IBM to offer supply chain outsourcing services

June 28, 2005
IBM Corp. has introduced a supply chain business transformation outsourcing (BTO) capability. The new offering will tap into IBMs internal supply chain

IBM Corp. has introduced a supply chain business transformation outsourcing (BTO) capability. The new offering will 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.

The new services will provide companies with supply chain efficiencies that will allow them to become On Demand businesses, as they aim for improvements in business flexibility and performance.

“Each year, roughly $3 trillion is spent globally on supply chains, and most CEOs recognize that a responsive, on demand supply chain is key to optimizing business performance,” says 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 capture this new market opportunity.”

Supply chain optimization and management represents an approximate $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,” adds 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 as part of the company's transformation to an On Demand business, will be incorporated into the new offerings, as well as design support and expertise provided by IBM consultants who have both deep 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 will offer transformational outsourcing services in a range of key supply chain areas, including logistics, direct materials sourcing and supply chain optimization.

In 2004, IBM’s supply chain efficiencies reduced IBM inventories to their lowest level in 30 years, generated $285 million dollars in cash and improved sales force productivity by 25%.

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