@ Supply Chain Management

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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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

Enjoy!

Tags: DTCI Links roundup, 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.

Tags: DTCI, Scope and scale of DTCI, DTCI KPIs

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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Supply Chain Software Once Again Hot Sector reports Investors Business Daily (IBD) in last Friday’s edition of their business rag. They report:

The supply chain gang is back in business.

Makers of supply chain management software fought a rough spending climate as tech budgets froze in the early 2000s.

But over the past year, many of these companies have come back with solid growth and higher stock prices.

Some firms such as Manhattan Associates, JDA Software Group, Logility and Red Prairie,

have recorded double-digit revenue growth in the past year. That compares with a 7% growth rate for all software.

The funny thing is that I had been looking for a job late last year and early this year, not really looking but I was knowledgeable about the state of the Supply Chain software hiring phenomenon. And I did note that these companies and others were expanding their employment base, first a trickle and then much more than a trickle. Its good to know that there was a "real" story behind that uptick.

However, some of this makes little sense:

Several factors sparked the rebound. Manufacturers and retailers face stiff global competition, so their supply chains are more important.

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And the caveat line should be – pending some tradeoff analysis. The fact of the matter is that I’ve made up my mind but I need some numbers behind my intuition even though I think that the numbers will also bear me out.

The surest question that I will be asked is – You shop at Walmart? Perhaps, @ SCM is now on the blacklist of many a reader. So let me give you the list of reasons that didn’t go into making this decision and those that did loom large.

1. I’m not doing this for the Mom and Pop stores. I am a big fan of small businesses but it is because, strategically speaking, they are nimble actors who can identify, supply and defend niches at first and then grow from there. In a sense, I like small businesses because they compete in different ways from large businesses and some small businesses go on to become big businesses because they’ve profited from insight, positioning and in most cases from a good dose of luck. Or to abstract it a layer further, I like small businesses because they have a good deal of pluck and a whole lot of spunk.

2. I’m not doing this because Walmart treats their employees "poorly". There is no doubt in my mind that I will not do the kind of jobs that Walmart employees do. Unless I have no choice but to do so. I do not think that it is beneath me. There is nothing more mind numbing than punching in the item SKU code whenever the reader cannot read it, deal with "some" customers (more of that later but I think you know that special subset of customers that I am talking about) but these guys do it day in and day out. What’s more that they don’t make a lot of money and they don’t get much (if any) by way of health care etc. I am more or less certain or perhaps I "believe" that in the long run (and that’s the shame of it – it is the long run and not the short run), employers who don’t value their employees are just not going to cut it.

3. I’m not doing this because Walmart imports stuff from China. Or India. Or Tahiti for all I care. Undeniably, there is an impact that such wholesale import of goods from every port in the world including Timbuktu (such as on the trade balance between nations for one and its attendant issues) creates in the importing country but if you think that a Ferrari F430 is worth buying and you can do so, I think that a china made floor lamp is worth having and would like to obtain it at the cheapest price. And besides, I need the light a whole lot more than you desire the thrill of the ride. And yes, I am quite aware that such choices affect American manufacturing (and that American manufacturers have to compete with an artificially pegged yuan and so on and so forth) but this land was once the Wild West. I get the distinct feeling that a lot of Americans think of this land right now as the Mild Rest – a significant something has been lost in that transition. The fact that Walmart imports a lot of stuff from China is the effect of that transition but not the cause. To locate the cause, you have to find, metaphorically speaking, the time when the saddle was traded for the armchair.

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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?

Tags: The SCM boutiques, SCM players, Consultants – big and small, Arc Advisory, Steve Banker