March 31, 2009

Operations Management Lesson 5 Exercise

In this lesson exercise I would like to review the integrated supply chain of IBM Global Financing (IBM Credit Corp.) on the world wide level.

IBM Global Financing (IGF) proivdes different types of financing for IBM customers. Among IGF products there are different type of leases and loans, innovative credit line schemes and other. In most of the countries IGF is a part of IBM Corporation local subsidiary, but as far as IGF acts as a bank I would prefer to look at it as an separate finanicng entity.

Taking into consideration all mentioned above I can describe the IGF supply chain as the following:

IntegrateÒ Supply Chain

This chain perfectly shows the flow of the IGF product from "raw material" stage (money in the bank) to complicated financial product with number of additional services, options etc.

This chain is well developed and pretty mature so main focus should be on the issues of price of financing, speed and quality of made decisions, additional benefits to standard products.

Advantages:

  1. Partners in the supply chain splits the risks Banks do not accept the credit risk of the end customer which is deifnitely much lower than IBM Corporation credit risk.
  2. IBM reduces its costs using cheaper lended money than using own capital.
  3. IBM has a pool of banks and able to get the best offer on the market at each point of time.
  4. Banks receives the consolidated pool of IGF deals (not deal by deal). This helps them to deacrese their SG&A expenses portion.
  5. IBM Global Financing injects specialized IT knowledge into pure financial business.

Disadvantages:

  1. Dependability of IBM on the Banks refinancing.
  2. Vulnarability of the chain (chain is open to external negative impact like financial crisis).
  3. Respectively longer decision-making time due to the involvement of global treasury.

- One comment Not publicly viewable

  1. Neil McPhater

    Alexander,

    You have produced a very good blog for Lesson 5 which includes a diagram of the IGF supply chain (SC). Your description of the SC is very knowledgable and you have referred to SC objectives. I thought your advantages/disadvantages were excellent.

    For reflection, you might consider relating your blog answer more to the OM theory of the course material. You mention ‘raw material’ – you could relate this to Slack’s input-transformation-output system model Figure 1.4 page 10. You mention ‘pools of banks’ – you could relate this to ‘multi-sourcing’ (Slack Figure 7.1 page 219). You could have said whether the supplier relationships were ‘transactional’ or ‘partnership (strategic)’ (Table 5.2 in the course Notes). Also, to what extent do the supplier performance objectives reflect the SC objectives? – see Slack Operations Principle page 219. Also how does information sharing affect supply chain dynamics?

    I look forward to your next blog.

    Ciao, Neil.

    04 Apr 2009, 09:44


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