OR/MS Today - June 1999

June 1999

IBM's Supply Chain Gang Saves Company $750 Million

Computer giant receives 1999 Franz Edelman Award

Faster, more efficient delivery of products. Additional reliability and flexibility. Company-wide savings of $750 million in a little more than a year. What more do you want from a reengineered supply chain?

How about the 1999 Franz Edelman Award for Achievement in Operations Research and Management Sciences?

INFORMS and CPMS, the Practice Section of INFORMS, presented the 1999 Edelman Award to IBM and a team of researchers who developed and implemented the Asset Management Tool (AMT) to measure, analyze and guide the reengineering of the computer giant's complex supply chains.

IBM's Edelman triumph capped a year-long competition that began with a call for nominations. Following a comprehensive review of more than 30 entries, the prize committee selected seven finalists who made formal presentations before a panel of judges during the recent INFORMS meeting in Cincinnati.

In announcing the results of the competition, Edelman Committee Chairman Russ Labe noted that IBM has used the AMT to study a wide range of global issues and that the program has generated a total of $750 million in terms of cost savings and price protections.

IBM's award-winning entry, officially entitled "Extended Enterprise Supply Chain Management at IBM Personal Systems Group and Other Divisions," was authored by Grace Lin (lead author), Markus Ettl, Steve Buckley, Sugato Bagchi, David Yao, Bret Naccarato, Rob Allan, Kerry Kim and Lisa Koenig. The authors will split a $10,000 cash prize. INFORMS member Robert Smith served as the winning team's coach. IBM embarked on its global supply chain reengineering project in order to speed responsiveness to customers while minimizing inventory. As a first step, in 1996, IBM Research worked with IBM's Integrated Supply Chain team to develop the AMT. The tool consists of an optimization engine, a simulator and a series of data extraction modules.

Using AMT, IBM's Personal Systems Group worked with IBM Research to reduce expenses by approximately $100 million in one area alone during 1998. Additional savings were achieved through a number of ways: inventory was reduced by more than 50 percent from 1997 to the end of 1998; product delivery time was reduced up to six weeks; and the number of components used to build products was reduced by 35 percent.

To date, AMT has been deployed in approximately half of IBM's operation worldwide.

"We applaud your collective effort in making the Edelman such a meaningful distinction," Barbara Martin, vice president of Integrated Supply Chain at IBM, told a large audience of INFORMS members in Cincinnati. "Publicizing and celebrating achievements in this field is critical to the ongoing vitality and continuing advancement of this central but often unseen discipline."

Martin, who is responsible for overseeing the supply chain efforts in all of IBM's divisions, said that the AMT project was particularly special to her because it bridged the gap between concept and reality.

"It (the AMT) enabled us to bring advanced technology to our divisions to help them optimize their supply chains in a very real well. I expect this to continue to have increasing benefit for many years to come."

Calling the Edelman award a "milestone" marking an intensive three-year effort by a core team of 30 people at IBM, Martin said that, "even more importantly, it is a tribute to a larger team of people working across business units, across processes, across functional organizations. It is truly a team effort."

The best is still to come, Martin said, noting that other projects that will apply the AMT are already underway.

"Of course, with the results we've been able to demonstrate with AMT, our senior executive management is keenly interested in and supportive of our work," Martin said. "This award validates our efforts and shows progress toward a key strategic goal at IBM: to be world class in all of our operations."

The real winners, Martin concluded, are the IBM customers and business partners who benefit from lower costs, lower prices, better quality, and more reliability and flexibility in the supply chain.

The Franz Edelman Award, named for the "quintessential" practitioner of management science and operations research, annually recognizes outstanding accomplishments in OR/MS practice. The committee looks for verifiable results and work that produces a major impact on the client organization.

Labe was joined on this year's committee by Joseph Discenza, Howard Finkelberg, Newt Garber, Stephen Graves, Yoshiro Ikura, Peter Norden, Richard Rosenthal and Michael Rothkopf. The list of finalists included: Spicer Off-Highway Product Division of the Dana Corporation, Visteon Automotive Systems a division of Ford Motor Company, Mason and Hangar Corporation, British Telecommunications UK Customer Service, AT&T and Towers Perrin.

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