1. IBM Governmental Programs © 2003 IBM Corporation IBMs Global Supply Chain Evolution in Post ITA Environment Douglas Gregory VP IBM Governmental Programs EMEA

2. IBM Governmental Programs © 2003 IBM Corporation Global Supply Chain Changes Since ITA IT Supply Chain is Complex –Supply Chain activities gained prominence in post ITA environment –Drive to become more responsive, efficient and resilient, to deliver greater customer value, reduce costs and make cost structure more variable. –Greater application of IT to a more globally integrated end-to-end operation. Increasingly many functions outsourced (manufacturing, sales, and logistics). Supply Chain Management In IBM: –Early 1990s: decentralized geographic and functional departments –Mid-late 1990s: Distribution and logistics functions centralized into a global organization with world-wide responsibility –Early 2000s: merger of Customer Fulfillment, Procurement, Manufacturing, and Global Logistics/Distribution functions into a new global Integrated Supply Chain function Result: cost savings of $5.6B in 2002 and $7B in 2003

3. IBM Governmental Programs © 2003 IBM Corporation IBMs Supply Chain is Complex, Extensive, Contains high value items and Controlled Technologies. BuyerSupplier Freight Forwarder Terminal at Origin Surface Carriers Ocean Carrier Bank Air Freight Terminal at Destination Terminal at Origin 1. Request for Quote 2. Quotation 3. Purchase Order 4. P. O. Confirmation 5. Shipper Order/Instr. + Invoice + Packing List 6. Ship Order / Instr. 11. Pre-alert/Arrival Notice 7b. Shipping Order Cycle (S/O, BoL) 7a. Ship Instr. Cycle 8. Gate-out/ Gate-in 10. Bay Plan 13. Payment Order 14. Remittance 15. Import Documents 16. Proof of Delivery 9. Bay Plan Capture Gate Movement (Gate-out/in) Capture Gate Movement 12. Export Documents 8. Gate-in/ Gate-out 5. Shipper Order/Instr. + Invoice 7a. Manifest Terminal at Destination

4. IBM Governmental Programs © 2003 IBM Corporation Future Challenges: Security in the Supply Chain Pre 9/11 major concern was theft Post 9/11 concern is security and prevention of terrorism Security enhancements are needed –Governments and industry must work together –Society should not have to sacrifice the efficiencies that have been built into the system –i.e., security and efficiency are mutually reinforcing Opportunities for enhanced trade efficiencies –Harmonized and Transparent Customs Procedures –Automation Must ensure changes support further trade in IT

5. IBM Governmental Programs © 2003 IBM Corporation Conclusions The supply chain is complex, globally integrated and extends beyond the enterprise to third parties. Changes to the supply chain are being driven by company efforts to deliver better customer value, reduce costs, increase responsiveness and resiliency. IT duties and customs barriers are factors in internal business optimization and location decisions. New challenges are on the horizon as governments develop strategies to address security concerns. Security and efficiency are mutually reinforcing. Supply Chain complexities make government-industry partnership essential. Traditional trade facilitation issues and platforms provide an opportunity to expand global IT trade and also address new security concerns.