 3 TOPICS
2Role of Analytics in
Supply Chain
3The Software-Defined
Supply Chain
1Today’s High Tech
Supply Chain

3. © 2014 IBM Corporation2
3 CHARACTERISTICS
OF HIGH TECH SUPPLY CHAINS
Economies of Scale BIG
Multi-Tier Supply
Chains COMPLEX
Low Cost Supply
Chains GLOBAL

4. © 2014 IBM Corporation3

5. © 2014 IBM Corporation4
See what
others don’t
Exploit global
efficiencies
Know the
customer as well
as yourself
Source: IBM Institute for Business Value
Volatility
Value
Visibility
NEW VISION AND NEW RULES ARE
NEEDED

6. © 2014 IBM Corporation5
#1: KNOW THE CUSTOMER AS WELL
AS YOURSELF
Predict demand and be in a position to react to demand variability
and market volatility with rapid response and allocation of all global
resources
Implementation of Smarter Supply Chain Capabilities

7. © 2014 IBM Corporation6
CONSUMER ELECTRONICS MAJOR
 S&OP as a globally integrated process
manages the Supply Chain globally on
a weekly basis
 Global visibility of inventory levels and
replenishment needs
Model of Global SCM
Customer 1
Customer 2
Customer 3
Region
Sales
Region
Sales
Region
Sales
Plant1
Plant2
Plant3
Unit of Planning
$XB
$YB
2003 2012
Over 3X
Achieved over 3X growth
for last 10 years
through pure organic growth
 In major divisions, Global Operation
Center & HQ supply chain management
teams have maintained the same size,
supporting a business that has grown 3
times

8. © 2014 IBM Corporation7
STRATEGIC INITIATIVES HAVE
ENABLED THE COMPANY’S GLOBAL
SCM ENVIRONMENT
Global Competition
Risk of
Supply Chain Disruption
Lower Margin
Key Challenges Strategic Initiatives
Globally Integrated
Supply Chain
Optimize global operation
Global Concurrent
Launching
Get high profit in early market
Advanced Customer
Collaboration
CPFR & Retail Channel Mgmt
Extended Supply Chain
Flexible supply with less risk
Increased
Market Uncertainty

9. © 2014 IBM Corporation8
STRATEGIC MIX OF BUY & MAKE OF
KEY COMPONENTS
Make
Buy
Buy Vs.
flexible
flexible
Strategy of Component
Supply
Strategy for key
components
In short term, there’s a
constraint to change
the Buy strategy
 Mix Buy & Make for key components
to mitigate the risk of supply chain
disruption
 In order to make key decisions for
new internal investment of component
plants, clear visibility on the
component demand-supply balance is
needed

10. © 2014 IBM Corporation9
IBM’S GIVIEW PLANNER FUNCTIONALITY
MET 4 KEY REQUIREMENTS
9
Plant A (Internal)
Purchase (External)
Warehouse
Purchase
Purchase
Purchase
Manufactur
e
Manufactur
e
Dummy
Transport
10%
90%
Transport
60%
40%
Transport
Demand
Demand
Demand
Warehouse
for Domestic/Export
Demand from
Final Assembly
Component Manufacturing
Or Purchasing
Proportional
Sourcing
Auto Build
ahead (1
week)
No carryover @
Plant:
Push out all
inventory to W/H
Consume
Capacity by
cycle time
1
2
3
4

11. © 2014 IBM Corporation10
Collaborate with insight and visibility to events, with suppliers, service
providers and customers in an open, action-oriented, environment.
Implementation of Smarter Supply Chain Capabilities
#2: SEE WHAT OTHERS DON’T

12. © 2014 IBM Corporation11 11
What if you could accurately predict
which characteristics tend to lead to
a higher frequency of failures?
What if, when an asset is
scheduled for maintenance,
you could predict what
parts are likely to fail in the
near future?
What if you could identify the characteristics
that tend to increase ownership cost and
downtime over the life of a system?
What if you could replace
those parts that have not yet
failed and avoid further
unscheduled downtime?
What if you could quickly mine the
thousands of logs that describe the
maintenance performed on a system and
determine what important observations are
being logged by the maintenance team?

13. © 2014 IBM Corporation12
Group cases that exhibit
similar characteristics.
Which parts tend to fail most
often? At what rate do they
fail?
Predict or Classify
behavior & characteristics.
What are the
characteristics of parts that
perform well versus parts
that fail often?
What events occur
together?
Given a series of part
failures, which parts are
likely to fail in the future?
Associate Classify
Cluster
DATA
MINING
Data Mining &
Predictive Modeling
unearths insights
PREDICTIVE ASSET OPTIMIZATION

14. © 2014 IBM Corporation13
2. Predictive Maintenance
(Service Optimization)
1. Manufacturing Quality
3. Warranty Analytics
4. Remote Diagnostics
(Connected Equipment)
5. Business Model
Transformation
Predictive maintenance for plant equipment
Equipment repair and maintenance optimization
Optimization of service parts and engineers’ schedules
Production quality management
(PLC/MES/Quality inspection data)
Warranty monitoring and analysis
Field quality early warning using warranty claim data
Warranty accruals management
Equipment data analysis and early warning
Remote monitoring and diagnosis
Maintenance optimization
Business model transformation with extended warranty,
performance assurance, and operational excellence.
Transformation to analytics-driven organization
APPLIES TO 5 BUSINESS DOMAINS IN
EQUIPMENT MONITORING.

15. © 2014 IBM Corporation14
• Virtuous Cycle: Inflection point to
rapid change: at 15 percent of the
market, a sudden takeoff in the
proportion of spending is shifting
to managed print services
• Huge Value Proposition:
Compelling 30+ percent cost
reductions for customers, higher
margins for winning vendors
• Service Extension: Branching
beyond copying into printers,
processes, and other IT
infrastructure services
• Winner Takes All: Transformation
driving consolidation toward larger
vendors
THE MARKET FOR PRINTING SERVICES
TRANSFORMED ITSELF IN 3 YEARS BETWEEN
2008 AND 2011
Source: Photizo Group, MPS Advisory Service, MarketWatch™
Huge Growth for Managed Print Services,
Represented by the Number of MPS Programs Announced
75%
50%
25%
0%
= Number of new MPS programs
= MPS program growth
1 1 1 1
10
31
11
2
1% 2% 3% 4%
14%
45%
56%
58%
2004 2005 2006 2007 2008 2009 2010 2011

16. © 2014 IBM Corporation15
PAO ARCHITECTURE
Industrial Enterprise Services Bus
(Message Broker)
End User Reports, Dashboards,
Drill Downs
High volume streaming data
(InfoSphere Streams)
Telematics, Manufacturing
Execution Systems,
Legacy Databases,
Distributed Control Systems
EAM System
(Tivoli Maximo Tririga or
other)
Analytic Datastore
(Pre-built data schema for storing quality, machine and prod data, configuration)
DB2
Statistical
Analytics
(SPSS Modeler)
Decision
Management
(SPSS DM)
Business
Analytics
(COGNOS BI)

17. © 2014 IBM Corporation16
UK Utility Company
In Production Line
• Pro-active detection rate
increased by 90-100%
• Sustained 41% reduction
in production incidents
and unscheduled
downtime
• Reduced liability damage
by 30% in 2 years
Japanese Manufacturer
In Field Services
• Saved $1 million in repair
costs in under 2 weeks
• 12-14 times return on
investment in just 4
months
German Auto Manufacturer
In Warranty Services
• Proactive identification of
systematic error patterns
and their dependencies
• Reduced warranty cases
from 1.1 to 0.85 per
vehicle
• 5% reduction in warranty
cases
• Annual savings of €30m
CASE EXAMPLES

18. © 2014 IBM Corporation17
Optimize pipeline inventory, the global network, and cost structures. Create cost-
efficient, sustainable practices while hedging risks.
Implementation of Smarter Supply Chain Capabilities
#3: EXPLOIT GLOBAL EFFICIENCIES

19. © 2014 IBM Corporation18
Globally Integrated
Enterprise
Multinational Era
Homegrown IT
 Multiple, separate supply
chains
 Few common processes
ERP
 Enterprise efficiencies
 Streamlined global
processes
 Information sharing
Analytics
 Enterprise and multi-
enterprise optimization
 Transparent SC
 Predictive, Cognitive
Smarter Supply
Chain
CASE EXAMPLE: IBM

20. © 2014 IBM Corporation19
R&D
Marketing
Finance
TOFROM
Supply Chain • 3 global procurement centers• 300 local procurement centers
• Outsourced non-core processes
reduced costs 25-35%
• Integrated decision-support
• Multiple local organizations
• Non-integrated decision support
• 13 global standardized marketing
programs leveraged locally
• Product- and geo-specific marketing
IT
• 1 global CIO
• 5 global data centers
• 4,790 applications
• 128 Local CIOs
• 155 local data centers
• 16,000 applications
• Fully integrated R&D
• Collaboration with 50 organizations to
build IP marketplace
• Multiple international R&D centers
• Local specialization with duplication
HR
• Global HR planning
• Standardization
• Local systems and management
• Local resource skill-set definition
GLOBAL INTEGRATION

21. © 2014 IBM Corporation20
IBM’S SUPPLY CHAIN TRANSFORMATION
Pain Points Transformation Approach
IBM’s supply chain was a fragmented cost center and not
critical to overall revenue.
Challenges included:
 Pockets of integration in functional silos but no enterprise-
wide common process
 Distributed and hard-wired to business units
‒ Non-electronic invoicing
 Lack of shared measurements and end-to-end visibility
 Non-consolidated transaction processing
 Integrated supply chain together with shared measurements
to support end-to-end operation
 Focused on client satisfaction along with operational results
 Leveraged global scale by connecting suppliers online with
IBM’s international workforce
‒ Consolidated transaction processing in global delivery
centers
 Introduced supply-chain business transformation outsourcing
capability
Integration Benefits
Business Operations Benefits Financial Benefits
 Averaging $3.0 - 6.5B in procurement savings
every year for the last six years
 Manages over $35B+ of spend for IBM across plus
over $20B spend on behalf of clients
 Quality early Warning System saves $40M per year
 Transformed from 36 plants and 300 Operations Centers to 9
plants and 5 Consolidated Global Operations Centers
 35,000 suppliers connected online in 45 countries; 98% of
invoices are electronic
 Improved sales force productivity: now spending
38% more time with clients
 100,000 Business Partners, 90+% of orders “touch-less”
 Clients in 100 countries have self-service access to contract,
order and inventory information

22. © 2014 IBM Corporation21
SOFTWARE DEFINED
SUPPLY CHAIN

23. © 2014 IBM Corporation22
3 NEW
TECHNOLOGIES
3D PRINTING OPEN SOURCEINTELLIGENT
ROBOTICS

24. © 2014 IBM Corporation23
HARDWARE CONSTRAINED
BUILD A
MOLD OR
CAST
HARDWIRE
PRODUCTIO
N LINE
DEVELOP
EMBEDDED
CHIP
SOFTWARE DEFINED
PRINT PARTS
DIRECTLY BY
SOFTWARE
RECONFIGURE
ASSEMBLY
THROUGH
SOFTWARE
DIGITAL
CONTROLS USING
SOFTWARE

25. © 2014 IBM Corporation24
4 DIFFERENT PRODUCTS COST
VOLUME
SIZE
COMPLEXITY
PERSONALIZATION
WASHING
MACHINE
INDUSTRIAL
DISPLAY
MOBILE
PHONE
HEARING
AID

26. © 2014 IBM Corporation25
3 AMAZING RESULTS
COST
SCALE
CO2 IMPACT

27. © 2014 IBM Corporation26
LOWER COST
23
%
CHEAPER
AGGREGATE NORMALIZED UNIT COST

28. © 2014 IBM Corporation27
LOWER SCALE
90
%
LESS
VOLUME
REQUIRED
AGGREGATE NORMALIZED
MINIMUM ECONOMIC SCALE

29. © 2014 IBM Corporation28
NOT NECESSARILY GREENER
100
89
33
100 99
92
100 100 101100
120
109
0
20
40
60
80
100
120
140
2012 Traditional 2017 Digital 2022 Digital
AGGREGATE NORMALIZED
CO2 ANALYSIS
9%
HIGHER
67
%
LOWER

30. © 2014 IBM Corporation29
BIG
COMPLEX
GLOBAL
SMALL
SIMPLE
LOCAL

31. © 2014 IBM Corporation30
RECOMMENDATIONS
FOR INDUSTRY

32. © 2014 IBM Corporation31
ibm.com/electronics