Agile Demand-Supply Alignment – Part 3D

This article is an excerpt from the report Agile Demand-Supply Alignment — Part Three: ADSA Solution Assessments.
A copy of the full report can be downloaded here.

In Part 3C, we looked at E2open, an acquisitive integrator of supply chain applications with an end-to-end networked platform. Here in Part 3D, we cover IBM Sterling and Elementum.

IBM Sterling: Inventory Control Tower Built on a Broad Suite of Supply Chain Software

IBM’s Inventory Control Tower (ICT) was launched in June 2020. ICT leverages a mature set of technologies developed over many years (see sidebar). Its core control tower capabilities have been used by IBM’s clients for several years. The platform ingests data on production, logistics, inventory, and demand to predict supply disruptions and demand-supply imbalances. It leverages Watson AI to offer solutions with natural language conversations, smart alerts, and digital playbooks.

Industry Focus

IBM is initially focusing on three industries: 1) healthcare providers, 2) grocery retailers, and 3) spare parts dealer networks and aftermarket parts dealers (in particular automotive spare parts). They also sell to industrial manufacturing and high-tech firms. IBM has not yet disclosed the names of any of its initial customers for ICT.

User Roles

ICT is typically used by supply chain professionals, such as inventory planners and managers, supply chain planners, and distribution planners and managers.

Functionality

The Inventory Control Tower (ICT) is one of several solutions in this report evolving towards autonomous supply chain capabilities. Currently that includes detecting external events leading to demand-supply imbalances (whether caused by supply disruptions or demand volatility), bringing together the information required to resolve it, providing collaboration tools, and providing suggested resolutions. ICT has the benefit of sitting atop proven technology but is still early in the adoption and refinement curve. Customers who adopt now may have the opportunity to shape the direction and roadmap for this product and will likely uncover things they want improved.

Network-wide View

ICT’s network-wide view of orders, inventory, and shipments is driven largely by integrating data from various supply chain systems into a common data model, enabling end-to-end visibility, analytics, and AI, to find and resolve issues quickly. Inventory can be tracked across multiple enterprises, as is done in a spare parts dealer network. Real-time updates on shipments can be derived from tracking services, such as Project44 which is pre-integrated to ICT.¹

As of now, there is no direct ingestion of IOT tracking data, such as from ELD/GPS units or AIS data from ships. This system can also ingest ongoing inventory and stock movements data in order to display daily SKU-by-location, including feeds from DCs as well as forward stocking locations like stores or stockrooms. Ingestion of retailer POS data is not pre-built. IBM does have open APIs that allow their Expert Lab Services team to work with clients integrating POS data, IoT data, or non-EDI data formats as part of the implementation project.

Time-phased View Highlights Upcoming Shortages and Overages

Forecasts are fed into the control tower where ICT matches supply and demand for each SKU/location combination to determine daily stockouts. The ICT provides a time-phased view that shows planned vs. actual inventory, supply and demand plan, on-order and in-transit inventory, and sales orders. This time-phased view highlights potential supply/demand mismatches that are upcoming but does not actively alert about those. It highlights SKUs that are predicted to breach upper and lower thresholds or that are approaching out-of-stock or excess quantities, showing average days of supply and excess days of supply. They also highlight expiring inventory.

Resolution Rooms

Once an issue is detected, companies can open a resolution room to manually collaborate, via online chat and sharing of online views of data about the issue. Resolution rooms can be used to communicate precise instructions and context to the person responsible for the execution to fix the issue (such as a transportation manager who requests expediting from the carrier). With precise instructions sent to them, the responsible person can manually execute the requested action with confidence, as well as confirm that the action has been taken.

Taking Action

Actions can be initiated from within the control tower provided that the necessary API integration to the appropriate execution systems has been implemented. Examples of actions that could be taken via API include transferring inventory, adjusting safety stock in a forward stocking location (to ensure inventory is available for walk-in sales or local consumption), turning online order fulfillment on or off from the specific node for the SKU having issues, and expediting or changing POs or shipments. Not all actions are done in the resolution rooms; actions, like transferring inventory or adjusting safety stock in a forward stocking location (to ensure inventory is available for walk-in sales or local consumption) or turning on or off online order fulfillment from the specific node for the SKU having issues would be done in inventory screens rather than the resolution room. Users can also search for alternative suppliers.

Playbooks

While Resolution Rooms do not actually execute workflows, they do provide playbooks that list all the steps and actions needed to resolve an issue, as well as a list of the appropriate people that should be involved, and normal timelines for execution. Watson machine learning² analyzes past actions taken in resolution rooms and creates playbooks to resolve similar issues. For example, if a weather event causes a disruption in the supply chain, the user can open a resolution room, bring in stakeholders, and together they can figure out a solution to the problem.

After finding a solution, the user can use ICT’s ‘analyze resolution room’ functionality through which Watson will analyze the room using natural language processing to determine the steps that were taken and the people that were involved to solve the issue. The user can then open that playbook, which contains the actions that Watson pulled from the resolution room, and manually edit the playbook to finalize it for others to use. The next time the same or similar issue happens, any user can use Watson to search for the playbook that best addresses the issue at hand. Playbooks can also be manually created by users from scratch (or by duplicating an existing one) to create new playbooks that reflect an organization’s pre-defined steps to handle certain problems. Alternatively, playbooks can be created manually on the fly, once an issue or disruption arises.

Pricing, ROI, Time-to-Value

Pricing Basis

ICT is a subscription service, with the fee based on four factors: # of SKUs, # of Locations, Update Frequency (how frequently supply/demand data is updated), and # of Users. There is no extra charge for suppliers participating in Resolution Rooms. There is a relatively small one-time setup fee. Professional Services fees for implementation typically range from a quarter to two times the annual fee. Some of the pieces of a complete solution, such as IBM’s supplier portal or their EDI network, are separate products, billed separately.

ROI

Since ICT was only recently launched, IBM did not yet have actual ROI data from customer implementations at the time of this research.³ They shared some expected potential benefits from implementing ICT, organized by industry. Some potential benefits in healthcare applications include reduced nursing staff time spent on supply issues, reduction in procedures delayed due to lack of supplies, and reduced overall inventory levels. Potential benefits for grocery retailers include reduced out-of-stocks (thereby improving revenue and customer loyalty) and reduced expedited shipping costs. Potential benefits for spare parts and dealer networks include increasing service levels while simultaneously reducing overall inventory costs, early warning of end-of-life or expired items, and more productive shared use of inventory across the network.

Implementation Services and Timeframes

Initial implementation of ICT typically takes four to six months, with elapsed time depending largely on the amount of effort required to integrate external systems and data. IBM tries to take a phased approach to implementation to shorten initial implementation times. IBM provides four levels of deployment professional services for helping customers implement ICT:

• Deployment Assurance — IBM oversight for ICT implementations sold through resellers and Systems Integrators. IBM provides help in project planning, reviewing integration design, recommending best practices, consulting on data migration and testing, and a go-live readiness assessment.
• Blueprint — Similar to Deployment Assurance but more comprehensive, concluding with a tailored implementation proposal. Typically, about a three-week engagement.
• MVP Lite — Discovery, design, configuration, training, testing, and ‘Hypercare’ support. Typically, about a 15-week project.
• Standard Implementation — Same as MVP Lite, but with integration support, though the client does the actual integration. Typically, about 24 weeks.

Who IBM Sterling ICT is a Good Fit For

ICT is a good fit for companies that have large complex global supply chains with critical inventory needs — especially healthcare providers, grocery retailers, and spare parts dealers. This includes companies that have lots of SKUs and stocking locations, many suppliers, international logistics, and high consequences for inventory stockouts.

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Elementum: Best of Breed Case/Incident Management and Issue Resolution

Elementum offers a solution for tracking and collaboratively resolving issues and incidents. This can be useful in aligning demand and supply once an issue, such as a supply disruption or predicted shortage, or quality issue, has been detected. The Elementum solution does not predict issues, nor does it provide recommendations for resolutions. Rather it enables collaboration between multiple parties – internal and external – for solving issues requiring human intervention, and it automates many of the tasks that would typically be done manually. The Elementum solution aggregates all information about past issues and how they were resolved into a single location in order to simplify trend and root-cause analyses for permanent corrective actions of systemic, recurring issues.

Target Customer Characteristics/Factors Driving Adoption

Elementum’s customers tend to be larger companies (500 – 10,000+ employees), because the factors driving adoption tend to be the characteristics of larger firms. Elementum is useful for companies that have complex supply chains with many issues arising, where resolution of those problems requires multi-party collaboration across functional and enterprise boundaries. Companies with some of the following characteristics might find this solution valuable:

• A large number of SKUs;
• High transactional volumes;
• Rapid product lifecycles and many new product introductions being managed;
• Demanding regulatory requirements;
• Complex outsourced manufacturing relationships;
• Many quality, design, and manufacturing issues that need to be resolved across organizations.

Industries that exhibit these characteristics include CPG, Food and Beverage, Healthcare and Life science, and High Tech/Electronics.

User Roles

The software is used by anyone involved in resolving issues, which encompasses a broad range of operational functions such as:

• Customer service and support/contact center
• Engineering, quality control
• Supply chain, logistics, import/export
• Manufacturing
• Procurement/supplier management
• Finance/accounts receivable
• Compliance

It is used by front-line workers in resolving issues, managers and executives to understand and improve the company’s timeliness and performance in resolving issues, and by analysts to identify and address systemic, recurring problems.

Although Elementum’s customers will use Elementum to manage a variety of issues, most customers will start with one area or team of higher priority, and then expand from there.

Functionality

Originally founded in 2012 as a supply chain control tower solution, Elementum refocused on issue resolution — enabling multi-party collaboration to solve cross-functional and inter-enterprise problems identified by other control tower solutions, other types of solutions, or manually by people. Their focus is now enabling teams to communicate internally and externally (across multiple tiers and service providers) and solve problems and issues that arise during execution. This could include things like production or shipment delays, material shortages, stockouts, quality and customer service issues, product launch issues, unexpected charges or penalties, and process improvements. In many if not most companies, these kinds of issues are solved using phone calls, email, spreadsheets, and texts, making it hard to assess status, and leaving many ‘cracks’ for issues to fall into. Elementum can provide a much more systematic approach, provided the organization has the discipline to use the system consistently and not revert to old habits.

Incident Detection and Resolution

Elementum does not monitor operations or events themselves to identify when issues arise, but rather relies on other systems or people to identify and enter/create the incidents. This is often done manually by a person creating the case or it may be done by an external system via API or another type of integration that automatically creates the issues. For example, late shipment incidents may be generated by a TMS system, tickets for customer problems may be generated by call center software, or demand/supply imbalance incidents alerted by a planning system. Most of Elementum’s customers will upgrade to automated incident creation and resolution within the first 12 months of usage.

Each incident typically has a series of tasks, each task with a responsible person and due date. Alerts can be sent (via email, text, or in-app notification) when task due dates are near or past due. Internal and external parties can be invited into the incident to help in resolution. Business objects (such as an order, shipment, company, or product) can be linked by URL reference and attached files. Additionally, master data can be loaded into Elementum so users can directly attribute incidents to the specific business objects, such as specific products, carriers, and sites. Elementum’s mobile app allows pictures to be taken and attached to an incident (for example of damage in transit, or quality issues). Dashboards allow viewing status and drill down across any filtered subset of all outstanding issues, filtered by a number of incidents and by the dollar value of those incidents in different currencies.

Incident Analytics, Systemic Improvements

Built-in dashboards and analytics can be used to spot recurring incidents and systemic improvement opportunities. This can include things like recurring quality issues due to a design defect, recurring billing issues (like a supplier that consistently overbills), problems with a particular carrier, inadequate packaging leading to recurring damage, and so forth.

Pricing, ROI, Time-to-Value

Pricing is based on named users, with the cost per user varying for each of the three different editions offered: Essentials, Pro, and Enterprise.

Elementum reports the payback period is typically less than three months. That short payback period is enabled because most customers start small with one process that includes a small number (e.g., 5-10) of users. Users can become live with new processes running after only a single training session and IT involvement is not necessary for most initial processes. For simpler implementations, the starting monthly fees will be low, and fees for professional services will typically be waived. As a result, the value of benefits can exceed the monthly fee very soon, within a month or so after implementation, depending on how quickly employees transition onto the new system.

When the incident capture process is automated, the implementation takes a bit longer due to the integration required. For larger rollouts or for customers that want to start with APIs right away, implementation takes (in the neighborhood of) three to six months. When an automated capture process has been implemented, the percent of incidents managed is often quite high almost immediately after go-live, thereby accelerating value realization soon after the integration is completed.

The benefits gained vary widely, depending on what type of issues are being addressed by the system and which functions are involved. Benefits can be realized as efficiency gains (e.g., headcount reductions or reallocation), cost savings (e.g., fewer chargebacks, reduced shipping damage, etc.), shorter cycle times (e.g., faster time-to-market), and systemic process improvements (e.g., improvements to on-time/in-full rates, reductions in stockouts).

Who Elementum is a Good Fit For

Elementum is a good fit for companies that have large complex supply chains with many issues arising, where resolution of those problems requires multi-party collaboration across functional and enterprise boundaries. It can be useful for companies that have many issues to manage due to having a large number of SKUs or transactions, many simultaneous and/or complex new product introductions, demanding regulatory requirements, complex outsourced manufacturing relationships, and/or lots of cross-functional issues. This can be especially useful in CPG, food and beverage, healthcare, life science, and high tech/electronics companies.

In Part 3E, we examine Infor Nexus, a mature end-to-end global trade, logistics, and finance platform.

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¹ As of this writing, real-time shipment status data from other tracking services has not yet been integrated. That data could be integrated but would require a custom integration project. — Return to article text above
² IBM Watson’s capabilities are included in the ICT solution. — Return to article text above
³ IBM has published data on ROI for their control tower and inventory invisibility solutions, which have been around longer than ICT. — Return to article text above

To view other articles from this issue of the brief, click here.