IBM Practices What it Preaches in Supply Chain Transformation

⇨ Amidst the accelerated migration to cloud-based infrastructures, a discernible trend emerges wherein substantial resources are directed by organizations towards SAP transformations, with a notable emphasis on enhancing supply chain functionalities.

⇨ Recognizing the market trend towards enhanced supply chain capabilities, IBM has accelerated its expertise and is driving the next generation of SAP consulting and technology engagement to define and deliver digital transformation for SAP.

⇨ IBM’s approach involves working closely with clients to navigate process and transformational changes, identifying areas ripe for optimization and justifying subsequent investment in digital supply chain solutions from SAP.

Modern supply chain management systems go beyond traditional logistics of “where” and “when,” affecting aspects like product and service quality, delivery efficiency, costs, customer experience, and ultimately, overall profitability. This shift has prompted global supply chain leaders to reassess conventional practices, acknowledging that adhering to outdated methodologies poses the most significant risk when dealing with disruptions. However, despite advancements, supply chain operations still heavily rely on traditional, manual, paper-based processes, notably in transportation and warehousing.

Amidst the accelerated migration to cloud-based infrastructures, a discernible trend emerges wherein substantial resources are directed by organizations towards SAP transformations, with a notable emphasis on enhancing supply chain functionalities. Typically, these transformations allocate a considerable portion—ranging from 5% to 10%—of their budgets specifically towards engaging supply chain consulting services, underlining the critical importance accorded to optimizing supply chain operations within this paradigm shift.

Recognizing the market trend towards enhanced supply chain capabilities, IBM has accelerated its expertise and is driving the next generation of SAP consulting and technology engagement to define and deliver digital transformation for SAP, in which, IBM’s advanced AI plays a crucial role, in combination with other Digital Supply Chain solutions such as: SAP Integrated Business Planning (IBP), SAP Extended Warehouse Management (EWM), SAP Transportation Management (TM), SAP Yard Logistics (YL), SAP Digital Manufacturing (DM), and SAP Enterprise Asset Management (EAM).

Ronny Horvath, Partner – Digital Supply Chain at IBM Consulting emphasizes the combination of IBM’s consulting expertise with technological capabilities, particularly within the SAP supply chain domain. As Horvath says, “IBM’s mission is clear: use the combined power of IBM’s and SAP’s technologies to revolutionize supply chain operations and drive industry-wide transformation and optimize supply chains through AI-driven solutions. IBM is poised to redefine how businesses approach supply chain management focusing on continual innovation and leveraging AI to its fullest potential.”

IBM’s approach involves working closely with clients to navigate process and transformational changes, identifying areas ripe for optimization and justifying subsequent investment in digital supply chain solutions from SAP. However, while IBM aligns closely with SAP’s offerings, it is vital to delineate the organization’s role as implementers rather than creators of the SAP suite. Horvath says, “SAP’s conception of the digital supply chain encompasses various components, as elucidated by the plan – buy, make, deliver, and return frameworkEach component is addressed by distinct SAP solutions. Planning is facilitated by SAP Integrated Business Planning (IBP), while production is managed through Digital Manufacturing. Execution modules such as Extended Warehouse Management (EWM) and Transportation Management (TM) handle delivery logistics efficiently. Notably, procurement, although integral to the supply chain, is segregated by SAP, with the Ariba platform residing outside the digital supply chain space.”

Regarding interoperability, IBM’s products seamlessly integrate with SAP’s portfolio, including ERP systems like SAP S/4HANA, fostering a cohesive operational landscape. As Horvath says, “IBM’s objective is not to compete with SAP but to enhance the functionality of their solutions through integrated technological enhancements, underscored by SAP’s utilization of IBM’s AI technology. As implementation partners, our role closely mirrors SAP’s product offerings.

AI Points to Cognitive Autonomous Supply Chain

According to recent data from the IBM Institute for Business Value, 89% of executives report that key investments in automation will include generative AI capabilities—and 19% say generative AI will be critically important to their supply chain automation futures. IBM’s AI-based optimization and automation solution is specifically designed for organizations struggling to solve supply chain disruptions through traditional transformation. IBM’s AI-driven optimization and automation solution is tailored for organizations facing challenges in addressing supply chain disruptions using traditional methods. The suite of products facilitates digital supply chain transformations, enhancing supply network resilience and sustainability, boosting agility, and expediting time-to-value through actionable insights, intelligent workflows, and automation.

The essence of IBM’s strategy lies in transitioning towards a cognitive autonomous supply chain focusing on diagnostic analysis, gradually progressing towards prescriptive and predictive functionalities. Ultimately, the goal is to achieve full autonomy, where the system predicts and prescribes solutions and implements them autonomously, continually learning and adapting in the process. Benjamin Reich, Partner Digital Supply Chain at IBM Consulting, remarks, “Our approach typically begins with conducting internal trials, serving as a ‘client zero’ scenario, which provides invaluable insights. This process involves integrating our AI capabilities into existing systems, including SAP and some third-party solutions, across 170 nations worldwide. At the forefront of this integration sits IBM’s Cognitive Supply Chain Advisor 360 Solution on watsonx, an interface designed to proactively identify and address potential disruptions by continuously analyzing inventory and other pertinent data.”

IBM Consulting’s Supply Chain Transformation offerings delivers global supply chain management expertise, enabling customers to construct resilient, adaptable, and sustainable end-to-end supply chains. IBM’s results-oriented methodology, coupled with cutting-edge technologies and AI capabilities, facilitates the evolution and streamlining of supply chain workflows, enabling hyper-automation of decision-making processes and enhancing profitability. All this is evident in IBM’s substantial progress in optimizing its own supply chain. By leveraging its proprietary AI technology, IBM successfully streamlined its supply chain, leading to a remarkable $160 million reduction in inventory costs and optimized shipping costs. Despite the disruption caused by the COVID-19 pandemic, IBM successfully fulfilled all its orders by leveraging its cognitive supply chain, swiftly adjusting resources and rerouting parts as needed.

Building on watsonx Foundation

IBM distinguishes itself from other consulting firms with its combination of robust consulting services and advanced technological capabilities. IBM’s unique position in the market is accentuated by the fact that many of its competitors rely on IBM for their AI needs. Its innovative AI technology sets it apart from many other companies in the industry.

Drawing from this foundation, IBM leverages its internal practitioners’ expertise, honed through real-world supply chain transformations within the company, to achieve remarkable results. While significant savings were realized in just two years, even greater returns are anticipated in the future. This journey serves not only to demonstrate the efficacy of generative AI but also to underscore the rapid return on investment it offers, often in a matter of weeks.

The differentiation expands to encompass the realm of quantum computing, where IBM is making strides. Recognized as one of the top contenders in the quantum computing race, IBM’s efforts in this domain have far-reaching implications, particularly in the realm of supply chain management. The potential impact is staggering, with projections indicating a $50 billion market for quantum computing in supply chain applications over the next five years.

Reich states, “We see a transformative industrial revolution unfolding in supply chain management, driven by the convergence of AI and quantum computing technologies. The goal is nothing short of revolutionizing supply chain operations, mitigating disruptions, and ushering in a new era of efficiency and reliability. When it comes to IBM’s offerings, our technological prowess is evident, but the cornerstone of our portfolio lies in SAP’s digital supply chain products. Successful clients are those who have undergone a seamless S4 transformation, particularly incorporating digital supply chain elements. S4 transformations often prioritize supply chain enhancements due to the substantial return on investment they offer. Several companies of IBM’s customer portfolio have exemplified this trend.”

Looking ahead, IBM’s strategy focuses on both acquisitions and organic growth initiatives. Leveraging its extensive network developed over the past decade, the organization is expanding its organic capabilities and forming partnerships to address niche market needs effectively. These strategic partnerships, ranging from boutique consulting firms to specialized logistics product companies, are designed to complement IBM’s strengths.

What it means for SAPinsiders

Embrace change: The evolution of technology has brought about unprecedented opportunities to automate and revolutionize supply chain operations. Businesses need to adopt a mindset of openness to change, recognizing that the technology for the next leap is readily available and mature.

Act now: The time for transformation is now. With mature technologies and tested solutions at our disposal, businesses no longer need to wait for the future to realize their dreams of a self-learning, autonomous supply chain. The capabilities exist today for businesses to gain real-time value from their supply chain, and they can be harnessed to drive significant customer value.

Don’t wait to understand everything: Understanding new technologies takes time. However, waiting to become experts in AI or other advanced technologies may result in missed opportunities. Instead, businesses should partner with experts who can guide them in integrating these technologies into their supply chain processes.

Start small, think big: Transformations do not have to happen all at once. Businesses can start small by implementing targeted solutions and gradually scale up as they gain confidence and experience. By taking incremental steps, businesses can begin realizing the benefits of advanced technologies in their supply chain operations without feeling overwhelmed.