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How IBM makes radical collaboration work?

How IBM makes radical collaboration work is a special report that BusinessWeek has up at its website. Since I work at the site that forms the ground zero of this radical collaborative venture at and through IBM, I am at the vantage of seeing this happen not so much in evaluating how each of these partners are actually collaborating and creating value but in ensuring that the chip designs and processes of the collaborators actually get executed in the best way possible.

First, Steve Hamm lays out the financial picture of IBM prior to embarking on this radical venture.

By late 2003, IBM’s decision three years earlier to pump $5 billion into its chip business wasn’t looking so smart. The division had lost more than $1 billion in 2002 and was on its way to losing $252 million more in 2003. Investors urged Big Blue to quit, but that wasn’t going to happen. IBM saw leading-edge chip technology as vital to keeping its lead in the highly profitable business of making powerful server computers. Still, clearly, something had to be done.

I must note two different actors in this drama, their respective actions and their reasons which are important to evaluate not so much because they can be pigeonholed as primary reactions but as a sort of chicken-egg dilemma. As reported, the financial fact is that IBM is bleeding money in its semiconductor division. In IBM’s view chip-making is a source of competitive advantage in its high-margin server business and so it views its chip-making (and perhaps chip design) as an important upstream activity. Investors on the other hand, privy as they are to a set of financial facts and numbers, will view a bleed as something that has to be fixed. There are scores of examples that one can find where unprofitable businesses are spun-off or shut down by parent companies that go on to find, fund, nurture and defend other sources of competitive advantage. So why not in this case? What bridges these two camps is the need for a new story, a new strategy, a set of steps that must not only staunch the bleeding but also refresh the bleeding patient. And that’s what IBM has done,

IBM has built what it calls an "open ecosystem" of chip R&D with nine partners, including Advanced Micro Devices, Sony, Toshiba, Freescale Semiconductor, and Albany Nanontech, a university research center. All told, in five separate alliances, IBM partners have contributed more than $1 billion to help expand the company’s facilities and buy the latest chipmaking equipment. But just as important, they’re providing brainpower, including more than 250 scientists and engineers who now work in East Fishkill. As a result, IBM’s chip operation boomed, and, even now, during a cyclical downturn in the chip industry, it’s still making a profit.

How far this sort of collaborative innovation will go is anyone’s guess but it is a stab at the future. What you will note is that there isn’t a magical software that is enabling this sort of a collaboration. If you read more of the article, you will note that this sort of collaboration involves actual engineering teams sitting down together and circumscribing the terms of the collaboration while being open to the road ahead. So mark this down as an important milestone in the collaboration journey:

1. Collaboration requires partners to get down to brass tacks and structure it or at the very least draw a few boundaries and open up a few channels – it also involves the commitment of resources.

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More DTCI links…

The interest in DTCI (Defense Transportation Coordinator Initiative) related material has been surprising. So, I thought that I’d post a roundup of links about it:

DTCI Program Office

DTCI – the beginnings – What the DoD was trying to achieve through the DTCI?

DTCI incorporates lessons from its pilot program – Outlines some of the reasons why DTCI was a successful program; a pilot and then the real thing.

The Big Switch – A lengthy article that highlights the many turns of the DTCI project.

DTCI protest info – Some information about the protest lodged by TIA

My own blog posts about DTCI are here:

Uncle Sam’s looking for a few good bids

DTCI contract awarded to…

High level overview of DTCI


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High level overview of DTCI

If you wanted to know more about DTCI (Defense Transportation Coordinator Initiative), you might want to check out this public link from SDDC – Defense Transportation Coordination Inititative Overview Briefing that provides a high-level summary presentation of the scope of the DTCI contract.

What I’d cue you into are the following slides:

Slide 4 which shows the scale of the US DoD logistics network and conservatively what the Dept. hopes to save.

Slide 7 which is the roll out plan for the DTCI contract which should give you an idea of the complexity of the network and the volume that will flow in it

Slide 8 which is the distribution of the facilities that will fall under the plan

Slide 9/28 which summarizes the Key Performance Indicators (KPIs) that the coordinator is expected to fulfill.

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DTCI Contract awarded to …

Menlo Worldwide. Menlo Worldwide is the winner of the DTCI contract awarded by the US Dept. of Defence (DoD) for all Continental US (CONUS) logistics. DTCI is a huge contract not only to win (which was the easy part) but it’s going to be a challenging one to execute as well,

Under the contract, which is potentially worth $1.6 billion, Menlo will be responsible for deploying and operating an integrated logistics solution for shipment planning, optimization, shipment execution and overall transportation resource management governing all Department of Defense (DOD) materiel shipments moving into and among DOD facilities in the 48 contiguous United States.

They should be congratulated. Their team was as follows:

Menlo Worldwide is prime contractor for DTCI in partnership with the following principal subcontractors:

  • Computer Sciences Corp. (CSC), which will provide IT infrastructure hosting, network management and integration services;
  • ONE Networks Enterprises, Inc., which will provide the transportation management software for shipment planning, optimization and execution, and;
  • Olgoonik Logistics, which will provide professional services supporting the participation of minority-owned and small business firms as service contractors for DTCI.

DTCI was a project that I worked on in my previous firm GENCO for a considerable amount of time – it was a stretch experience for me and so I truly enjoyed it. I blogged about it previously here – Uncle Sam’s looking for a few good bids (Something I worked on)

What I didn’t know then and I know now is the composition of the teams that competed for the project. I didn’t know the teams because the DTCI project was split up into an analysis component which GENCO competed on and won and the execution component which Menlo (or rather Con-Way Inc) has just won.

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Time to go for a boutique?

T’is time to go for a boutique? I’d like to draw your attention to this list of articles by Steve Banker of Arc Advisory Group:

Top SCM Boutique Consulting Firms: Part 1, The Logistics Boutiques

Leading SCM Boutiques – Part 2, Supply Chain Planning Vendors

10 Coolest SCM Boutique Consultants

Most of the firms listed in the lists above span from small consultancies to behemoths who make the industry and in some cases is the industry. So what is it that these small fish are thinking when they play in the playground of the behemoths? By the way, why are there small fish anyways? Are the big fish listening?

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Logistics Management awards Quest for Quality

Logistics Management has as its lead story this month, the winners of its Quest for Quality awards in the transportation arena. Check it out!

The basis of their picks, the criteria of ranking is discussed in the article. They include:

Transportation service providers are rated on LM’s five key criteria: On-time Performance, Value, Customer Service, Information Technology, and Equipment & Operations. Due to the nature of supply chain services offered by third-party players, a different set of criteria is used to judge this category. Third parties are rated on the following attributes: Carrier Selection & Negotiation, Order Fulfillment, Transportation & Distribution, Inventory Management, and Logistics Information Systems.

The evaluation itself is a weighted metric. The scores take into account the importance readers attach to each attribute. Each year, readers are first asked to rank the attributes in each category on a five-point scale, with 5 representing the highest value and 1 representing the lowest value. Our research team then uses those attributes’ rankings to create weighted scores in each category.

And the winners in the broad categories as outlined below are:

Some thoughts to savor though,

But while shippers are clearly more satisfied with their core-carriers, we have noticed a somewhat troubling trend that began with our 2006 report. Overall satisfaction and core satisfaction scores are trending downward over the past two years. As a matter of fact, the survey found that core satisfaction scores were down over 2006 findings in every category with the exception of Truckload-Expedited (38.3), Rail/Intermodal (30.69), and Air Cargo (35.00). And while core satisfaction scores continue to be higher than non-core, our team found that the 2007 overall satisfaction scores were down in 13 of the 16 categories compared to the 2006 results.

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Private fleets for hire!!

Private fleets for hire – a great idea but does it work? Logistics Management reports on the efforts of private fleets to hire themselves out for the back haul – maybe even contribute to the logistics budget bottom line.

The only problem with this is that it is a great idea but execution is the problem. I speak from personal experience. In my previous job at Genco, I worked on precisely this sort of opportunity with a host of private shippers – some really big names in there as well. It was called Genco Shipper Alliance.

The Shipper Alliance started in July of 2005 with Unilever as its first customer. Since this time, GENCO has put a tremendous amount of work into building the program and maintaining good working relationships with all shippers and carriers involved. Shipper Alliance, to be successful, had a dependency on shared assets and collaborative participation by all of the Alliance members. This support has become increasingly difficult to maintain with our customers in the current economic situation and has substantially changed the value proposition of the Shipper Alliance going forward.

The work I did was create the algorithms that created the tours that collaborators in the shippers alliance would use – so its mathematically feasible and with a bit of ingenuity it can be made real time as well. However, the reason why the plug was pulled is illustrative – whose truck, what load, who gets the final say?

Meanwhile, getting back to the article…

About me

I am Chris Jacob Abraham and I live, work and blog from Newburgh, New York. I work for IBM as a Senior consultant in the Fab PowerOps group that works around the issue of detailed Fab (semiconductor fab) level scheduling on a continual basis. My erstwhile company ILOG was recently acquired by IBM and I've joined the Industry Solutions Group there.

@ SCM Clustrmap

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June 2021