Friday, June 24, 2005

IBM Aims Big Push Into Supply - Chain Consulting

June 23, 2005 By REUTERS

SAN FRANCISCO (Reuters) - IBM, the world's largest computer maker and technical consultant, said it will introduce a new consulting practice on Thursday to help corporate customers more effectively manage global logistics.
Bob Moffat, the IBM executive who has wrung billions of dollars in cost-savings out of IBM's own operations in recent years, said the company is seeking to package up consulting services, software automation technology and its own expertise in global computer logistics as set of services for customers.
Moffat, 48, a fast-rising IBM executive, has been tapped to lead the new supply-chain consulting practice -- which economists estimate represents as much a $3 trillion global market in which companies procure goods and services.
IBM sees supply-chain services as potentially its most promising new growth area -- a market segment which research firm IDC estimates to be worth $23.5 billion. As supply chains go global, they become more complex, harder to run. Costs of managing them have risen about 10 percent a year, Moffat said.
``It is obvious to me that 'supply-chain' is moving up the strategic agenda of CEOs,'' Moffat said in a phone interview.
Of the $3 trillion, about $750 billion goes to outside service providers who help companies run internal logistics.
In part, Moffat is selling his own experience in driving down costs for IBM in recent years. He is credited inside IBM with helping make cost reductions that saved $5 billion to $6 billion in 2002 and $7 billion in both 2003 and last year.
``This is really a case of IBM putting a price tag on stuff it does internally that also probably has appeal outside the organization,'' said Bruce Richardson an analyst with Boston-based AMR Research, a supply-chain research firm.
``It's an appealing message: Here's how we took billions of dollars of costs out of our supply chain,'' Richardson said.
This is not traditional outsourcing work, which is still a big business for IBM in which it manages technology or business operations on behalf of other companies. Instead, Moffat sees supply-chain work as something its customers will want to keep close control over but use IBM as trusted outside advisor.
IBM eyes the role of ``global trade orchestrator,'' he said.
``Customers don't really want to outsource their supply-chain operations. But they do want to improve them,'' said Frank Dzubeck, an analyst with Communication Networks Architects in Washington, D.C.
It is a market which IBM believes puts the company into competition with global logistics providers such as FedEx Corp., United Parcel Service Inc., DHL Worldwide Express and other transport companies, not to mention traditional consulting rivals such as Accenture Ltd..
IBM said its strengths include the 19,000 people Moffat now manages as senior vice president in charge of integrating the computer company's own global supply chain for procuring products and services in the 160 countries in which it operates.
IBM has another 8,500 staff already working in supply-chain consulting, many of whom help customers set up SAP AG software for managing global business operations.
It has set up a wholly owned business in China for handling low-cost procurement of materials for its customers, and plans to offer such services in other low-cost regions such as Eastern Europe, Latin America and India, it said.
``We are pretty sure only IBM knows how to do this range of things and that is going to set us apart,'' Moffat says.
International Business Machines Corp. of Armonk, New York, a roughly $90 billion company, sees half its business from providing computer or business services.
IBM has been pushing in recent years beyond simply selling hardware, software and technical services into what it calls Business Process Transformation Services (BPTS). This refers to provision of corporate customers with payroll processing, human resource and customer service-center support operations.
Supply-chain consulting is seen as an additional opportunity. Basic business consulting, logistics services and supply chain management all figure in.
``In each of these cases, there is an opportunity for IBM to either run these services or provide (consulting)'' for customers,'' Moffat said.


Post a Comment

<< Home