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January 23, 2009

IBM model supplies greener, cheaper logistics

How to optimise the supply-chain network?

By Jason Stamper

Supply-chain experts at IBM’s research labs in China have developed a computer model for businesses to better manage their supplies logistics, cut costs and lower carbon dioxide emissions in their supply chains.

The company will develop consulting services around the new tool, dubbed the Supply-chain Network Optimization Workbench or SNOW.

The software allows for detailed supply chain analysis by running simulations that show how an organisation could optimise its supply chain network.

Mathematical models are used to first help identify some cost-effective scenarios from a large number of candidates. Optimisation results are then converted to simulation models automatically for more detailed analysis, taking into account operational policies and uncertainties.

In a test, Chinese shipper and logistics company Cosco is said to have used the system to reduce the number of distribution centres it uses to 40 from 100, lowering costs by 23% and cutting carbon dioxide emissions by 15%.

“When you improve overall efficiency you can almost automatically lower cost, waste, and environmental impact,” Eric Riddleberger, head of IBM’s business strategy consulting practice, said in a statement.

In a separate announcement, IBM has announced that it will collaborate with eFuture Information Technology to debut SaaS retail applications in mainland China.

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eFuture provides software to distributors, wholesalers, logistics companies and retailers in China’s front-end supply chain market.

China’s retail sector is forecast to reach $1.4 trillion by 2010 to become the world’s second largest market, and manual procurement and supplies management processes will not be able to keep up with the pace of growth.

The IBM and eFuture SaaS service will extend from fully automated order processing to settlement, delivery, inventory and payments.

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