News

Singapore, 16 March 2009 - IBM’s Global Chief Supply Chain Officer study, based on face-to-face interviews with nearly 400 supply chain executives in 25 countries, reveals that 70 percent say their number one 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 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 Chief Supply Chain Officer 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 number two 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. This 'Smartmap' to the Supply Chain of the Future, brings together the ability of human know-how and technological excellence to make optimal use of machine-generated data – flowing out of sensors, 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 by removing latency and increasing the certainty about the outcomes of actions taken by business decision makers.

Industry outlook
In terms of cost containment, consumer products rank highest at driving cost reduction, in fact 2/3 claim to be great at doing so. For Supply Chain Visibility, status monitoring is amplified in the aerospace industry with more than half of them experiencing significant visibility. For Risk Management, a large majority of utilities express that risk management is impacting their supply chain significantly, whilst all of the respondents in the telecommunications industry have adopted the practice of sharing risks across the network, with a small percentage doing so extensively. Looking at increasing customer demands, a significant majority of electronics and consumer products industries claim shortening product lifecycles is a significant challenge, and nearly all of these for demand-driven replenishment. Under Globalisation, the results noted that aggressive global competition is higher in transportation and logistics than any other industry, with a high majority of aerospace respondents claiming that global sourcing of direct materials is a great challenge.

In Asia Pacific and ASEAN
In Asia Pacific, results of the survey closely mirrored global responses, with their top challenges listed as Supply Chain visibility, followed by increasing customer demands and risk management. Other pervasive themes in the top five challenges reflected the growing importance of “Green initiatives” and Talent Management.

Further Asia Pacific results highlight aggressive global competition as a significant or very great challenge, more than any other region, with more than half of the respondents emphasizing shorter product life cycles as a significant or very great challenge. Another key finding was the heavy focus placed on leading SCM-related compliance programes, and positioning the supply chain as a revenue growth driver.

The results coming out of ASEAN showed a different emphasis on the various challenges faced, vis-à-vis Asia Pacific and the global findings. In ASEAN, the most pressing challenges were Risk Management, followed by both Cost Containment and Supply Chain Visibility, sharing the same level of importance.

Currently, ASEAN have a widespread implementation of risk management programs.
Consistent with Asia Pacific findings, moving forward, ASEAN companies will focus on
addressing supply chain planning and monitoring supply chain disruptions. Said Yeonho Yoo,
Partner Industrial Sector and Supply Chain Management Leader for Growth Market Units
inclusive of Asia Pacific region, IBM Global Business Services, “With regards to Risk
Management as the number one challenge in ASEAN, we see a trend in ASEAN executives
focusing attention on adopting various risk management practices. This shows that ASEAN
executives have a higher level of alertness to the macro factors which potentially impact their
business.” He continued, “Given that Risk Management is one of the key areas that the Chief
Supply Chain Officer should be responsible for, it would seem that ASEAN has a more mature
context to introduce or expand the role of the Chief Supply Chain Officer to overcome this
number one challenge in an orchestrated manner.”

Comparing Asia Pacific and ASEAN findings, the results showed that similar to Asia Pacific findings, most ASEAN firms have already implemented visibility and event management capabilities, although ASEAN firms have implemented a wider range of connectivity practices. When compared to Asia Pacific firms, a greater emphasis has been placed by ASEAN companies on attempting to reduce challenges in bringing new products and services to market, through correct identification of customer product and service needs. Although ASEAN companies have been placing more emphasis on demand collaboration with customers, their greatest focus is still on internal sales, operations planning and supplier collaboration. For these ASEAN firms, their supply chains are developed to promote cost containment eg. the procurement organization places supplier-total-cost, as the most important criteria by far, as opposed to Asia Pacific firms, which place emphasis on both supplier-total-cost and quality.

“Companies in Singapore are not spared the volatility in global markets and complexities in supply chains, thus supply chain executives here echo their global counterparts’ cry for improved supply chain visibility and risk management. Perhaps due to Singapore’s world class air and sea ports, propelling the Republic’s increasing status as a mega-logistics hub, companies here currently possess relative sophistication in supply chain management, with a strategic intent to move to the higher end of the value chain,” says Shyam R Mamidi, Partner, IBM Global Business Services in Singapore.

“In as early as 1997, IBM Singapore was a beneficiary of the city-state’s superior geographical position, robust infrastructure and political stability when the global IBM Corporation set up the IBM Singapore Trading Center here – being the only other operational center outside of the United States. The Singapore Trading Center procures components/commodities from OEM suppliers on behalf of IBM’s outsourced/contract manufacturing partners; routing transactions worth billions through Singapore annually, with a total of US$4.5 billion in 2007 and US$2 billion in 2008. This optimised procurement process through consolidation also protects IBM contract price-confidentiality between our suppliers and manufacturing partners plus improves and leverages our working relationship with our key suppliers.”

“Leveraging IBM’s own supply chain transformation success to streamline all of IBM’s supply chain processes with the objective to drive growth and optimize cost, we continue to help clients build globally integrated supply chains through a focused approach around strategic realignment of their operations, revisiting talent pool deployment and supply chain strategy, in order to support their move towards a global business model, akin to IBM’s today,” Shyam concludes.

Role of ‘Chief collaborator’
The Supply Chain Officer role 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 says 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.