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Business Consulting Services

Supply Chain Management New competitive realities


Linda B. Ban Management Briefing Seminar August 2, 2004

2004 IBM Corporation

Business Consulting Services

Agenda
Supply chain management why is it so hard? Manufacturer and supplier findings What affect IT has on supply chain The road ahead

MBS Briefiing

August 2, 2004

2004 IBM Corporation

Business Consulting Services

Why is supply chain so hard?


In-depth interviews with twenty-nine automotive executives Sixteen manufacturing and supplier companies Global organizations European and North American participation Interviews covered a broad range of questions around SCM activities within the organization and its impact with its value net Current opportunities and challenges SCMs influence on the organization Technologys influence/impact on SCM Activities and future plans

MBS Briefiing

August 2, 2004

2004 IBM Corporation

Business Consulting Services

We broadly defined supply chain management (SCM)

We defined SCM to also include the customer delivery channel


4 MBS Briefiing August 2, 2004 2004 IBM Corporation

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We heard several points over and over again from interviewees


The performance of SCM lags its recognized importance

SCM crosses numerous boundaries, both internally and externally

Globalization has an increasingly larger impact on supply chain tasks

Complexity, ranging from company cultures to product design, multiple sourcing and pricing configurations continues to create significant challenges
5 MBS Briefiing August 2, 2004 2004 IBM Corporation

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Manufacturers have some specific challenges. . . .


Intense cost pressures Managing the global supply chain Establishing additional manufacturing footprints Identifying sourcing partners

Being able to efficiently support an increasing number of lower volume vehicle models, each with a higher level of option content and complexity, is a fundamental challenge. To the automotive supply base, this challenge results in greater product and process complexity, lower volumes of individual parts or options, and a higher level of variation in supply chain demand flows. - Manufacturer respondent

MBS Briefiing

August 2, 2004

2004 IBM Corporation

Business Consulting Services

. . . see room for improvement in several areas. . .

MBS Briefiing

August 2, 2004

2004 IBM Corporation

Business Consulting Services

. . . and are focusing heavily on technology


Standardization
Common nomenclature and data formats Common tools

Integration
diverse computer systems supply chain processes with engineering, purchasing, logistics, etc

Implementation of portal technologies

MBS Briefiing

August 2, 2004

2004 IBM Corporation

Business Consulting Services

Suppliers face similar challenges with a different twist . .


Increased complexity of manufacturer orders Cost and pricing issues Risk management in the supply chain Collaboration and relationship management in the supply chain

MBS Briefiing

August 2, 2004

2004 IBM Corporation

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. . . feel they are performing well in several areas. . .

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MBS Briefiing

August 2, 2004

2004 IBM Corporation

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. . . and are focusing on the use of technology a little differently Connection and collaboration with the Tier N supply base Cost reduction Inventory visualization Computer system integration

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MBS Briefiing

August 2, 2004

2004 IBM Corporation

Business Consulting Services

Manufacturers and suppliers agree on some of the most important things. . . Inventory is the hidden cost within the supply chain
Taking cost out is still a major problem

Globalization has a significant impact


Identifying and managing suppliers from afar is challenging

Complexity continues to increase


Both product design and in management of relationships

Success is taking cost out of the supply chain structure, not just moving margins. - Manufacturer respondent
12 MBS Briefiing August 2, 2004 2004 IBM Corporation

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but ambiguity still exists


Selection vs development models
Shifting purchasing philosophies

Component vs module vs system decisions


No consistent definition of the process

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MBS Briefiing

August 2, 2004

2004 IBM Corporation

Business Consulting Services

IT is important to both manufacturers and suppliers


Manufacturers
Portal technology One face to all suppliers and functions Accessibility of information Fast access to ratings
Delivery, cost, quality

Suppliers
Accessibility of information Inventory optimization Better continuous improvement efforts
Information flows more quickly to all involved parties

Challenges
Integration of legacy systems to deliver information to portals Security

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MBS Briefiing

August 2, 2004

2004 IBM Corporation

Business Consulting Services

Manufacturers and suppliers are using technology to move towards optimal integration

Buying, not browsing Working, not surfing Get on the Net

Optimize operations dynamically respond to the needs of customers, employees, partners.

Advanced

Integrating

Early
Access Publish Transact Integrate Internally Integrate Adapt Externally Dynamically

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MBS Briefiing

August 2, 2004

2004 IBM Corporation

Business Consulting Services

By contrast, China auto suppliers have a different focus


Survey of 299 auto suppliers in China Joint venture and domestic respondents

Most use in-house technology

Most orders are placed by fax and telephone

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MBS Briefiing

August 2, 2004

2004 IBM Corporation

Business Consulting Services

By comparison with Europe and North America, IT spending by Chinese automotive suppliers is much lower
Half of all surveyed firms spend less than $50k a year, 81% spend less than 100k of the 56 companies spending more than that, 33 are joint ventures
60% 50% 40% 30% 20% 10% 0% Less than $50,000 50,000-100,000 100,001-200,000 200,001+ Chinese firms Joint ventures

Source: Economist Corporate Network China auto suppliers survey, 2004 17 MBS Briefiing August 2, 2004 2004 IBM Corporation

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The road ahead for SCM efforts


Key success factors include: Better linkages between forecasts and material requests

Use of portal technologies to integrate internally AND externally

Integration of functions to improve performance, increase effectiveness and reinforce consistent organizational cultures

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MBS Briefiing

August 2, 2004

2004 IBM Corporation

Business Consulting Services

Linda Ban Global Industrial Sector Leader IBM Institute for Business Value Automotive Practice

lban@us.ibm.com 248-552-4570

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MBS Briefiing

August 2, 2004

2004 IBM Corporation

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