New IBM Consulting Service Finds Savings Throughout Supply Chains

New IBM Consulting Service Finds Savings Throughout Supply Chains

At one time, Chinese shipping and logistics company Cosco had 100 distribution centers. Turn’s out, the company really only needed less than half of them.

With the help of IBM’s new supply chain consulting service, Cosco figured out it could reduce its number of distribution centers from 100 to only 40 while maintaining the same level of service to its customers.

IBM’s service, Supply Chain Network Optimization Workbench (SNOW), takes a look at the entirety of a company’s supply chain, and can help analyze five logistics areas: materials for products, sourcing and suppliers, manufacturing and production processes, warehousing, and transportation and distribution.

In the case of distribution centers, it can look at where a company’s centers are, look at where it’s customers are and create alternative set-ups and scenarios that would lower costs and cut energy and fuel use.

In Cosco’s case, the company lowered its logistics costs 23 percent and cut carbon dioxide emissions by 15 percent, or about 100,000 tons per year.

"The main thing is, it gave them a way to look holistically at the placement and utilization of their centers,” said Eric Riddleberger, IBM's global leader for business strategy consulting. "Especially with companies that grow quickly, you build distribution centers based on where there is demand. This is a chance to step back and say, ‘What should our distribution centers be like, where should they be?’”

IBM works with companies to use the service and understand the impacts of alternatives. The service is also designed to help companies find alternate transportation routes to reduce fuel and trucking miles, and to analyze the trade-offs of sourcing from different suppliers.

How often a company will have to use the tool to look at its operations will depend on its situation. "You're not going to make changes in distribution centers or sourcing or production on a continuous basis, but it is the kind of thing that you want to see them working on a semi-annual or annual basis," Riddleberger said. Companies expanding quickly might want to do it more often; companies that are fairly stable would have to do it less frequently.