When IBM switched from a focus on regional business units to operating as a global organization, it had to create a single, integrated supply chain aligned with the new business model.
In the early 1990s, International Business Machines Corporation, better known as IBM, was changing not just its product line but its entire business model. The technology giant had reached the point where it was selling as much software and services as computers. The problem was that its supply chain had been designed to support local and regional computer sales and delivery. That fragmented approach, moreover, prevented IBM from capitalizing on one of its greatest strengths: the ability to leverage its purchasing power with vendors around the world. What "Big Blue" needed was to restructure its supply chain as a unified, global organization.
But that would require changing more than just the way IBM delivered products and materials. "We had to reinvent the supply chain as a system that moves people and insights and results and motivation," says Timothy E. Carroll, vice president of supply chain operations for IBM's Integrated Supply Chain. That mission set the company on a journey of self-improvement that continues to this day.
Building an integrated organization
Based in Armonk, N.Y., IBM was founded a little more than a century ago, in 1911. The giant company earned more than US $106 billion in worldwide revenue from hardware, software, and services in 2011. Its supply chain management organization works out of 360 locations in 64 countries, tracking more than 1.5 million assets for both IBM and its clients. The organization also deals with about 23,000 suppliers in nearly 100 countries.
IBM's supply chain operation oversees two critical processes for the corporation. The first is the order-to-cash cycle. That process, Carroll says, starts when a customer is ready to do business with IBM. It continues with the placement and then the execution of the order, including manufacturing and delivery. The cycle also encompasses billing and invoicing, accounts receivable, and post-sales support.
The second process is called "procure-to-pay," which encompasses purchasing and payment of suppliers. The procure-to-pay systems enable the integration of the purchasing department with the accounts payable department. In fact, these systems are designed to provide IBM with control and visibility over the entire lifecycle of a transaction—from the way an item is ordered to the manner in which the final invoice is processed. "It's everything that we do with external suppliers," Carroll says. "Our chief procurement officer and his organization have full responsibility for all purchasing on behalf of IBM, whether it's production, administrative, travel, you name it."
Two decades ago, IBM's supply chain picture was very different. It had a supply chain structure suited to supporting regional product sales across 150 countries, with different business units handling sourcing, logistics, and delivery of orders. "We had local procurement, local cash collection, local unique processes, and many units had their own [information] systems," Carroll recalls.
IBM's move toward global delivery of software and services meant that a supply chain strategy focused on local or regional businesses was no longer viable. In 1993 the company began the process of reorganizing its many supply chain organizations into a single global entity. The first step was to transform its procurement and order fulfillment functions, including establishing standards for those activities for all business units in every country.
The following year, IBM established Global Sourcing Councils where procurement executives could exchange knowledge with their counterparts in other countries. These councils also allow professionals with deep sourcing expertise to work together to solve problems and coordinate with other functions. "Our [procurement] professionals worldwide work hand-in-hand with product development in design, manufacture, and delivery of products that not only meet governmental regulations, but also meet voluntary objectives set by IBM, such as lower power consumption," Carroll explains.
Building on those earlier unification initiatives, by 2002 the company was able to formally establish a single, global supply chain organization. "We extracted anything [supply chain-related] that was in a line of business or in other functional entities across IBM and consolidated them into one integrated organization," Carroll says.
The global integration of IBM's supply chain serves as the foundation for two principles, or axes, underpinning the company's service philosophy. The first is what Carroll terms the "pillars of strength." The supply chain organization, he says, provides strength and stability to the company because there are uniform practices at its centers for procurement, manufacturing, and order fulfillment around the globe. For example, all fulfillment centers, regardless of location, follow a standard procedure for taking orders or handling cash collection. "The driving force is to 'do it once, consistently' around the globe," he observes.
Process standardization also allows IBM experts located anywhere in the world to support customers wherever the company does business—at any hour of the day or night. For example, a client in Europe that discovers a need for a critical part late at night doesn't have to wait until normal business hours to place an order, but can instead contact a fulfillment center in another part of the world to process its request. "These centers are supporting 24/7 everything that takes place around the world," Carroll says.
The other axis, dubbed the "pillars of value," relates to effectiveness in serving customers. It refers to the fact that supply chain professionals, located in a center anywhere in the world, can work on developing a specific solution to meet the needs of a particular industry, geography, or group of customers. By applying its expertise to solve a particular problem, IBM is able to increase customer or shareholder value.
Analysis and prevention
A decade after IBM achieved its objective of creating a single, integrated supply chain, the company continues to seek ways to improve on that model. Its latest supply chain initiative involves using predictive and prescriptive analytics to drive operational improvements. The tech giant has begun using a number of analytic software applications that sift through disparate types of information to find patterns or propose solutions to problems. IBM applies analytics to such areas as visibility, risk management, customer insight, cost containment, and sustainability. It also uses the software to model the impact of potential scenarios on its supplier network.
Carroll notes that analytics helped IBM respond in a timely and effective way when natural disasters threatened to disrupt the company's supply chain. For example, when a volcano in Iceland halted flights throughout much of Europe in April of 2010, the analytical software told IBM to focus its response on Asia rather than Europe. Carroll says he and his colleagues were "quizzical" at first about the software's analysis, which indicated that the critical link in IBM's supply chain was Hong Kong. It quickly became clear why. The analysis forecast that if IBM did not take steps to secure sufficient airlift once the volcanic eruption abated and flights resumed, it would encounter a bottleneck in Hong Kong when it tried to quickly move a backlog of components and products from Asian manufacturers to European customers. As a result of that prescriptive analysis, IBM booked space on commercial and charter aircraft from Hong Kong to Europe in plenty of time. "We didn't sit and watch what was going on with the disaster," Carroll says. "We prepared ourselves for what to do once the disaster lifted."
Now, in fact, a team of specialists, part of a dedicated research arm within IBM's supply chain organization, reviews various scenarios to prepare a response to a natural disaster or man-made crisis anywhere in the world. "We are constantly playing out scenarios through business analytics to determine if we have a way of quickly recovering from a situation," Carroll says.
The biggest challenge
As IBM continues to refine its supply chain strategy, analytical tools will play an even greater role. That's because Carroll believes that the biggest challenge facing his company is protecting the enterprise, its clients, and its shareholders from the unknown. "Most supply chain chiefs don't worry about what they know," he says. "They worry about what they don't know."
Predictive tools will enable IBM to foresee problems and take pre-emptive actions to prevent supply chain interruptions anywhere in the world. Its global, integrated supply chain organization will ensure that those actions are carried out quickly, efficiently, and consistently, no matter where or when they're needed.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
The number of container ships waiting outside U.S. East and Gulf Coast ports has swelled from just three vessels on Sunday to 54 on Thursday as a dockworker strike has swiftly halted bustling container traffic at some of the nation’s business facilities, according to analysis by Everstream Analytics.
As of Thursday morning, the two ports with the biggest traffic jams are Savannah (15 ships) and New York (14), followed by single-digit numbers at Mobile, Charleston, Houston, Philadelphia, Norfolk, Baltimore, and Miami, Everstream said.
The impact of that clogged flow of goods will depend on how long the strike lasts, analysts with Moody’s said. The firm’s Moody’s Analytics division estimates the strike will cause a daily hit to the U.S. economy of at least $500 million in the coming days. But that impact will jump to $2 billion per day if the strike persists for several weeks.
The immediate cost of the strike can be seen in rising surcharges and rerouting delays, which can be absorbed by most enterprise-scale companies but hit small and medium-sized businesses particularly hard, a report from Container xChange says.
“The timing of this strike is especially challenging as we are in our traditional peak season. While many pulled forward shipments earlier this year to mitigate risks, stockpiled inventories will only cushion businesses for so long. If the strike continues for an extended period, we could see significant strain on container availability and shipping schedules,” Christian Roeloffs, cofounder and CEO of Container xChange, said in a release.
“For small and medium-sized container traders, this could result in skyrocketing logistics costs and delays, making it harder to secure containers. The longer the disruption lasts, the more difficult it will be for these businesses to keep pace with market demands,” Roeloffs said.
Jason Kra kicked off his presentation at the Council of Supply Chain Management Professionals (CSCMP) EDGE Conference on Tuesday morning with a question: “How do we use data in assessing what countries we should be investing in for future supply chain decisions?” As president of Li & Fung where he oversees the supply chain solutions company’s wholesale and distribution business in the U.S., Kra understands that many companies are looking for ways to assess risk in their supply chains and diversify their operations beyond China. To properly assess risk, however, you need quality data and a decision model, he said.
In January 2024, in addition to his full-time job, Kra joined American University’s Kogod School of Business as an adjunct professor of the school’s master’s program where he decided to find some answers to his above question about data.
For his research, he created the following situation: “How can data be used to assess the attractiveness of scalable apparel-producing countries for planning based on stability and predictability, and what factors should be considered in the decision-making process to de-risk country diversification decisions?”
Since diversification and resilience have been hot topics in the supply chain space since the U.S.’s 2017 trade war with China, Kra sought to find a way to apply a scientific method to assess supply chain risk. He specifically wanted to answer the following questions:
1.Which methodology is most appropriate to investigate when selecting a country to produce apparel in based on weighted criteria?
2.What criteria should be used to evaluate a production country’s suitability for scalable manufacturing as a future investment?
3.What are the weights (relative importance) of each criterion?
4.How can this methodology be utilized to assess the suitability of production countries for scalable apparel manufacturing and to create a country ranking?
5.Will the criteria and methodology apply to other industries?
After creating a list of criteria and weight rankings based on importance, Kra reached out to 70 senior managers with 20+ years of experience and C-suite executives to get their feedback. What he found was a big difference in criteria/weight rankings between the C-suite and senior managers.
“That huge gap is a good area for future research,” said Kra. “If you don’t have alignment between your C-suite and your senior managers who are doing a lot of the execution, you’re never going to achieve the goals you set as a company.”
With the research results, Kra created a decision model for country selection that can be applied to any industry and customized based on a company’s unique needs. That model includes discussing the data findings, creating a list of diversification countries, and finally, looking at future trends to factor in (like exponential technology, speed, types of supply chains and geopolitics, and sustainability).
After showcasing his research data to the EDGE audience, Kra ended his presentation by sharing some key takeaways from his research:
China diversification strategies alone are not enough. The world will continue to be volatile and disruptive. Country and region diversification is the only protection.
Managers need to balance trade-offs between what is optimal and what is acceptable regarding supply chain decisions. Decision-makers need to find the best country at the lowest price, with the most dependability.
There is a disconnect or misalignment between C-suite executives and senior managers who execute the strategy. So further education and alignment is critical.
Data-driven decision-making for your company/industry: This can be done for any industry—the data is customizable, and there are many “free” sources you can access to put together regional and country data. Utilizing data helps eliminate path dependency (for example, relying on a lean or just-in-time inventory) and keeps executives and managers aligned.
“Look at the business you envision in the future,” said Kra, “and make that your model for today.”
Turning around a failing warehouse operation demands a similar methodology to how emergency room doctors triage troubled patients at the hospital, a speaker said today in a session at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
There are many reasons that a warehouse might start to miss its targets, such as a sudden volume increase or a new IT system implementation gone wrong, said Adri McCaskill, general manager for iPlan’s Warehouse Management business unit. But whatever the cause, the basic rescue strategy is the same: “Just like medicine, you do triage,” she said. “The most life-threatening problem we try to solve first. And only then, once we’ve stopped the bleeding, we can move on.”
In McCaskill’s comparison, just as a doctor might have to break some ribs through energetic CPR to get a patient’s heart beating again, a failing warehouse might need to recover by “breaking some ribs” in a business sense, such as making management changes or stock write-downs.
Once the business has made some stopgap solutions to “stop the bleeding,” it can proceed to a disciplined recovery, she said. And to reach their final goal, managers can use the classic tools of people, process, and technology to improve what she called the three most important key performance indicators (KPIs): on time in full (OTIF), inventory accuracy, and staff turnover.