IBM Introduces Supply Chain Outsourcing Offering

Big Blue offers to apply its own experience to transforming, optimizing other companies' supply chains

Big Blue offers to apply its own experience to transforming, optimizing other companies' supply chains

Armonk, NY  June 24, 2005  IBM this week introduced what it says is the world's first supply chain business transformation outsourcing (BTO) capability, a new offering designed to tap into IBM's internal supply chain experience and 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.

Big Blue is looking to leverage its own experience in supply chain transformation, which the company says 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," yielding improvements in business flexibility and performance, IBM said in announcing the new services.

"Each year, roughly $3 trillion is spent globally on supply chains, and most CEO's 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 to capture this new market opportunity."

IBM believes that supply chain optimization and management represent roughly a $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 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 will be incorporated into the new offerings, along with design support and expertise provided by IBM consultants with 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 said it 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 complex global networks and deliver 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 IBM's own procurement processes and expertise, IBM logistics professionals will develop logistics processes and supplier management systems to improve supplier performance, orchestrate a global network and work to deliver logistics savings.

  • Supply Chain Optimization  IBM said it will address the value chain management process from supply chain planning and fulfillment to optimization of manufacturing for worldwide real-time collaboration.
In 2004, IBM says that supply chain efficiencies reduced the company's inventories to their lowest level in 30 years, generated $285 million dollars in cash and improved sales force productivity by 25 percent.

IBM claims the world's largest supply-chain management consulting practice, with over 8,000 experts.

Additional Articles of Interest

 For an in-depth look IBM's supply chain transformation initiative, read the interview with Linda Cantwell, IBM vice president for business growth initiatives, in the article "Breaking the Silo Mentality" in the April/May 2004 issue of Supply & Demand Chain Executive.

 For more information regarding "on demand" computing models, see the article "Cutting Through the 'On Demand' Hype," the Net Best Thing column in the December/January 2004 issue of Supply & Demand Chain Executive.

 Do you only dream of having a supply chain as efficient as Dell's? Then it's time to wake up and manage your inventory liability. To find out how, read the article "Managing Inventory Liability in an Outsourced Relationship."

 For more information on procurement business process outsourcing (BPO), see the following articles: