The presentation given by Donnie Haye, Vice President – Analytics, Solutions and Acquisitions ISC at IBM, at the Supply Chain Insights Global Summit in Scottsdale, AZ on September 11, 2014 Imagining Supply Chain Processes Outside-in. Building Value Networks at IBM to Improve Channel Effectiveness. As inventory sits in the channel in high-tech and electronics, it loses value. Join this session to understand how IBM automated the channel outside-in through the creation of a value-added network termed iBAT to drive channel effectiveness.

1. Donnie Haye
IBM
Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.1

2. Agenda
 IBM Analytics-led Transformation, Lesson Learned
 IBM Buy Analysis Tool (iBAT) Overview
 Collaborating for the Future
Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.2

3. ISC transformation: analytics-led, technology-enabled
Globally Integrated Enterprise Smarter Supply Chain
New Era Supply Chain
Reinvention
 Enterprise efficiencies
 Streamlined Global processes
 Information sharing
 Advanced Analytics, Optimization,
Big Data Mgt
 Supply Chain Visibility
 Multi-enterprise supply chain
transformation
 Watson-enabled cognitive analytics
 Supply Chain Transparency
 Data Driven /Digitally Executed
 Cloud, Mobile, Social
Evolving Supply Chain Management from cost center to value center…
Business Impact
 2013 Cash Collected : $99B
 2013 Managed Spend : $53B
 >20K Employees in 70 countries
 $7B in procurement saving annually
 18K+ suppliers connected online
 >96% of invoices are electronic
 32 Smarter Analytics projects
 Over 3.9M visits to eTools
Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.3

4. We rely on different types of analytics to leverage Big Data
How do we optimize a dynamic, Big Data
environment?
Deeply analytical computing systems that learn &
interact naturally with people
What should we do about it?
Prescriptive
Cognitive
Collaborate for maximum business value,
informed by advanced analytics
What will happen?
Understand the most likely future scenario,
What happened?
Descriptive
Predictive
and its business implications
Get in touch with reality, a single source of
the truth, visibility
Watson Analytics
Velocity (data in motion)
Variety (many forms of data)
Volume (data at rest)
Veracity (data in doubt)
Big Data = All Data
(structured, unstructured, internal,
partner, public)
Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.4

5. We have over 30 analytics solutions working across our extended enterprise
IBM supply chain
Enterprise Process
Framework with
Analytics Solutions
Portfolio of analytics
driving significant
top- and bottom-line
value
Focus on
iBAT
Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.5

6. Lessons learned – establishing momentum, success with analytics
Project deployment &
readiness to change
Iterative approach
Incentive alignment
 Start with a business pain point
 Have a visualization and user interface strategy
 As critical as the math and analytics expertise are, transformation leadership and
execution/ operations expertise is even more important (3-in-the-box management
system)
 It is OK to start modestly and build towards major impact
 Iterative approach allows you to improve your capabilities along the way and build
progressively stronger stakeholder support
 Incorporate cycles of learning into the analytics solution
 Design Compelling business benefits for each supply chain participant (win/win/win)
 Reflect benefits in terms and conditions
 Encourage utilization with incentive alignment
Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.6

7. Agenda
 IBM Analytics-led Transformation, Lesson Learned
 IBM Buy Analysis Tool (iBAT) Overview
 Collaborating for the Future
Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.7

8. IBM struggled to manage its channel demand & inventory planning to control
channel stockouts & overages
Case Background: IBM Systems and Technology Group
Manufacturing Channels End Customers
Industrial OEM
Contract
Manufacturer
Overage
Shortage
Challenges
Tier 1
Distribution
DeXmand SalXes out SalXes out
Lack of channel
demand visibility
Non optimized channel
inventory
Tier 2
Distribution
Value Added
Reseller [VAR]
Lack of visibility to demand factors and sales-out by
partners inhibited IBM from making accurate buy
recommendations to the channels
IBM inventory was not optimized in the channel leading to
overages (with price protection exposure) and underages
(with lost sales and customer service issues)
Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.8

9. IBM Buy Analysis Tool (iBAT) is a visibility & analytical platform to enable
better channel management & optimization
Manufacturing Tier(s) Distribution Tier(s) End Customers
Value Added
Reseller (VAR)
Tier 2
Distribution
Scope of iBAT
 Collaboration platform & data model
 Channel collaboration & support processes  Incentive alignment
Demand
Signal
Repository
iBAT is recognized by multiple awards:
 Tech Data 2010 Inventory Optimization
Partner of the year
 CRN Channel Champion award
 IBM Research “Outstanding
Accomplishment” 2011
Industrial OEM
Contract
Manufacturer
Tier 1
Distribu-tion
The Solution
 Channel collaboration solution
with advanced analytical modeling
of daily demand signals to supply
pipeline
 Optimized replenishment
decisions under price protection
constraints. Automated terms &
conditions, payment/reconciliation
Key Benefits (accrue to both IBM & channel)
 Predictive analytics
 Price protection expense reduce by 80%
 Inventory reduced by 30%, aged inventory by 25%
 Returns reduced by over 50%
 Serviceability increase by 10%
 Significant enhancement of visibility to channel inventory, sales, other
metrics  optimization opportunity
Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.9

10. Data & collaborative decision making with channels is key to producing viable
buy recommendations
Utilizing iBAT to collaborate with channels to drive better buy recommendations
1. Receive daily
channel partner
information
[sales out,
inventory
positions]
2. Receive
internal
manufacturing
data [product
lifecycle,
backlog]
3. Transform
data into
channel
forecast
4. Generate
optimized min-max
buy
recommendations
with alerts
5. Channel
partners and
channel reps
collaborate on
weekly buy
decisions
6. Place
purchase orders
based on iBAT
generated buy
quantities
iBAT calculates
Qualified Price
Protection Qtys
and Summary
Report
Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.10

11. iBAT handles IBM’s diverse channel partner landscape
Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.11

12. Channel incentive linkage: iBAT enables channel price protection and
automated business processes for ease of doing business
• Price protection is a financial incentive offered to distributors via contractual terms & conditions
– Protects a distributor against price reductions within a specified time, e.g. 45-60 days from invoice date
• Qualified Price Protection (QPP) offers distributors enhanced price protection based on compliance to iBAT
– Not all part numbers are in QPP; we select those part numbers which represent 70-80% of revenue
– Qualification occurs weekly, part number by part number
• If the distributor maintains their actual supply within the iBAT range of the recommended supply, their
inventory will be price protected up to the maximum recommended supply line quantity, regardless of the
age of the inventory
• iBAT automatically summarizes QPP status and results weekly in the tool
• iBAT is interlocked with the price protection rebate process; QPP results transmitted weekly
• Regular use of iBAT & QPP is proven to be financially beneficial to IBM and Business Partners
Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.12

13. iBAT: Web-based, collaborative dashboard to track market demand changes,
inventory visibility & to provide buy/sell alerts
Rich analytics
capabilities
 Descriptive
 Predictive
 Prescriptive
Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.13

14. What do our channel partners say about iBAT?
iBAT provides a
stable and consistent
platform to manage
my business
I no longer have to
refer to 20 different
bookmarks for
product data
US Distributor, VP Materials, Operations
… it’s more than inventory
management … iBAT is
integrated into our
strategic mgt. and sales
cadence
Netherlands Distributor
We’ve been struggling
for months to develop
something similar, iBAT
is amazing!
Multi-country European Distributor
French Distributor
Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.14

15. Agenda
 IBM Analytics-led Transformation, Lesson Learned
 IBM Buy Analysis Tool (iBAT) Overview
 Collaborating for the Future
Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.15

16. Extensive collaboration inside & outside of IBM
Representative Clients
Global Business
Services (GBS)
Software
Group (SWG)
Systems & Tech
Group (STG)
IBM Channel
Partners
IBM Suppliers
Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.16

17. IBM supply chain capabilities – future vision
Cloud
Mega trends influence the development of key strategic SC capabilities
Attain Supply Chain
Transparency
Analytics
Leverage Big Data &
Advanced Analytics
Extend Multi-enterprise Supply
Chain Transformation End-to-End
Social Mobile
Mega trends in Computing Critical 2020 SC Capability
Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.17

18. Thank you…
Sup9p/ly1 C5ha/2in 0In1sig4hts Global Summit #ImagineSC September 2014, p.18