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Telstra details supply chain makeover

Telstra this week said its IBM-led supply chain overhaul had helped shed 400 staff, cut its inventory centres by half, and cut out 2,000 suppliers.

Telstra this week said its IBM-led supply chain overhaul had helped shed 400 staff, cut its inventory centres by half, and cut out 2,000 suppliers.

Speaking to journalists yesterday at IBM's annual Asia Pacific Insights conference in Shanghai, the telco's head of procurement Ian Wheatley said IBM now handled a raft of its back office functions. The deal, which has gradually cut deeper into Telstra's operations, covers everything from procurement to accounts payable, logistics and distribution.

"IBM acts as our agent for indirect procurement. That covers the sorts of products and services that any large company would buy such as temporary labour, stationery and travel," said Wheatley.

Procurements that IBM makes on Telstra's behalf accounts for around 20 per cent or $1.4 billion worth of Telstra's $7 billion annual procurement budget, Wheatley later told ZDNet.com.au.

Telstra's IBM-hosted "Procure to Pay" transaction system, which went live in September 2007, had been integrated with its SAP ERP system. The system now has 4,500 users.

"It enables us to automate a lot of transactions with vendors in terms of order placement, invoices ... and a single view of transactions across our vendors," he said.

Wheatley said 80 per cent of Telstra's inventory management has been automated, with hopes to reach 90 per cent in years to come.

Since last December IBM had also taken over logistics, warehousing and distribution for Telstra. "That directly impacts our entire logistics operations, which supports our communications technicians out in the field which build and maintain our network," he said.

The executive said the arrangements with IBM would result in the closure of 120 of 220 of its inventory stocking centres.

It has also changed the way stocks are delivered to staff. Telstra's technicians have been unable to order inventory online and have had to visit inventory stations. The future would see supplies delivered to technicians' homes, he said.

"We're implementing it and starting to roll it out nationally... There are several hundred guys in the first tranche and this will move more broadly across our technical workforce."

Since inking the deal with IBM in 2006, Telstra has shed 400 logistics and back office staff, some of which took up roles with IBM, said Wheatley.

"Phase one impacted 60 odd positions. They were offered to move across to IBM. The majority took that opportunity up. In phase two there were 335 positions affected. As a result of that many of them were offered roles with IBM or IBM's partners [while] others have been redeployed into other parts of [Telstra]," he said. "It was a pretty good outcome."

Telstra workers at the time held a different view, with the union and Telstra in March this year facing a stalemate on transferring knowledge to the IBM operations until Telstra met the terms of workers to be made redundant.

The majority of skills Telstra lost under the second phase were logistics, inventory and demand management. The staff are either based in Melbourne or Brisbane, said Randy Walker, GM APAC, Managed Business Process Services.

IBM is now firmly entrenched in Telstra's operation. In 2006, Telstra also outsourced the management of its entire IT infrastructure to IBM until 2012.

Liam Tung travelled to Shanghai as a guest of IBM.