IBM’S ON-DEMAND MODEL DRIVES

FASTER, LEANER, MORE EFFICIENT SUPPLY CHAIN

Case Study: Challenge Solution

• Build a supply chain that can sense
IBM and respond to changes in customer
demand and available supply and
support IBM’s on-demand business
model
• E2open solutions provide IBM and
its multiple tiers of suppliers with
a consolidated view of demand
and available supply. IBM is able
to proactively manage demand-
supply execution, inventory, and
replenishment across its global
supply chain

IBM Uses E2open to Support Its On-Demand Business Model

Company Profile
• The world’s largest provider of
computer products and services,
IBM makes mainframes and servers,
storage systems and peripherals
IBM aims to practice what it preaches. The company’s early support of fully automated
processes—such as order management, service requests and OEM manufacturing
work orders—has served to improve customer satisfaction and operational efficiencies.
And over the years the company has remained committed to continuous improvement
through the intelligent application of new technologies, becoming a model for a fully
automated enterprise using the most advanced supply chain solutions and practices.
IBM defines the next level of business process efficiency as an on-demand model: “An
enterprise whose business processes can respond with speed to any customer demand,
market opportunity or external threat.” This model requires seamless end-to-end
integration of internal business systems within IBM and extending into the business
systems of key partners, suppliers and customers.

IBM also realized that a unified on-demand system—one able to sense and respond with
speed and accuracy to changes in customer demand—was an essential requirement
for creating a faster, leaner and more efficient enterprise. And this system would have
to support both demand/supply synchronization and full visibility into complex supply

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“With the E2open solution, IBM is
laying the foundation for true end-
to-end process integration across
the entire supply ecosystem. This will
move procurement to higher levels
of efficiency through true multi-tier
visibility, thanks to E2open’s any-
to-any integration platform, which
allows suppliers to connect to IBM
electronically in the format of their
choice.”
Ian Crawford, Vice President, Production
Procurement, IBM
e2open.com
chain processes across multiple tiers of suppliers. The rewards were clearly there. Low-
touch or no-touch management would mean significantly lower administrative costs,
potential reduction in capital expenditures and an improvement in customer satisfaction.
The benefits of realizing IBM’s on-demand business model would be to:
• Evolve IBM’s supply chain to an on-demand business operation, moving it from an
expense to a major competitive advantage
• Focus on building value across the extended supply chain
• Implement adaptive marketing that quickly responds to change
• Improve operations and speed innovation
• Create a faster, leaner, more efficient enterprise
• Transform both customers and internal supply chains
The Challenge
With one of the largest and most complex supply chains in the world, IBM spends $41
billion annually on orders for more than two billion component parts a year, working with
33,000 suppliers and 45,000 business partners. Its supply chain spans lead management,
the creation of customer proposals, component sourcing/procurement, manufacturing
fulfillment, customer service, billing, accounts receivable and aftermarket services.
“IBM has long focused on creating and building an integrated, end-to-end supply chain,”
says Kevin O’Connell, IBM’s director of manufacturing and procurement processes. “Now
we wanted to bump it up to new levels of collaboration. To achieve our on-demand goals,
we needed to extend integration of business processes across a multi-tiered supply chain
and into customer and partner systems as well.”
O’Connell and his team realized that their in-house supply chain system was not sustainable.
Like most legacy systems, it was a hard-coded application resistant to change. Proprietary
architecture and point-to-point connections were becoming increasingly expensive to
maintain and had limited scalability. Besides, the legacy solution lacked easy connectivity
and visibility into current supplier systems—a serious roadblock to extended supply chain
management.
With their legacy system, IBM relied on suppliers’ and partners’ reports and management
systems for visibility into its own supply chain. Sourcing compliance by Electronics
Manufacturing Services (EMS) providers for IBM core suppliers was nothing close to real
time. Instead, IBM operated in a reactionary mode, relying on EMS self-reporting and
supplier end-of-quarter information.
After extended analysis, IBM identified specific pain points in two key areas: synchronization
of demand/supply and visibility into Tier 2 and 3 suppliers and contract manufacturers.
The company needed an industry-standard solution to support IBM global manufacturing
sites and divisions, and to provide visibility and control across multiple tiers of suppliers.
The system had to be flexible and robust enough to support changing customer demand
scenarios with proactive supply/demand planning.
The team put together a wish list outlining the characteristics for a new solution that would
help them with their goal of ensuring supply while cutting costs and cycle times. IBM
set high standards, insisting that the solution must have the ability to send out forecast
information, receive supplier commitments, monitor supplier inventory levels, trigger
replenishment cycles and ensure continuity of supply.
Case Study: IBM Page 2
 It was a tall order, but achievable, O’Connell and his team decided. And if even a small
portion of the wish list could be realized, the effort of transforming their supply chain to
support an on-demand model would pay off enormously.

The Solution

IBM turned to E2open to provide two production-proven solutions:

• E2open Demand/Supply Synchronization Solution

• E2open Multi-tier Visibility Solution

These components directly support IBM’s primary business requirements: gaining visibility
and control of critical demand/supply chain processes across global manufacturing
facilities, replenishment service centers and multiple tiers of suppliers. Working seamlessly
together, the E2open solutions provide IBM and suppliers with a consolidated view of
customer demand, available supply and any imbalances—representing 85 percent of
IBM’s manufacturing procurement expenditures.

In addition, the E2open Demand/Supply Synchronization Solution allows IBM to

proactively manage demand/supply execution, inventory and replenishment across IBM’s
global supply chain—including 37 global manufacturing facilities, 10 replenishment (VMI)
service centers and Tier 1 suppliers and contract manufacturers. Key benefits include the
ability to:

• Quickly sense demand and supply imbalances, provide timely alerts on potential
shortages and automatically trigger replenishment cycles
• Align forecasts with procurement activities while reducing excess inventory and
liabilities

IBM’s initial deployment focused on providing multi-tier inventory and supply planning
information. This data provides a more accurate view of supply positions and allowed IBM
to provide improved planning information to suppliers. Over time, the solution became
even more powerful as IBM and its suppliers added to a knowledge base of information
aggregated by the E2open Multi-tier Visibility application. This solution ensured that every
supplier tier had the business data they needed to make effective supply chain decisions.

E2open Demand/Supply Synchronization Solution

The E2open Demand/Supply Synchronization Solution helps IBM sense and respond
to demand and supply changes—including forecast/commit cycles—quickly flagging
demand/supply imbalances and potential shortages. It supports traditional forecast and
commit processes and multi-pass planning processes. Collectively, these capabilities
ensure IBM’s goal of building a comprehensive supply chain that responds to demand and
supply changes rapidly and accurately.

Powerful exception management and decision support capabilities allow all tiers of IBM’s
supply chain to track actual execution against forecasts, demand and inventory positions.
And the solution automatically calculates inventory levels and tracks inventory compliance
and target levels. As a result, IBM can respond quickly and decisively to any changes
in demand. The solution ensures supply, cuts costs by eliminating excess or obsolete
inventory, reduces liabilities, slashes cycle time and increases flexibility within the IBM
supply chain.

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 E2open Multi-tier Visibility Solution
The E2open Multi-tier Visibility Solution provides Tier 1, 2 and 3 suppliers with consolidated
visibility into forecasts, commits, aggregate order quantities and inventory positions—
so each tier of the supply chain can track execution and respond quickly to alerts on
imbalances, errors and shortages. The scope and depth of this visibility is critical to high
levels of supply assurance. To ensure access to business-critical information, multiple
partner integration options, using an any-to-any integration platform, transfer content
between IBM and its partners using partner-preferred data formats.

Rapid Configuration and Deployment, Ongoing Support and Management

E2open solutions make it easy for IBM and multiple tiers of suppliers seeking to participate
in IBM’s dynamic business ecosystem to get up and running quickly with minimum up-
front investment. E2open provides all the software, deployment and operations services
needed to implement, manage and support these applications. This complete solution
can reduce the time needed to integrate a supplier in a server-toserver mode from three
months or more to as little as 10 to 15 days.

To implement its solutions, E2open leverages a program management methodology

designed specifically for this kind of inter-company program and tools for the successful
delivery of the solution. “On-boarding” services ensure rapid provisioning, installation,
configuration and testing of the E2open solution for contract manufacturing, suppliers
and other trading partners. These services include partner-readiness evaluations, user
workshops, training, B2B technical specifications and integration with back-end systems
and existing EAI/B2B infrastructure. And the E2open solution allows suppliers to avoid
much of the hardware, software, operations, services and hosting costs associated with a
typical integration project. This cost savings motivates IBM’s suppliers to actively support
the company’s new business process initiatives.

Results

The solution currently extends across 37 manufacturing facilities and 10 replenishment (VMI)
service centers, representing more than 85 percent of annual manufacturing procurement
expenditures. It provides both IBM and Tiers 1, 2 and 3 suppliers a consolidated view of
demand and available supply. With the E2open Demand/Supply Synchronization Solution,
IBM is able to proactively manage demand/supply execution, inventory and replenishment
across its global supply chain.

IBM is poised to incrementally scale the solution as more supply chain partners come on
board through acquisitions and expansions.

The company experienced a very fast time to value with rapid integration and deployment
across global sites and tiers of suppliers, lowered total cost of ownership, streamlined
operations, and increased responsiveness and flexibility within their supply chain. The
solutions help IBM in its quest to build a highly responsive supply chain that can meet
changes in customer demand rapidly and efficiently.

Specific improvements achieved:

• Reduced supply/demand planning time from 45+ days to 10 days

• Increased pull replenishment levels to 85 percent
• Improved outbound on-time delivery rates to 90 to 95 percent
• Improved inventory turns more than 42 percent
• Achieved time to benefit of less than nine months

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 About IBM
IBM is the world’s largest information technology company, with 80 years of leadership in
helping businesses innovate and leverage new technologies. Drawing on resources across
IBM and key business partners, the company offers a wide range of services, solutions and
technologies that enable customers of all sizes to take full advantage of the new era of
e-business. Among the leaders in almost every market in which it competes, IBM makes
mainframes and servers, storage systems and peripherals. IBM’s service arm is the largest in
the world, and the company is the second-largest provider of software as well as one of the
largest semiconductor providers. The company continues to use acquisitions to augment its
software and service businesses, while streamlining its hardware operations with divestitures
and organizational shifts.

About E2open
E2open is the leading provider of software and services to manage inter-company
processes such as inventory management, order management, demand/supply forecast
synchronization, outsourced manufacturing visibility and multi-tier visibility—integrating
trading partners across multiple tiers of distributed global supply and demand networks.
For more information, call 1.650.645.6500 or visit www.e2open.com.

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