IBM builds the world’s first cognitive supply chain

Delivering a superior customer experience, even during a pandemic

by Mike Tucker
8-minute read

During the last decade, a cascading series of unpredictable events — including earthquakes, volcanic eruptions, catastrophic storms, disease outbreaks and armed conflicts — has exposed deep fragilities in global supply chains. These events served as initial alarm bells for much greater challenges to come.

Intricately woven supply chains were built on concepts such as just-in-time manufacturing and designed to reduce labor and operating costs. Over the years, companies relentlessly optimized their supply chains to serve markets with relatively predictable supply and demand patterns. However, recent and unprecedented events have shown how these choices have created inflexible supply chains that are brittle under stress.

Breaking a single link in a globalized supply chain can have a ripple effect, impacting customers thousands of miles away from the point of disruption. “Supply chain issues” has become a catchphrase for economic dislocation.

“In recent years, supply chain has gone from the background, something people did not think about, to a boardroom-level topic,” says Rob Cushman, Senior Partner, IBM Supply Chain Transformation. “It’s a concept that people have had very painful personal experiences with. And that’s why thinking about supply chain is pivoting from cost to being about resilience and agility, and ultimately driving growth.”

two men working on a computer on factory floor

By deploying a cognitive supply chain, IBM reduced supply chain costs by USD

160 million

and built in more resilience and agility

Even during the peak of the COVID-19 pandemic, IBM maintained a

100%

order fulfillment rate of its products to clients

In the IBM cognitive supply chain, anyone can access the data, depending on their authority. It’s a real-time, single view of the truth, giving us immediate insights to manage the client experience, operate with resilience and react to market disruptions much faster.
Ron Castro
Vice President, IBM Supply Chain
Fork pallet truck with stack of cardboard boxes

A need for more supply chain speed and transparency

Warehouse manager using a laptop

The worldwide reach, size and complexity of its supply chain organization represented a significant challenge as IBM began exploring transformation strategies for delivering a differentiated customer experience to promote customer loyalty and growth. IBM employs supply chain staff in 40 countries and makes hundreds of thousands of customer deliveries and service calls in over 170 nations. IBM also collaborates with hundreds of suppliers across its multi-tier global network to build highly configurable and customized products to customer specifications.

Previously, the IBM supply chain ran on legacy systems spread across different organizational silos, making information sharing slow and incomplete. Employees also performed much of their work on spreadsheets, which impeded collaboration and real-time data transparency.

However, at the same time the IBM supply chain was re-thinking business processes and transforming its technology platforms, IBM was making major strides in AI, cloud, data fabric, IoT, edge computing and other tools. “We saw the advances IBM was making in all these new technologies,” says Ron Castro, Vice President of IBM Supply Chain. “So, we asked, ‘Why not leverage our own technology to move our own supply chain forward?’”

Supply chain has gone from the background, something people didn’t think about, to a boardroom-level topic ... And that’s why thinking about supply chain is pivoting from cost to being about resilience and agility.
Rob Cushman
Senior Partner, IBM Supply Chain Transformation

Countering supply chain disruption with innovation

“The principle behind why we embarked on this journey was to answer the question, ‘How can we best react to disruptions to manage resiliency and our client experience?’” says Castro. “We needed to identify disruptions quickly, analyze the data, get insights and decide on the best course of action.”

IBM supply chain management set out a bold vision to be the world’s first cognitive supply chain. The aim was to have an agile supply chain that extensively uses data and AI to lower costs, exceed customer expectations, ruthlessly eliminate or automate non-value add work and exponentially improve the experience of supply chain colleagues.

IBM Consulting™ was brought in at the beginning to help develop the processes required to drive the transformation. “We consider ourselves ‘Client Zero’ for IBM Consulting,” says Debbie Powell, IBM Digital Supply Chain Transformation Leader. “We have the technology to do what we need to do. It’s the culture and the processes where change was needed. We also realized that a lot of our knowledge was tribal and often depended on one person. We needed to digitize and democratize knowledge to support decision-making throughout the organization.”

Shadow of airplane over shipping container at sea

IBM Consulting helped the IBM supply chain team use Design Thinking methods to plan its digital transformation and move from sequential to continuous planning. “We put a lot of effort into agility and a cultural shift to empower people and adjust workflows in a controlled way,” says Matthias Gräfe, Director of IBM Supply Chain Transformation. “We went from a top-down approach to identifying personas from the bottom up, the people that actually make the decisions.”

“Successful digital transformation required us to challenge traditional ways of working that were held sacred for decades and win the hearts and minds of supply chain colleagues for change to stick,” says Takshay Aggarwal, Partner, IBM Supply Chain Transformation.

At a high level, the IBM supply chain digital transformation revolves around building sense-and-respond capabilities. This was accomplished by democratizing data and automating and augmenting decisions achieved by combining cognitive control tower, cognitive advisor, demand-supply planning and risk-resilience solutions. “We view the cognitive control tower as the single source of truth where you have access to all the data and it helps advise the best course of action,” says Castro. “It also helps gather insights from the information quickly across the end-to-end supply chain.”

The cognitive control tower is powered by the IBM® Cognitive Supply Chain Advisor 360 Solution, which runs on IBM Hybrid Cloud and on Red Hat® OpenShift®External Link software. Cognitive Advisor 360 enables real-time, intelligent supply chain visibility and transparency. It also senses and responds to changes in demand as they happen and simplifies the automation of supplier management.

The system uses IBM Watson® technology to enable natural language queries and responses, which accelerates the speed of decision-making and offers more options to correct issues. “I can ask — in natural language — about part shortages, order impacts, risks to revenues and trade-offs,” says Cushman. “There’s a button that recommends actions to solve issues — that’s what Watson does. It’s augmented intelligence so we empower people with better information to make data-driven decisions very quickly.”

“With the world’s first cognitive supply chain, we have the benefit of bringing in all these data from legacy systems and internal and external sources, as well as unstructured data, to apply advanced analytics and different elements of AI,” says Castro. “And since the system responds to natural language, think about the power of being able to extract data and get insights and recommendations without having to be an expert in a legacy system or an ERP platform.”

The IBM cognitive supply chain technology architecture also includes IBM Edge Application Manager, IBM Maximo® Visual Inspection and IBM Track and Trace IoT — an integrated stack of solutions that connect data end-to-end across the supply chain. “Our procurement, planning, manufacturing and logistics data are connecting in close to real time,” says Cushman. “That’s how we can share inbound information from suppliers, manufacturing status updates with our external manufacturing partners and delivery information with our customers.”

“We’ve added demand sensing, so that the solution pulses the market for changes in demand, predicting the future. We’ve also embedded a cloud-based risk management tool called Resilinc into our procurement and inbound parts management process,” says Cushman. “It essentially uses AI to crawl the web and if there is a disruption, we can take action quickly to secure a second supply source.”

Everyone else was screaming supply chain issues and we’re shipping products. We delivered on our promises during the height of the disruptive era we live in.
Daniel Thomas
IBM Business Optimization Manager, Chief of Staff

Greater operational visibility and cost savings

Warehouse foreman using a digital tablet

On a minute-by-minute basis, one of the biggest advantages of IBM’s cognitive supply chain is that it provides employees with immediate access to the information they need to read and mitigate disruptions. “There is unbelievable power that comes from taking lots of disparate data and putting it where people can see and understand it,” says Cushman.

“The real-time, single-view of the truth increases the velocity of decisions and leverages rapid response,” says Castro. “It helps us develop ‘what-if’ scenario analysis from a planning perspective all the way through to the execution team and suppliers.”

In fast-moving, real-world situations, quick, informed decisions provide a competitive advantage. “In the past, a major disruption — such as the closing of a major airport — would take days for us to understand the immediate impacts. With our current solution, we have ‘what-if’ capability that brings this analysis down to minutes,” says Powell. “In a supply constrained environment, whoever gets the information first wins.”

Since its cognitive supply chain became operational, IBM has saved USD 160 million related to reduced inventory costs, optimized shipping costs, better decision-making and time savings. “When mitigating a part shortage, it used to take four to six hours per part number,” says Powell. “We’ve brought that down to minutes and made further improvements to seconds.”

“Where’s my stuff?” is a common question in the supply chain industry. Finding an answer can entail hours of phone calls, emails and ERP queries across different geographies. “We’ve built a solution where you can log in and enter an order and you’ll have an answer in about 17 seconds,” says Cushman. “That was an enormous pivot and a powerful change in how we do business.”

By using its cognitive supply chain platform, the IBM supply chain team is also able to create new capabilities much faster. “Years ago, when we started this journey, we needed a long, looping roadmap with one or two years required for major capability upgrades,” says Castro. “With this digital enterprise, we now have teams that complete deployments in two or three weeks. We’ve moved to much more agile development.”

Despite dislocations caused by the COVID-19 pandemic, IBM fulfilled 100% of its orders by using its cognitive supply chain to quickly re-source and re-route parts as necessary. “During the last two years, the IBM supply chain did not fall behind. We met our commitments. Everyone else was screaming supply chain issues and we’re shipping products,” says Daniel Thomas, IBM Business Optimization Manager and Chief of Staff. “We delivered on our promises during the height of the disruptive era we live in.”

“Guaranteed supply is important, but many of our clients are also looking for predictability of supply,” says Castro. “The tools we have now help us address both issues. They enable us to manage the demand side to meet the right client expectations.”

With this digital enterprise, we now have teams that complete deployments in two or three weeks. We’ve moved to much more agile development.
Ron Castro
Vice President, IBM Supply Chain

Inspiring future IBM supply chain leaders

Hand holding a tablet infront of a computer screen with financial data scrolling

“We have a responsibility to inspire younger supply chain leaders who will keep the IBM supply chain at the cutting edge and beyond for years to come,” says Aggarwal. “People entering the work force today have different experiences than previous generations. They are digital natives and expect a consumer-grade experience when managing their work. As we embarked on our journey, we actively engaged them in designing workflows and digital capabilities. There were trials and tribulations and we had multiple failures in design and rollout. Architecting the world’s first cognitive supply chain, and learning from failures and successes, made our young leaders champions of the cognitive supply chain and constant innovators of new capabilities.”

“IBM is the only global services company with its own multibillion-dollar supply chain, and we’ve transformed it into a data-driven architecture to drive our business. There’s a richness of experience that we bring to client conversations because we’ve done this work for ourselves,” says Cushman. “It’s all about how a supply chain delivers a differentiated customer experience to enable stickiness and growth.”

“The collaboration between IBM Systems and IBM Consulting teams to transform our own business and demonstrate the power of exponential technologies in supply chain has been one of our finest moments as a company,” says Cushman. “We look forward to sharing our real-world experience and learnings with our worldwide community of customers, partners and clients.”

IBM logo
About International Business Machines Corporation (IBM)

IBMExternal Link is an information technology company based in Armonk, New York. Founded in 1911, the company offers hardware, software and services in cloud computing, AI, commerce, data and analytics, IoT, mobile and cybersecurity, as well as business resiliency, strategy and design solutions. IBM has a global workforce of more than 280,000 employees serving clients in over 175 countries through IBM Consulting, IBM Software and IBM Infrastructure.

Solution components
IBM logo
About International Business Machines Corporation (IBM)

IBMExternal Link is an information technology company based in Armonk, New York. Founded in 1911, the company offers hardware, software and services in cloud computing, AI, commerce, data and analytics, IoT, mobile and cybersecurity, as well as business resiliency, strategy and design solutions. IBM has a global workforce of more than 280,000 employees serving clients in over 175 countries through IBM Consulting, IBM Software and IBM Infrastructure.

Solution components
IBM employs supply chain staff in 40 countries and makes hundreds of thousands of customer deliveries and service calls in over 170 nations.