Venture Outsource talked with Tim Carroll, Vice President, Operations & Strategy, IBM Integrated Supply Chain. Discussion transcripts follow.
VO: Competition between companies can no longer be thought of as company against company but more so as supply chain against supply chain. What do you feel helps IBM’s supply chain stand apart from supply chains of other large, global technology companies?
Carroll: Our vision from the beginning of our supply chain transformation was to create a new business model for managing the operations of the Company. This model is called “on demand” and it’s a competitive advantage for IBM. Being on demand isn’t just about how to cut costs and drive efficiency, but how we can leverage IBM’s supply chain to improve growth and drive productivity throughout the entire Company, and in turn, improve client satisfaction.
We have brilliant IBM researchers working on algorithms for supply chain optimization, we have access to the leading open standards-based software in WebSphere and DB2 and our experience with thousands of clients as a hardware manufacturer is second to none.
VO: With the recent sale of IBM’s PC division and IBM becoming closer to achieving an on-demand business model, what execution challenges do you see for IBM’s on-demand supply chain?
Carroll: The most difficult challenge is the cultural impact it has across the Company. Breaking down the silos to encourage cross-organizational working and horizontal thinking is not easy with 19,000 people across 60 plus countries. But once you can demonstrate the value, it can have a domino effect as more and more employees recognize the benefits of working in a more collaborative environment.
VO: Can you please tell our readers what are some of the performance indicators IBM uses to monitor the health of its supply chain?
Carroll: Today, IBM and its supply chain employees measure the supply chain as a whole not just by the silos they report under. We measure our performance in several ways including; customer satisfaction (95%), cost reductions ($7 billion in 2004) and by the amount of cash we have generated for the IBM Corp. and its shareholders ($285 million in 2004). Companies that only measure their supply chain silos will never understand or realize the benefits of an integrated supply chain.
VO: What trends do you see surfacing in technology supply chain practices as companies rely more on vendors and suppliers to help them meet their objectives?
Carroll: Outsourcing the commodity functions of a supply chain has been a reality for IBM for several years. Part of the IBM supply chain transformation in the early 90’s included the outsourcing of logistics which has achieved more than $1.1 billion in year-to-year cumulative cost savings. IBM no longer owns distribution warehouses or delivery trucks and this enables us to be more flexible and responsive to market fluctuations. IBM believes outsourcing parts of the supply chain is more than just a trend. It is an opportunity for growth. We recently launched a new practice to serve this market.
VO: As companies look to further decrease their on-hand inventory and increase their inventory turns, what is IBM doing to minimize inventory risk while still positioning itself to be flexible to changes in forecast?
Carroll: Let me start by saying in 2004 IBM achieved its lowest inventory levels in the past 30 years. To achieve this it required both technology and trusted partner relationships. On the IT side, we have implemented Siebel’s customer relationship management (CRM) software. Siebel provides us with a detailed view that includes the size of the opportunities and, more importantly, what stage in the sales cycle they are in and when they expect to close. We also formed a closed-loop process between i2’s Demand Fulfillment application and SAP R/3 to bring planning and execution together.
This has improved customer delivery cycle time by 20%. But outside the technology, it’s the relationships within IBM and with our partners, and the shared understanding that we are a team, that serves our clients better when we work as one. Providing our suppliers with accurate forecasts and vice versa is a powerful competitive advantage against OEMs and suppliers that try to ‘game’ the system.
VO: What was the last business-based book you read and what key message did you walk away with after reading this book?
Carroll: ‘Who Says Elephants Can’t Dance’ by former IBM CEO Lou Gerstner, which documented IBM’s historic turnaround from 1993-2001. The book takes a close look at the period when IBM began its on demand transformation, which started with the supply chain. The overall key message I took with me was about corporate culture and how much of an impact it can make across an organization. It’s amazing what can be accomplished when the entire Company is on the same page and focused on one goal – a satisfied client.
VO: Thank you, Tim.
Carroll: Thank you.
VentureOutsource.com, August 2005
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