New Trend — Managing Risk — Joins Faster, Better, Cheaper Motto says 60 Percent of Top Supply Chain Execs

Armonk, N.Y. — February 24, 2009 — IBM's Global Supply Chain study, based on face-to-face interviews with nearly 400 supply chain executives in 25 countries, reveals that 70 percent say their No. 1 challenge is overwhelming and fragmented data, as well as a lack of ability to make sense out of the information. However fixing this "visibility" problem is low on action plans because it is costly, difficult, silos are worse than ever and respondents say they are just too busy.

Supply chain leaders understand the threat of information blind spots, but they are only cautiously optimistic that they are taking steps to use their valuable information for real competitive advantage. Just 16 percent indicated that they are effective at integration and visibility of information across the supply chain with external partners.

The study shows the greatest opportunity for these executives are smart devices and integrated enterprise resource planning (ERP) systems that capture real-time visibility: forecasts/orders, schedules/commitments, pipeline inventory and shipment lifecycle status. Automating real-time detection with smart devices increases flexibility, speed and accuracy to promote better decision-making.

The Global Supply Chain study, titled "The Smarter Supply Chain of the Future," was developed by IBM Global Business Services' Supply Chain Management Practice in conjunction with the IBM Institute for Business Value, which develops fact-based strategic insights for senior business executives. Supply chain executives in 29 industries participated in structured interviews and candidly talked about their most serious challenges.

Risk Management — A Looming Concern

According to the study, the No. 2 issue for these executives is having the visibility and flexibility to manage risk, with 60 percent of respondents saying risk is escalating as a concern. The last decade has been peppered with wake-up calls: tainted food and toys, random acts of terrorism and, most recently, the dramatic downturn in global economics, which will destabilize supply chains as trading partners retrench or fail.

Among the respondents, 38 percent manage risk and supply chain performance in some manner, but with separate tools and processes. Executives cite the lack of standardized processes, insufficient data and inadequate technologies as the chief stumbling blocks preventing effective risk management. The most successful supply chain executives are incorporating risk management into their plans, and using analytical predictive tools to mitigate risk, and identify new opportunities.

"As important as cheaper, faster, better is, this year, we're beginning to hear a new verse — a clear message about the overwhelming need for greater visibility and flexibility to manage risk," said Sanjeev Nagrath, global leader, Supply Chain Management, IBM Global Business Services. "A crisis in one country or region can now ripple very quickly across the world economy, creating tremendous turbulence. As supply chains have become more complex, global and stressed, the executives we spoke with believe they must drive far more intelligence throughout their supply chains if they are going to anticipate, rather than react."

IBM's report calls for a future supply chain that is thoroughly instrumented, interconnected and intelligent. It brings together the ability of human know-how and technological excellence to make optimal use of machine-generated data — flowing out of sensors, radio frequency identification (RFID) tags, meters, actuators and GPS. The entire supply chain will be connected — not just among customers, suppliers and IT systems in general, but also parts, products and other smart objects used to monitor events within the supply chain. In addition, supply chain decisions will be more intelligent on two fronts: automated for real-time responses to a range of external stimuli and also removing latency and increasing the certainty about the outcomes of actions taken by business decision makers.

In addition, the leadership function will become more strategic. According to the supply chain executives who were interviewed for the study, most are overseeing traditional functions like distribution and logistics (77 percent), demand/supply planning (72 percent), and sourcing and procurement (63 percent). But some are rising to the level of a chief supply chain officer, taking a place in the C-Suite and orchestrating strategy through execution in the complexities of today's global supply chains in an ever-increasingly volatile marketplace.

IBM said the evolving role of the chief supply chain executive will also become "chief collaborator," bringing together stakeholders (even those outside the extended supply chain, like regulators, financial organizations and governments) and facilitating joint planning and risk mitigation. Negotiation and stakeholder management skills will be components of the future supply chain expertise.

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