Moving Towards a Smarter Value Chain with Business Analytics
Dr. Pitipong Lin, Analytics Innovation and Application Lead
IBM Global Supply Advanced Analytics Center of Excellence
The growing volume and variety of information encountered in a supply chain operation is driving unprecedented complexity as well as a requirement for using business analytics. Business leaders must be able to use the massive amount of data they have captured to make competitive decisions, moving beyond 'gut check' to 'fact check'.
IBM's 2009 CIO Study of 398 executives worldwide found that analytically driven organizations outperform their competitors. Nearly 75% said more predictive information will drive better decision making. More than 80% of the top performers were pursuing advantages though new analytics, which, together with the right management systems, tools, and culture that will enable them to seek, evaluate and act on opportunities.
Analytics give global supply chain executives a new class of competitive decision capabilities across geographic boundaries, including the technique to forecast commodity price changes in order to buy earlier or buy later, to predict potential supply shortages even before they turn critical, and to scan through the supply catalogs to detect price discrepancies for a product across multiple suppliers. Like the growth of Enterprise Resource Planning (ERP) or Customer Relationship Management (CRM) in the past, Business Analytics and Optimization (BAO) will be the next big focus for companies.
Building the smarter value chain
Business leaders realize that change is needed in order to meet their goals for profitability, revenue, cost reduction, and risk management. Basic business process automation can only go so far. Through better classification and use of information, companies can not only reduce risk associated with making an informed decision, but can also achieve the next generation of effectiveness by leveraging precise, contextual analytics.
IBM ranks among the top in terms of annual spend that not only includes buying parts for hardware production, but also on products and services for its internal use and for supporting its transformation outsourcing business for clients. There is a push to control cost by investing in procurement analytics applications, weaving data together from sourcing, procurement, transaction records, and payment processing.
IBM's Integrated Supply Chain (ISC) links to the greater IBM idea of a Smarter Planet to enable a Smarter Supply Chain by doing more with less, seeing without being there, solving problems before there is a problem, and knowing the customer as well as we know ourselves – a break away conundrum.
To align with this strategy, IBM's value chain has created an ISC Analytics Community and the Global Supply Advanced Analytics Center of Excellence. Both help IBM focus on driving business performance improvement through the globally integrated team, leveraging global talents and innovation to best address problems and opportunities.
Take, for example, a smart warning system that can predict future defect trends 30 weeks before any quality incident occurs, saving IBM and its core suppliers 7 weeks of defect containment effort.
"IBM must capitalize on the momentum created and differentiate ourselves from the competition," said Linda Cantwell, VP of Client Services Procurement. "IBM is well-positioned to leverage BAO."
Returning value to clients
The key approach is to use business analytics to drive measurable improvements in client experience, revenue, and efficiency and effectiveness across the value chain, as well as gain real-time and predictive insight across multiple sources of data to drive improved business planning and execution.
This shift sees the move of business analytics and optimization from a handful of procurement experts to a platform that can empower every analyst in the organization. This allows for rapid, informed and confident decisions and actions, moving from a static "sense and respond" to a dynamic "predict and act" capability. Furthermore, BAO can shine light on cost saving opportunities while resonating with the industry's appetite for shorter-term projects with faster return on investment (ROI).