Prepare Now for Volatile Supply Chains, IBM Study Says

Published: March 3, 2009

by Alex Woodie

IBM is urging companies to take steps now to deal with the instability of supply chains in the years to come. The recommendations--including more widespread use of RFID and GPS sensors, deeper B2B integration, and better predictive analytics--were included in the Global Chief Supply Chain Officer Study, which details the results of interviews with 400 supply chain executives, and which was released last week.

While globalization brings the promise of greater revenue for the manufactures, distributors, and retailers that operate supply chains, increased cash flow comes with a substantial risk of disruption that didn't exist before. This abstract risk becomes real when events such as terrorist attacks and product recalls happen. The latest risk to rear its ugly head is the global economic crises, which is demonstrating--in frighteningly stark terms--just how connected the world has become.

But the greatest threat to global supply chains is not increased risk of traumatic events. Increased risk was number two on the list of concerns to supply chain executives, according to the results of IBM's study. The number one threat, IBM says, is overwhelming and fragmented data, and the incapability to make sense out the data. Combined with the possibility of supply chain disruptions, the lack of clear visibility of supply chain operations is enough to keep executives awake at night.

"As important as cheaper, faster, better is, this year, we're beginning to hear a new verse--a clear message about the overwhelming need for greater visibility and flexibility to manage risk," says Sanjeev Nagrath, who holds the title of global leader of supply chain management for IBM's Global Business Services unit. "A crisis in one country or region can now ripple very quickly across the world economy, creating tremendous turbulence. As supply chains have become more complex, global, and stressed, the executives we spoke with believe they must drive far more intelligence throughout their supply chains if they are going to anticipate, rather than react."

IBM recommends a three-pronged approach to this mainly two-headed problem of elevated risk and "information blind spots": infuse better instrumentation, interconnectedness, and intelligence across the supply chain.

Better instrumentation means using more sensors, RFID tags, meters, actuators, and GPS devices to generate situational data from containers, pallets, and products. Better interconnectedness means adherence to B2B standards and better monitoring of supply chain events. Better intelligence means more accurate predictive models for understanding supply chain dynamics, and computerized decision-making in some circumstances.

There's one more element that will mark the successful supply chain organization in the future, according to IBM: the position of "chief supply chain officer." The CSCO will also become "chief collaborator," in effect, and bring together all the stakeholders, including supply chain participants, and even those outside the supply chain, such as regulators, banks, and governments.

You can view an executive summary and a short video on IBM's Global Chief Supply Chain Officer study, titled "The Smarter Supply Chain of the Future," at www.ibm.com/supplychainstudy.

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