IBM goes to school for supply chains

IBM has begun to fund joint research centers at universities to aid in the study of supply chains, with the eventual goal of helping Big Blue improve its own operations.

Supply chains--the complex logistical systems

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used for managing orders, automating administrative procedures or running global manufacturing operations--are near and dear to the heart of IBM. The company shaved approximately $5.3 billion in 2002 from its own operating expenses by tightening relationships with suppliers and customers as well as by getting internal divisions to cooperate more on product development.

"Supply chain is the battlefront of the future," said Stu Reed, vice president of the worldwide systems group at IBM. "The key is, you've got to look at (internal operations) holistically."

Under the first grant, IBM will donate hardware, software, storage systems and general expertise worth in excess of $500,000 to create a supply chain laboratory at Michigan State University's Eli Broad College of Business. Additionally, IBM will advise the school on course curriculum, Reed said. The center will open in the spring.

The company is negotiating similar deals with other universities. Over time, the different labs will be harnessed together in a grid computing network that will let graduate students and professors at different universities collaborate. Future areas of research likely will include optimizing inventory and order-tracking systems.

Ideally, the centers will benefit IBM in multiple ways. First off, the company is hoping to obtain research results that it can apply to its own operations. The centers also likely will become avenues for recruiting future employees, Reed added. Eventually, IBM's own experiences will be used as a template for service engagements with IBM customers and contribute to its "on demand" computing initiative.

The program also dovetails with an overall strategy at IBM to better exploit its research operations. In the past year, IBM has begun to devise ways to turn its deep scientific expertise into a stronger competitive advantage and a source of revenue. Under the On Demand Innovation Services Program, for instance, clients can retain IBM researchers on consulting projects.

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"IBM has solved a problem, which is, how do you make your research team relevant to product development?" Pat Sellinger, IBM vice president of data management architecture and technology, said in an interview.

While technology plays a key role in creating supply chains, getting them to work is more of a cultural issue. Getting companies to adapt to procedures developed by outsiders is often extremely difficult.

"Businesses want to run their businesses their way rather than someone else's way," Reed said. "It is somewhat of an ongoing schizophrenia you have to deal with."