IBM modeled its whole extended supply chain, saving $750M in 1998.

IBM sells through its own divisions and a web of channel partners, so responsiveness with minimal inventory is both valuable and hard to judge. In 1994 it began re-engineering the global supply chain.

The usual move is to improve each plant's plan. IBM instead built the Asset Management Tool, an extended-enterprise supply-chain analysis tool that models the whole chain, not just one node.

AMT wires graphical process modeling, analytical performance optimization, simulation, activity-based costing and enterprise database connectivity together, so IBM could test inventory budgets, turnover objectives, customer-service targets and new-product launches quantitatively.

Rolled out at a number of IBM business units and their channel partners, AMT saved over $750 million in material costs and price-protection expenses in 1998 alone.

Model the whole extended chain as one system

Decisions at one node ripple nationwide, so a whole-chain model is required

Coupling optimisation to activity-based costing makes the dollars visible

Simulation lets IBM test inventory and service trade-offs before committing

Modelling channel partners, not just IBM plants, captures the real system

When a chain spans companies, a shared model beats separate plans; linking optimisation to costing makes the trade-off visible.

AMT was implemented at several IBM business units and their channel partners, saving over $750 million in material costs and price-protection expenses in 1998. The work was published in Interfaces in 2000 and became a Franz Edelman Award finalist.