According to numbers collected by International Data Corp., China's Lenovo Group Ltd. recently became the world's second-largest maker of personal computers. IDC data from the fall of 2011 showed Lenovo with a 13.7-percent market share, passing up Dell Computer Corp. Not bad for a company that didn't make a splash in worldwide PC markets until 2005, when it bought the personal computer business of IBM.
But that designation wasn't enough for Lenovo. The company has its sights set on the number-one position in the PC marketplace. To get there, it plans to rely heavily on an efficient global supply chain.
One of the cornerstones of Lenovo's efforts is its means of communicating with key suppliers and logistics partners. Until recently, the company was burdened by a legacy-style platform for electronic data interchange (EDI), a vestige of its IBM roots.
"We needed to change that out," says Jon Pershke, vice president of strategy and transformation for Lenovo's global supply chain. The cost and time involved in adding original device manufacturers or other partners "was far too great for the speed of our business," he says.
Ironically, Lenovo's chosen partner for making the switch to a more modern B2B system was IBM - or, more specifically, the latter's Smarter Commerce initiative. Pershke says the company began talking with IBM about upgrading its capability about a year and a half ago, although the effort to move its entire IT platform off the legacy network is "a multi-year project."
"They are really trying to get a lot more customer-focused," says Richard Douglass, industry director for manufacturing with IBM Smarter Commerce. "The upshot of that is, they've got to do a lot more granular segmentation of their supply-chain response." Attempts to achieve the perfect order with multiple customers can no longer be based on a "one-size-fits-all" metric.
Updating the Technology
Achieving better connectivity is a critical part of that initiative. Pershke says Lenovo drew on capabilities that came from IBM's acquisition of Sterling Commerce from AT&T in 2010. The deal gave the company a more sophisticated tool for linking suppliers, manufacturers and customers.
Lenovo opted to launch its new B2B integration project through the use of managed services, provided by IBM. In the process, Douglass says, it could redirect limited internal staff to other aspects of the supply chain.
Outsourcing the function turned out to be a key element in allowing Lenovo to make quick changes in its partner profile. Previously, it might have taken up to six months to fully onboard a new logistics service provider, with much of the delay chalked up to wait time. With the new IBM platform in place, the company could reduce that period to about five weeks.
The mere act of communicating with existing partners was equally complex. As Pershke noted, it could consist of multiple EDI messages confirming the tendering of a load, its acknowledgment from the logistics partner, and the advance ship notice, to name but a few. Up to 11 different EDI messages might be passed between shipper and carrier. A similar raft of communications ties the company to its ODM.
A new technology platform doesn't make those requirements go away, but it does streamline the way in which they are handled. It allows for multiple message formats to be traded between Lenovo and its various partners. Even the most unsophisticated supplier can link to its customer with relative ease. "A lot of what I'm seeing with modern-day B2B platforms is that [the format] almost becomes irrelevant to the user," says Pershke. "They're flexible enough to deal with whatever our partner wants."
Adoption of the new B2B platform took about six months in total, carried out in three waves. The first phase proved the concept, clearing the way for full implementation. Pershke says IBM kept its promises as to time and cost, despite the complexity of Lenovo's many partner relationships. "Honestly," he says, "I was pleasantly surprised."
System Yields Benefits
The new technology has yielded a number of benefits for Lenovo, says Douglass, including greater reliability in B2B communications, fewer errors, shorter cycle times and extended visibility. Often an ODM will make the product and ship directly to the company's customers. "Lenovo doesn't see the inventory at their dock," Douglass says, "but they do want visibility to what's being moved."
"Things that used to take months now take weeks," Pershke confirms, adding that the company's "five-digit- number cost is now a four-digit number."
Processes are smoother overall. "It's a much different discussion with my head of logistics when he wants to make changes," says Pershke. "I'm not the gate anymore - technology is enabling it."
With the decrease in costs, Lenovo can look to adoption of a "control tower" that oversees every aspect of the company's partner communications. Pershke envisions a greater reliance by the company on analytics and predictive exception management.
"We haven't got there yet," he says. "But we expect to be there shortly - I think within the next year."
The ultimate goal for Lenovo, Pershke says, is to create an integrated, end-to-end system that melds logistics with order fulfillment. As for IBM, says Douglass, it will continue to tackle the lack of supply-chain visibility experienced by many companies - the number-one issue cited by chief supply-chain officers, in an IBM survey of two years ago. Any improvements, of course, will have to be carried out against a backdrop of increased risk, rising costs and even more demanding levels of customer service.
In the case of Lenovo, "we're working with them on a number of fronts," says Douglass. "You're going to see them make a big push to expand out from where they are."
IBM Smarter Commerce
Keywords: supply chain, IT supply chain, supply management, logistics management, logistics services, supply chain planning, sourcing solutions, Lenovo, IBM Smarter Commerce
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