September 2011

1. September 2011 Smarter CommerceRedefining the value chain in the age of the customer Presenter: Scott Lewis - IBM

2. We have entered the age of the empowered customer • Customers now have unlimited access to information and can instantly share it with the world • Social networking and mobile commerce have dramatically changed the dynamic between buyer and seller. • Customer expectations of service, price and delivery is soaring. • This is changing the entire way products are sourced, manufactured and distributed—and making business more complex than ever. 95 million Number of tweets sent via Twitter each day 75% Percentage of people who believe companies don’t tell the truth in advertisements $93 billion Amount in sales missed due to out of stock inventory

3. Disruptive forces signal an end to business as usual • Individuals • The connected consumer • The networked workforce • The empowered citizen “Time is ticking for pure product companies. They need to become experience providers.”Consumer Electronics, Europe • Enterprises • Evolved business models • Optimized digital operations • Connected enterprise "We seem to have more data but our information is worse, as it is more difficult to sift out what information is most important.” CEO, Electronics Manufacturing Services, North America • Industries • Value migration • Value chain volatility • Customer-insight driven innovation “We need to do a better job at finding a way to use this information. The value chain needs to be connected to bring the most value to our customers.” Electronics company CEO, Canada Source: IBV Analysis

4. B2C Market Sell Fulfill Configure Bundles of Products & Services Research / Product Reviews Social Media Drop-Ship strategies Visibility Personalization B2B Market Sell Fulfill “I get product ratings & reviews for a $20 book – why not for a $1,000 industrial battery assembly?” B2B customer (buyer) expectations are set by B2C sites – they want a rich user experience too “How do I offer product recommendations to my B2B customers?” B2B sellers are adopting B2C-likemarketing techniques to shift from “order-taking” to “order-making” “How can I leverage the power of social networks with my B2B customers?” B2B sellers want to use social networks to promote their brands; buyers want feedback from the community on products and services …with B2C and B2B commerce models converging

5. Power has shifted to the customer - compressing margins and changing paradigms • In this new era, businesses need to: • Understand and anticipate customer behavior and needs based on • customer insights across all channels • Adapt sourcing and procurement based on customer demand and • optimize supplier interactions across extended value chains • Market, sell and fulfill the right product and service at the right price, • time and place • Service customers flawlessly, predict and drive customer loyalty

6. At IBM we call the path forward: Smarter Commerce Smarter Commerce is a strategic approach that places the customer at the center of your business operations It maximizes the insight generated through customer interactions It capitalizes on social and mobile commerce It synchronizes yourentire value chain to deliver consistent and predictable outcomes It drives growth by enhancing, extending, and redefining the value you provide Customer It increases margins by boosting efficiency at every stage of the commerce cycle It improves collaboration and visibility for your customers & partners

7. Smarter Commerce focuses on three dimensions centered around the customer Customer Value Strategy Customer Insight In turn, you must re-think how your customers define value, and the changes you must make to your value chainso you can deliver exactly what your customers want - profitably • In today’s world of instant business, you need deep insights, in real-time that you can turn into immediate action Customer Customer & Partner Engagement You need an approach that allows you to more effectively connect, collaborate, conduct commerce and create a differentiated customer experience …increasing the value companies generate for their customers and partners in a rapidly changing digital world

8. 8 Smarter Commerce can help transform every phase of the commerce cycle Market Creates personalized and relevant offers with unified cross-channel marketing Buy Drives intelligent, adaptive and optimized extended supply chains based on customer demand Insight Strategy Buy Market Targeted and personalized marketing across all customer interactions Sourcing, controlling and procurement of goods and services Servicing customer needs across all interaction channels Selling and fulfillment of products and services across all channels Customer Service Anticipates behavior and delivers flawless customer service across all channels Sell Enables customers and partners to buy what they want, when and where Service Sell Engagement

9. IBM’s integrated portfolio for Smarter Commerce VALUE CHAIN STRATEGY AND ENABLERS Innovation and business value Innovating and aligning business models to drive value to the customer Market and customer mgmt Aligning sales, marketing and operations to engage with customers Operating and Organization Models Designing operations, supply chain and the organization model to deliver customer value CORE BUSINESS SOLUTIONS Core Business Processes Market Service Buy Sell • Delivery, Service, & Support • Customer Self-Service • Reverse Logistics • Case Management • Cross-channel Selling • Distributed Order Management • Customer Integration & Collaboration • Fulfillment • Store Solutions • Payments & Settlements • Customer Awareness & Analytics • Social Media Marketing • Brand Experience • Cross-channel Campaign Mgmt • Digital Marketing Optimization • Marketing Resource Mgmt • Supplier Integration & Management • Supply Chain Optimization • Logistics Management • Payments and Settlements Advanced Analytics Store analytics | Purchase analytics | Consumer loyalty | Predictive and prescriptive | Social Analytics | Master data management Workload Optimized Systems (Z-Enterprise, Power, X, Storage and Systems Software) focused on agility, integration and automation to drive relevant business outcomes

10. Empowered Customers are: It’s changing the way you “buy” How the empowered customer is changing how you “Buy” • Increasing price pressure due to pricing knowledge of competitive products • Expecting instant product availability • Expecting quick new/enhanced product introductions • Demanding customizable product configurations Customer • Deliver the highest quality products with lowest costs and on time • Easily share information across internal systems and connectivity with suppliers • Collaborative environment to capture, evaluate, process and retain supplier and product information • Detect and resolve compliance issues as they happen, and predict before they happen • Continually analyze and refine the “buying process”

11. Supplier relationships are changing More than 85% of companies expect the complexity of their supply chains to grow significantly by 2012 Competitive pressures of today’s economy demand more information and flexibility • $15+ to process a manual document and $53 to reconcile manual errors 70% of supply chain officers report the lack of visibility has a significant impact on their supply chain and 55% report cost containment concerns 64% of organizations don’t know or don’t measure the average cost to manage a supplier annually

12. Companies need new capabilities to capitalize End-to-end performance management and advanced analytics to drive continuous improvements with supplier community Seamless and secure integration of key business processes with suppliers Secure, efficient, and consistent means of accessing and exchanging information with suppliers End-to-end visibility from order creation to payment and tracking supply chain events in real-time Analysis of supplier community and spend for efficient purchasing processes

13. Supplier Integration and Management helps continuously improve every phase of the supplier lifecycle Allows companies to improve and re-evaluate their purchasing activities and suppliers Provides seamless and secure integration of key business processes B2B Integration Sourcing Provides companies with end-to-end supplier performance management and business analytics Performance Analytics and Compliance Enables companies to better manage their supplier interactions and significantly improve relationships between vendors and suppliers Collaboration

14. Projects to make you more successful… Automate Procure-to-Pay Process - delivers process integration across an agile supply chain © 2011 IBM Corporation

15. Large office supply distributor strives for transactional excellence with automated purchase to pay Challenge • A cost-effective and efficient way of transacting electronically with suppliers Solution • B2B collaboration network to connect with large trading partners along with a supplier web portal for smaller non-EDI enabled suppliers Results • Now that manual interventions have been removed, orders are processed in a more timely and accurate fashion • Data accuracy from suppliers increased 90 percent • Improved on-time delivery to customers, which increases their satisfaction and loyalty. • More accurate orders resulting in more accurate stock levels Customer Profile • Large distributor of more than 80,000 paper, printing, imaging, graphic arts, packing, and maintenance supplies and equipment.

16. Commerce begins with your supply chain partners: Have you automated the process? • Do you know the cost of doing business with suppliers manually? • What is the cost of reconciling errors introduced during manual processing? • Do you have the confidence in your supply chain to compete and win new business? • Can your suppliers see into your supply chain? Bottom line: A comprehensive approach to supplier integration is critical to customer satisfaction and your margins

17. There is opportunity in automating supplier integration 68% of executives report that integration challenges impede collaborative relationships with partners $93 billion Amount in sales missed due to out of stock inventory $15 - $20 Is the cost of manually processing a customer order

18. The benefits of automating 100% of your procure-to-pay processes are... Buy • Reduce operational costs • Improve service level agreements with customers and partners • Compete and win new business through an agile supply chain • Make it easier to do business with your company

19. Projects to make you more successful… Build a Supplier Portal - Streamlines the way suppliers access and act on information and strengthens relationships © 2011 IBM Corporation

20. A consistent means of accessing and exchanging information significantly improves collaboration Challenge • Issues with Vendor Funds and Vendor Information Management • Relationship with vendors needed to be improved • Problems had both intranet and extranet aspects to them Solution • Supplier collaboration enabled with a supplier web portal Results Customer Profile • Faster and more structured on-boarding process for new suppliers • Closer partnerships and stronger collaboration with suppliers. • Consistent management of supplier co-marketing $s • New internally facing and external portals A multinational retailer of technology and entertainment products and services with more than $50 billion in annual revenue and over 180,000 employees.

21. Deliver on customer’s expectations by simplifying supplier collaboration: Have you optimized the process? • Do you know the cost of doing business with suppliers manually? • Can you exchange sales and inventory information with suppliers to ensure and predict appropriate inventory replenishment levels? • Can you quickly publish accurate, current product information across channels? • How long does it take you to onboard new suppliers? What is the impact on your business? • Do you have a way to personalize content for your top suppliers? • Are your suppliers able to quickly and easily manage their own users on your site? Bottom line:A robust supplier portal can allow you to better manage supplier interactions and significantly improve supplier relationships

22. There is opportunity in supplier collaboration $1.2 trillion Value of excess merchandise stockpiled in supply chains configured for long lead times - Goldman Sachs 68% of executives report that integration challenges impede collaborative relationships with partners 50% Of businesses plan to adopt more collaborative sourcing models

23. The benefits of establishing a supplier portal are... Buy • Reduce operational costs • 10%-30% reduction in operational costs • Make it easier to do business with your company • Reduce erroneous payments by up to 75% • Onboard new suppliers quickly and easily • Up to 50% reduction in contract negotiation cycle time • Improve service level agreements with suppliers • Compete and win new business through an agile supply chain

24. Projects to make you more successful… Refine Supplier Compliance Management- Detect and resolve compliance issues as they happen, and predict before they happen. © 2011 IBM Corporation

25. Hardware retailer driving improved supplier performance Challenge • Data received from suppliers was often incomplete, resulting in poor decision making and an increase in supply chain risk exposure and inefficiency • Inefficient manual processes to track supplier performance • Lack of visibility into their inbound supply chain processes Solution • Comprehensive B2B supplier network providing supply chain visibility and supplier performance metrics Results • Improved efficiency of inbound supply chain operations through real-time visibility into in-transit goods • Improved supplier performance through real-time non-compliance detection, chargeback calculation, and immediate notification to their supplier via a single solution • Reduced supply chain risks by enabling non-EDI suppliers to electronically communicate shipment, acknowledgement and invoice information Customer Profile • One of the largest U.S.-based full-line, full-service, member-owned distributor of lumber, hardware, and building materials products in the home improvement industry. 25

26. Supplier Compliance is key to efficient supplier management: What level of visibility can you provide your suppliers? • How do you identify suppliers worldwide who are not compliant? • How do your suppliers rate on performance? How do you measure their performance?  • How do you notify and resolve chargebacks or SLA penalties with your suppliers? • Can your accounts receivable team quickly resolve supplier disputes? • How much of your PO, SO and shipment information resides in different systems? • Can you provide intelligible and actionable business data to your suppliers? Bottom line:Establishing a single point of access for all supplier content and communications can reduce risk, improve cycle times, reduce costs, support growth and facilitate efficient supplier management

27. As companies strive to reduce costs, improving supplier performance is now a best practice 50% Respondents that experienced a disruption also lost an estimate of over $1 Million 41% Respondents have experienced supplier failure 45% Respondents experienced a supply chain disruption within the past 12 months

28. The benefits of real-time supplier compliance management... Buy • Improve supplier performance through real-time non-compliance detection, notification, and chargeback calculation • Reduce costs by enabling non-EDI suppliers to comply with buyer configured compliance guidelines • Improve efficiency in supply chain operations by automating the inbound receiving and compliance resolution process

29. IBM’s integrated portfolio for Smarter Commerce VALUE CHAIN STRATEGY AND ENABLERS Innovation and business value Innovating and aligning business models to drive value to the customer Market and customer mgmt Aligning sales, marketing and operations to engage with customers Operating and Organization Models Designing operations, supply chain and the organization model to deliver customer value CORE BUSINESS SOLUTIONS Core Business Processes Market Service Buy Sell • Delivery, Service, & Support • Customer Self-Service • Reverse Logistics • Case Management • Cross-channel Selling • Distributed Order Management • Customer Integration & Collaboration • Fulfillment • Store Solutions • Payments & Settlements • Customer Awareness & Analytics • Social Media Marketing • Brand Experience • Cross-channel Campaign Mgmt • Digital Marketing Optimization • Marketing Resource Mgmt • Supplier Integration & Management • Supply Chain Optimization • Logistics Management • Payments and Settlements Advanced Analytics Store analytics | Purchase analytics | Consumer loyalty | Predictive and prescriptive | Social Analytics | Master data management Workload Optimized Systems (Z-Enterprise, Power, X, Storage and Systems Software) focused on agility, integration and automation to drive relevant business outcomes

30. Empowered Consumers are: Expecting instant product availability Using social network tools for recommendations and validation for product selection Demanding access to detail product information and reviews via multiple channels Partners are carrying consumer expectations into the B2B experiences Forcing change to: Consumer expectations are driving business changes Customer Automation of manual processes to increase product availability Monitoring and responding to social channels for end consumers Support upstream channels with more content Build socially-infused web experiences for partners

31. B2B customer relationships are changing • Smaller partners rely on costly manualbusiness processes • Lack of technical expertise is costing money, $10+ to process a manual document Partner mandates require your compliance (Tech, SLA, Business rules) Big Box retailers dictate protocols, response times and penalties Velocityof business processes are increasing Drive to lower inventory is causing order size to decreasing, while order frequency is increasing Gettingcloser to their customers is a high priority Quickly changing demand is driving the need for better feedback loops.

32. IBM Customer Integration & Collaboration enables you to… Connect Automate Collaborate Become easier to do business Drive cost and inefficiency out of manual B2B processes Connect people together to drive innovation and revenue • Any standard, any protocol, any format • Full range of integration patterns and technologies • Community recruitment, provisioning and onboarding • Security, governance and compliance • Business process management • Automated exception handling • Small partner automation • Mobile-enabled web experiences • Personalized portals • B2B process visibility and SLA management

33. … and leverage social media in B2B customer interactions

34. Projects to make you more successful… B2B Customer Engagement optimizes customer interactions © 2011 IBM Corporation

35. Improved collaboration, increased revenue, and improved productivity Challenge • Need to support dealer network that operates from the back of a truck Solution • Personalized dealer portal enables dealer self-service + collaboration Results Customer Profile • Dealers have access to wide range of technical data to support the sale • Dealers can access the experience from anywhere • Dealers socialize- helping each other + providing innovative ideas back to the product provider • A manufacturer and distributor of quality professional automotive equipment, tools and toolboxes. They sell directly to professional mechanics through a network of independent franchised mobile distributors.

36. Commerce is not just about consumers, Have you engaged your B2B customers? • How are you leveraging mobile and social technology for your dealers/distributors? • Can your partners help each other, instead of just depending on you? • What other paths to market could you enable to sell more products and services? Bottom line: Connect people together to drive innovation and revenue

37. There is opportunity in B2B customer engagement 43% of baby boomers (55-64) use social media in Dec. 2010, up from 9% in Dec. 2008 5.3 Billion Mobile subscriptions by the end of 2010 (almost 80% of the world population) 32% of instant messages were in enterprises versus public in 2009

38. The benefits of better B2B customer engagement are... Sell • Reduce operational costs (one customer reduced call center support calls by 30%) • Collaboration that can drive innovation and new revenue streams (a customer has 31,000 dealer users who share ideas and support each other) • Make it easier to do business with your company (customer enables web experience to mobile devices)

39. Questions

40. Thank You