Global Supply Chain Integration Challenges

© Copyright IBM Corporation 2008
A Tale of Ants, Humans and Chaos
Mondher Ben-Hamida, CPIM, CSCP
Associate Partner / Global Electronics SME
IBM GBS Supply Chain Strategy Practice
mbenhamida@us.ibm.com
+1.415.425.7184

TheChallengeofGlobalSupplyChainIntegration
2009 ELECTRONICS INDUSTRY MAP
(PDIF)
Product LifecycleProduct Lifecycle
MgmtMgmt
(IS01, SCM)(IS01, SCM)
Product LifecycleProduct Lifecycle
MgmtMgmt
Strategic
Drivers
Industry
Solutions
(ISA Code)
Solution
Offerings
Industry
Framework
Infrastructure
Reduce Operating / Infrastructure costs Brand and Product Commoditization
/ pressure to innovate
Consumer Driven Innovation /
strategic selling and sales execution
Globalization and
Merger Integration
Tighter integration and partnering
industry ecosystem
Supply, Demand &Supply, Demand &
Global IntegrationGlobal Integration
(IS09, SCM, FMS,(IS09, SCM, FMS,
HCM)HCM)
Supply, Demand &Supply, Demand &
Global IntegrationGlobal Integration
(IS09, SCM, FMS,(IS09, SCM, FMS,
HCM)HCM)
Electronics MESElectronics MES
Electronics MESElectronics MES
Marketing, Sales &Marketing, Sales &
ServiceService
TransformationTransformation
(IS05, CRM, S&C)(IS05, CRM, S&C)
Marketing, Sales &Marketing, Sales &
ServiceService
TransformationTransformation
(IS05, CRM, S&C)(IS05, CRM, S&C)
• Requirements
Management
(Telelogic/Rational)
• Product Innovation
management/IPD
• Integrated BOM
• Embedded
system/Software lifecycle
management
• Test outsourcing
• Next generation PDM/web-
based and extended PDM
• Unified Verification
Management
• Requirements
Management
(Telelogic/Rational)
• Product Innovation
management/IPD
• Integrated BOM
• Embedded
system/Software lifecycle
management
• Test outsourcing
• Next generation PDM/web-
based and extended PDM
• Unified Verification
Management
• eGIE/CBM/Shared Service
Design
• Global Supply Chain
Planning
• Supply Chain Visibility
(VMI/CPFR)
• Master Data Mgmt
• Supply Chain Mgmt ERP*
• Green Supply Chain
• Global Financial System
Consolidation
• “Solar Fab In A Box”
• eGIE/CBM/Shared Service
Design
• Global Supply Chain
Planning
• Supply Chain Visibility
(VMI/CPFR)
• Master Data Mgmt
• Supply Chain Mgmt ERP*
• Green Supply Chain
• Global Financial System
Consolidation
• “Solar Fab In A Box”
• Semiconductor , Flat
Panel Display, Solar MES
(SIView, LCDView,
SolarView)
• Enterprise MES
• View Factory
Suite/Manufacturing
Process Improvement
• GIView (Globally
Integrated View)/Mfg
Cockpit
• Semiconductor , Flat
Panel Display, Solar MES
(SIView, LCDView,
SolarView)
• Enterprise MES
• View Factory
Suite/Manufacturing
Process Improvement
• GIView (Globally
Integrated View)/Mfg
Cockpit
• Marketing
Transformation / Market
Planning
• Sales Transformation
• Multi-Channel
Management (MCM)
• Service Management
• Med Device Contract
Sales & Service
• Marketing
Transformation / Market
Planning
• Sales Transformation
• Multi-Channel
Management (MCM)
• Service Management
• Med Device Contract
Sales & Service
Product Development
Integration Framework
Product Development
Integration Framework
Supply Chain Visibility /
VCC
Supply Chain Visibility /
VCC
Manufacturing Integration
Framework
(MIF)
Manufacturing Integration
Framework
(MIF)
Infrastructure:Infrastructure: servers, storage, communication networks & associated servicesInfrastructure:Infrastructure: servers, storage, communication networks & associated services
2

ABOUT THE PRESENTER Mondher Ben-Hamida, CPIM, CSCP
Associate Partner / Global Electronics SME
IBM GBS Supply Chain Strategy Practice
EducationEducationEducationEducation
1997
1995
Master of Science in
Industrial Engineering and
Operations Research,
University of Minnesota,
Minneapolis, MN, USA.
Master of Engineering in
Industrial Engineering,
ENIT, Tunis, Tunisia
LanguagesLanguagesLanguagesLanguages
• English
• French
• Italian
• Arabic
Fluent
Fluent
Fluent
Fluent
SpecializationSpecializationSpecializationSpecialization
• Supply Chain Strategy
• Global Issues in SCM
• Enterprise Sustainability
• Advanced Planning Tools
Experience OverviewExperience OverviewExperience OverviewExperience Overview
Mondher is an Associate Partner in the IBM Supply Chain Strategy group. The practice is
responsible for providing strategic and operational guidance to senior executives within
client organizations. Mondher is an Industrial Engineer and a Global Supply Chain Strategist
with over 13 years of global management and manufacturing consulting experience.
Primary focus has been the design and implementation of Supply Chain Management
strategies and tools, Advanced Planning and Scheduling solutions and Theory-Of-
Constraints initiatives. Mondher is a frequent speaker at various supply chain events
(APICS, SCC, AMR, etc.) and has published a number of articles on various topics ranging
from supply chain strategy to reducing the environmental impact of logistics operations. He
is also a co-inventor of a supply chain carbon modeling tool (patent pending). Mondher is a
universal citizen and his passion for solving global supply chain problems along with his
fluency in 4 languages has led him to operate in four continents
Sample EngagementsSample EngagementsSample EngagementsSample Engagements
• Helped one of the world’s largest fabless companies (wireless phone chip segment) define and
implement a comprehensive supply chain collaboration model (VMI, Consignment and
Schedule Sharing) with three of its most strategic customers on 3 continents.
• Led a major supply chain strategy definition for one of Europe’s largest industrial
conglomerates. Activities included assessing state of current operations model, compiling and
documenting appropriate best practices and devising a novel supply chain vision that is
customer centric (secured agreement on a new market segmentation) and emphasizes the
agreed upon core competency (fulfillment).
• Led a major supply chain strategy redesign effort at McDonald’s. This executive level initiative
assessed competitive trends and provided a global vision for the future supply chain integration
model along with a ‘playbook’ of practical steps to achieve the vision
• Selected by AMR Research as an SME and voting panelist for the 2007 World’s Top 25 Supply
Chains
• Served as the Make Best Practices Lead and co-author of SCOR 7.0
3

OBJECTIVES
Briefly discuss the challenges most companies face in optimizing the
integration of their global supply chain operations
Briefly discuss the challenges most companies face in optimizing the
integration of their global supply chain operations
Provide a critical analysis of the root cause(s) of these challengesProvide a critical analysis of the root cause(s) of these challenges
Provide an Overview of IBM’s Approach and Competitive DifferentiatorsProvide an Overview of IBM’s Approach and Competitive Differentiators
1111
2222
3333
4

First off, what is Global SCI and why is it important?
The supply chain needs to be aligned
with the market needs
The supply chain needs to be aligned
with the market needsComplication # 1Complication # 1Complication # 1Complication # 1
Complication # 2Complication # 2Complication # 2Complication # 2
Global competition is, to a large extent, a competition between supply chain models.
Superior supply chain execution, while not sufficient for business success, is a necessary
condition
Complication # 3Complication # 3Complication # 3Complication # 3
Supply chain costs need to be
minimized
Supply chain costs need to be
minimized
Supply Chain Integration is the act of
turning a complex and diverse
network of partners and operations
into a functioning ecosystem.
Supply Chain Integration is the act of
turning a complex and diverse
network of partners and operations
into a functioning ecosystem.
ABC, Inc.
Tier 1
Tier 2
The supply chain needs to be flexible
and responsive
The supply chain needs to be flexible
and responsive
Need to ensure consistency in design
and execution
Need to ensure consistency in design
and execution
Outsourcing is a key strategic
imperative
Outsourcing is a key strategic
imperative
Shrinking control yet ultimate
accountability to customers
Shrinking control yet ultimate
accountability to customers
5

What are the key pain points of our clients?
An External View
Make
•Make vs. Buy
•Reach of
production
facilities
•Product mix at
each location
Source
•Level and
scope of
collaboration
with suppliers
•Global vs.
regional
sourcing model
Design
•Internal vs.
external along
various
dimensions
•Level of
integration and
upstream
design
collaboration
with suppliers
•How to listen to
the needs and
wants of a
global customer
base
Service
•Warranty plans
and logistics
•Customer
service partners
•Reverse
logistics
Deliver
•3PL/4PL
agreements
•Customer
segmentation
and service
agreements
•What to hold
and where and
how much
Plan
CustomersSideCustomersSide
• Network Design Decisions
• Centralized vs Decentralized model
• Global demand Planning
• Make vs. Buy
• #, Location and scope of CM partners
• Global Inventory Planning
6

What are the key pain points of our clients?
An Internal View
Division / BU / GeoDivision / BU / Geo
PeoplePeoplePeoplePeople
ProcessesProcessesProcessesProcesses
SystemsSystemsSystemsSystems
TechnologyTechnologyTechnologyTechnology
MeasuresMeasuresMeasuresMeasures
People
Processes
Systems
Technology
Measures
Lack of true Supply Chain organization
Excessive customization, often for no reason,
with limited, if any, synergies between divisions
Too many systems and instances hindering
data consolidation and sharing
Disparate systems and supporting technologies
hinder integration and collaboration
Inconsistent and often conflicting set of
measures
Corporate HQCorporate HQCorporate HQCorporate HQ
7

Why Is Global Supply Chain Integration a Difficult Task?
The Uncanny Resemblance Between Complex Systems And Supply Chains according to Chaos Theory
1. Complex systems consist of a large number of elements.
2. The elements have to interact and this interaction must
be dynamic.
3. The Interaction is fairly rich, i.e. any element in the system
influences, and is influenced by, quite a few other ones.
4. Firstly, the interactions are non-linear.
5. The interactions usually have a fairly short range, i.e.
information is received primarily from immediate neighbours.
6. There are loops in the interaction.
7. Complex systems are usually open systems, i.e. they interact
with their environment.
8. Complex system operate under conditions far from
equilibrium.
9. Complex systems have a history. Not only do they
evolve through time, but their past is co-responsible for
their present behaviour.
10.Each element in the system is ignorant of the behaviour
of the system as a whole.

Root Cause # 1
The Gap Between Business Needs And Business Models
Phase 1Phase 1Phase 1Phase 1 Phase 2Phase 2Phase 2Phase 2 Phase 3Phase 3Phase 3Phase 3
Business creation
and local market
establishment
Business creation
and local market
establishment
Aggressive
Global Growth
Aggressive
Global Growth
SaturationSaturation
Reputation Matters Growth Matters Execution Matters
Suitability of Supply Chain Models and ToolsSuitability of Supply Chain Models and Tools LowHigh
Elapsed Time / Supply Chain Planning ComplexityElapsed Time / Supply Chain Planning Complexity HighLow
ABC, Inc.
Tier 1
Tier 2ABC, Inc.
9

Root Cause # 2 – The Challenge Of Internal Integration
“Tell Me How You’ll Measure Me, And I’ll Tell You How I’ll Behave”
Corporate HQCorporate HQCorporate HQCorporate HQ
LowHigh
HighLow
CEOCEOCEOCEO
CSO*CSO*CSO*CSO*
(*) – Global Chief Supply Chain Officer
EMEA DivisionEMEA DivisionEMEA DivisionEMEA Division
CEOCEOCEOCEO
CSO*CSO*CSO*CSO*
BU XYZBU XYZBU XYZBU XYZ
CEOCEOCEOCEO
CSO*CSO*CSO*CSO*
A desire to grow rapidly (Phase
2) provided divisions with a
great deal of independence
which led to the proliferation of
overly localized supply chain
processes and solutions
A desire to grow rapidly (Phase
2) provided divisions with a
great deal of independence
which led to the proliferation of
overly localized supply chain
processes and solutions
While the division-level supply
chain officer might listen to the
corporate-level officer, his/her
performance/bonus is decided
by the Division/BU head
While the division-level supply
chain officer might listen to the
corporate-level officer, his/her
performance/bonus is decided
by the Division/BU head
The tendency to promote local
performance has greatly
diminished the scope and
impact of corporate supply
chain officers
The tendency to promote local
performance has greatly
diminished the scope and
impact of corporate supply
chain officers
10

Root Cause # 3 – The Challenge Of External Integration
Integration is about Collaboration; However, Are We Wired For It?
The Idea: Unlike ants and bees, humans aren't hard-wired for
cooperation; we tend to act out of self-interest. That inclination
repeatedly draws us into "social dilemmas" where, in an
attempt to gain more for ourselves, we ultimately fare worse
than we would have by cooperating.
The evidence: The trick is to establish an agreement where
everyone's self-interest is best served by cooperating. That
means removing incentives to violate the agreement.
The Conclusion: Businesses are nothing but federations of
human beings. We think we’re different and unique and we
behave in ways that protect and promote that uniqueness. We
need to overcome some innate apprehensions to build a
winning value proposition for key supply chain partners
http://www.newsweek.com/id/17038011

Root Cause # 4 – The Issue of Asymmetric Benefits
What’s in it for me?
Many Supply Chain Integration Efforts failed because the incentives were
not properly defined and established
Many Supply Chain Integration Efforts failed because the incentives were
not properly defined and established
12

Lessons Learned and Tools to Leverage

Our Approach – A High Level Overview
Electronics Industry – Globally Integrated EnterpriseElectronics Industry – Globally Integrated EnterpriseElectronics Industry – Globally Integrated EnterpriseElectronics Industry – Globally Integrated Enterprise
Supply, Demand & Global IntegrationSupply, Demand & Global IntegrationSupply, Demand & Global IntegrationSupply, Demand & Global Integration
eGIE / CBM / Shared Service DesigneGIE / CBM / Shared Service Design
Global Supply Chain PlanningGlobal Supply Chain Planning
Supply Chain Visibility (VMI/CPFR)Supply Chain Visibility (VMI/CPFR)
Master Data MgmtMaster Data Mgmt
Supply Chain Mgmt ERPSupply Chain Mgmt ERP
Green Supply Chain (enabling IBM’s Smarter Planet)Green Supply Chain (enabling IBM’s Smarter Planet)
Global Financial System ConsolidationGlobal Financial System Consolidation
“Solar Fab In A Box”“Solar Fab In A Box”
14

Build the Right ModelBuild the Right ModelBuild the Right ModelBuild the Right ModelDefine the End StateDefine the End StateDefine the End StateDefine the End State
Consulting Guideline # 1
Ensure that the Supply Chain Strategy is Aligned with the Corporate
Strategy
Ensure that the Supply Chain Strategy is Aligned with the Corporate
Strategy
Core CapabilitiesCore CapabilitiesCore CapabilitiesCore Capabilities
Core CompetencyCore CompetencyCore CompetencyCore Competency
ExtendedExtended
CapabilityCapability 11
ExtendedExtended
ExtendedExtended
ExtendedExtended
ExtendedExtended
ExtendedExtended
CustomerCustomer
StreamStream AA
CustomerCustomer
StreamStream AA
CustomerCustomer
StreamStream BB
CustomerCustomer
StreamStream BB
CustomerCustomer
StreamStream CC
CustomerCustomer
StreamStream CC
Supporting ProcessesSupporting ProcessesSupporting ProcessesSupporting Processes
High
Low
Time to Accomplishment
ValueChainTotalPerformance
High
Today
““Incremental” ApproachIncremental” Approach
““Vision / Backward”Vision / Backward”
ApproachApproach
World Class Performance
Hurdle
Ideal
State
The End State Supply
Chain vision should be
aligned with the corporate
strategy and goals
The End State Supply
Chain vision should be
aligned with the corporate
strategy and goals
The supply chain working
model needs to be built
with as much commonality
as possible.
The supply chain working
model needs to be built
with as much commonality
as possible.
15

Consulting Guideline # 2
Define the Right Levers for a Globally Integrated Supply Chain ModelDefine the Right Levers for a Globally Integrated Supply Chain Model
Company ABCCompany ABCCompany ABCCompany ABC
Measures / ReportingMeasures / ReportingMeasures / ReportingMeasures / Reporting
Most companies’ (and their
consultants!) reflex is to
consolidate their supply chain
supporting systems (e.g. reducing
# of SAP instances, etc.)
Always start with these
dimensions taking into account
the company structure and
working model
For instance:
•Does the company want to have a
global fulfillment model (e.g. ship from
anywhere to anywhere) or prefer to
have regional fulfillment centers isolated
from each other
•Do the various business units (or
geo’s) compete for the same
resources?
For instance:
•Does the company want to have a
global fulfillment model (e.g. ship from
anywhere to anywhere) or prefer to
have regional fulfillment centers isolated
from each other
•Do the various business units (or
geo’s) compete for the same
resources?
Global Supply Chain Integration is,
above all, about integrating data feeds
to provide a holistic view of the system
performance. The choice of a
centralized or distributed SC
infrastructure should not be driven by
technology but rather by real business
needs
Global Supply Chain Integration is,
above all, about integrating data feeds
to provide a holistic view of the system
performance. The choice of a
centralized or distributed SC
infrastructure should not be driven by
technology but rather by real business
needs
16

CASE STUDY – A GLOBAL HIGH TECH
COMPANY
GTMGTM GTMGTM GTMGTM GTMGTM GTMGTM
ESBESB
End-StateEnd-State
•Consolidated Supply Chain systems onto single
backbone
•Integrated “Best of Breed” solutions
•Established hubs for business intelligence
SCSC
ESBESB
HubHub
HubHub
HubHub
Initial StepsInitial Steps
•Establish Enterprise Service Bus (ESB)
•Implement virtual information hubs
SCSC SCSC SCSCSCSC SCSC
SCSC SCSC SCSC SCSC SCSC
Current StateCurrent State
•Multiple systems with point-to-point interfaces
•Poor visibility across supply chain
HubHub
HubHub
17

Why Is IBM Uniquely Positioned To Help With Global SCI?
The Three Dimensions Of Our Offering
By leveraging innovative ideas from our research division and proven best practices from
our internal supply chain group, we are uniquely positioned to help our clients improve
their supply chain strategy and operations
Advisory ServicesAdvisory Services ResearchResearchInternal Supply ChainInternal Supply Chain
Supply Chain Strategy Practice
18

Why Is IBM Uniquely Positioned To Help With Global SCI?
A Rich Portfolio of Tools to lead the Field of Supply Chain Analytics and Enable Smart Design Decisions
(1) – ‘Recent Acquisitions’ refer only to ILOG and Cognos
(2) – ILOG can be seen as the Intel Inside of most SCM/APS Solutions
(1)
Some of our Existing Assets
SCPMSCPM
(Supply Chain
Process Modeler and
Simulator)
SCPMSCPM
(Supply Chain
Process Modeler and
Simulator)
SNOWSNOW
(Supply Chain
Network Optimization
Workbench)
SNOWSNOW
(Supply Chain
Network Optimization
Workbench)
WSPWSP
(Warehouse Site
Planner)
WSPWSP
(Warehouse Site
Planner)
VCCVCC
(Virtual Command
Center)
VCCVCC
(Virtual Command
Center)
Recent IBM AcquisitionsRecent IBM Acquisitions
(2)
19

Global Supply Chain Integration Challenges

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