Mar 04, 2009Supply chain leaders at companies around the world share similar challenges: They want to improve supply chain visibility, manage risks, know and serve customers better, contain costs and succeed at globalization, according to a new IBM study involving nearly 400 executives. But the report also reveals that few companies have adopted solutions that can provide them with a complete and real-time view of their supply chain operations—a finding that surprised the IBM executives who worked on it.
"The fact that, over and over again, we heard about the lack of visibility [was surprising], because a lot of people say, 'Oh my gosh, that issue is 150 years old,'" says Karen Butner, global lead of the IBM Institute for Business Value, who worked on IBM's inaugural chief supply chain officer study, entitled "The Smarter Supply Chain of the Future." The 72-page report offers a glimpse into the minds and agendas of 393 supply chain executives at companies located in 25 countries and serving 29 separate industries, including retail, industrial products, food and beverage, pharmaceuticals, telecommunications, electronics and government. The results, Butner says, are based on in-depth interviews conducted with these executives that typically lasted 90 minutes.
When asked whether their companies have real-time visibility of their supply chains—both within their own operations and beyond, to include partners' operations—only 15 percent of the executives surveyed answered in the affirmative. Seventy-five percent said their firms have "somewhat" real-time visibility, Butner says, while the remaining 10 percent indicated having none whatsoever. What's more, 70 percent of those questioned reported that the real-time visibility challenge impacts their supply chains to a significant or very significant extent.
According to IBM, the technologies best poised to improve supply chain visibility are RFID, sensors and GPS that can collect and deliver real-time data regarding every facet of an interconnected supply chain, with analytics, business intelligence and modeling layered on top to turn that information into intelligence that can be acted on instantly and decisively—and, in some cases, automatically.
"The baseline for smarter supply chains really is about RFID, sensors and actuators," Butner states. Companies not only require the real-time gathering of information that RFID and sensors can provide, they also need that data collection to span the supply chain, she says—from the moment raw materials leave a supplier to the instant a finished good is sold in a retail store, and beyond. That requires communication and collaboration within and across businesses, as well as the integration of systems within and across companies so those systems can share the collected data.
"Of course, we need to take it up another step," Butner says. "The last thing everyone needs is more information that no one can make sense of." The data not only needs to be fed into transactional ERP systems, she notes, but it also must be analyzed and modeled, so companies can proactively react to—and predict—events.
But Butner takes issue with that notion. "The answer is most definitely yes," she states, to the question of whether radio frequency identification and similar technologies are available and affordable. Still, she acknowledges that companies may be averse to implementing such solutions in light of current economic conditions. The solutions do have to be specific, she says, noting, "Companies really need to focus—especially in today's situation, where we absolutely cannot have any financial mishaps—and zero in on their specific problem areas, and then look for integrated capabilities to solve those problems."
IBM describes the smarter supply chain as one that generates real-time information via sensors, RFID tags, meters, actuators, GPS and other devices and systems. In the study, the company predicts that the supply chains will "rely less on labor-based tracking and monitoring, as objects like shipping containers, trucks, products and parts report on themselves." IBM also suggests that LED screens on devices perhaps not yet invented could contain dashboard programs that would display the real-time status of plans, commitments, supply sources, pipeline inventories and consumer requirements, thereby providing companies with additional tools for building smart supply chains.
Furthermore, IBM expects the future will see unprecedented levels of interaction, not only among customers, suppliers and IT systems in general, but among objects—such as RFID tags—that monitor the supply chain. According to the report, intelligent systems will then be employed to assess situations based on the data collected, and in some cases be capable of learning and making decisions automatically, without human involvement.
The authors suggest, for instance, that an intelligent system "might reconfigure supply chain networks when disruptions occur. It could acquire rights to use physical assets like production capacity, distribution facilities and transportation fleets on demand through virtual exchanges. This intelligence will be used not only to make real-time decisions, but also to predict the future. Equipped with sophisticated modeling and simulation capabilities, the smarter supply chain will move past sense-and-respond to predict-and-act."
The new IBM study is now available. For more information, and to download a copy of the study, visit IBM's Web site.
