supply chain creativity: when your supply chain suffers
TRANSCRIPT
Supply Chain Creativity:
When Your Supply Chain Suffers from Broken Links
Gerald R. Ford
CSCMP, CPSM, CMC
Tel: 226-474-1169
1. If you think you can do a thing or think you can't do a thing, you're right.
2. Nothing is particularly hard if you divide it into small jobs.
3. Obstacles are those frightful things you see when you take your eyes off your goal.
4. Quality means doing it right when no one is looking.
5. There are no big problems, there are just a lot of little problems.
6. Thinking is the hardest work there is, which is probably the reason why so few
engage in it.
7. You can't learn in school what the world is going to do next year. Henry Ford
8. A good story is a bad experience followed by a long period of time: Gerald (Jerry)
Ford
Count the letter “f”
These finished files are the result of a few years
of scientific study. This is due to the efforts of
many individuals who contributed facts and
ideas. Many of these concepts will be used
forever by future generations.
Write down your answer on a piece of paper!
In order to be able to manage risk you have to look at things differently
Actual count = 13
These finished files are the result of
a few years of scientific study. This
is due to the efforts of many
individuals who contributed facts
and ideas. Many of these concepts
will be used forever by future
generations.
What is Risk Management?
Business Continuity Management (BCM), defined by the Business Continuity Institute as “a holistic management process that identifies potential impacts that threaten an organization and provides a framework for building resilience and the capability for an effective response that safeguards the interests of its key stakeholders, reputation, brand and value creating activities” (BCI, 2005).
Business Vulnerability, defined as an exposure to serious disturbances, arising from risks within the supply chain as well as risks external to the supply chain (Christopher, 2003). Vulnerability is a result of any weakness within a complex system that can seriously jeopardize its activities (Ayyub, 2003).
Enterprise Risk Management (ERM) as a set of coordinated actions about protecting and enhancing share value to satisfy the primary business objective of shareholder wealth maximization (Chapman, 2006).
Resilient enterprise meaning the ability of the company to recover quickly from a disruption (Sheffi, 2005).
Step 1: Risk Identification
Step 2: Risk Assessment
and Evaluation
Step 3: Selection of
Appropriate Risk
Management
Step 4: Implementation of
Supply Chain Risk
Management Strategies
Step 5: Mitigation of Supply
Chain Risks Manuj and Mentzer (2008), “Global Supply Chain Risk
Management,” Journal of Business Logistics, Vol. 29, No. 1, pp.
133-155.
Business Continuity
Strategies and Planning.
Work with Procurement to
select vendors and
suppliers.
Test your Plan with your
critical Suppliers.
Classifying risks into
supply, operations,
demand and security risks.
Decision analysis, Case
Study, Perception Based.
Customers are driving supply chains
Stock availability
Delivery frequency
Order to delivery lead time
Timed delivery slot
Supply Chain inventory
“Innocence”
1985
90%
weekly
72 hours
± 1 hour
4 weeks
“Maturity”
1995
98%
daily
48 hours
± 15 minutes
2 weeks
“Excellence”
2008
99.9%
3 times a day
6 hours
on time
0.5 week
Industry Sector
Food and Drink
Automotive
Food and Drink
Retail
Electronics
..
... and product life cycles are measured in months not years
Normally companies have a plan for IT risk and not much else. Although in one instance a
company planned to move their data facility from Toronto to Fort Lauderdale which is in the
middle of hurricane alley.
EPC Electronic Disaster Database and
Its Characteristics Project Report 97-1
by Carol Tudor Office of the Senior Scientific Advisor
Emergency Preparedness Canada August 1997
THE 1998 ICE STORM:
10-YEAR RETROSPECTIVE
RMS Special Report
2008 Risk Management Solutions, Inc.
You are working in the purchasing department for a large insurance company in
southwestern Ontario. It is Friday afternoon at 3:00 pm and you have just heard that
your marketing department is working on a very important project. It seems that they
have decided to try and help those unfortunate individuals who have lost their
electricity due to the ice storm that has just hit the Ottawa region three days ago.
Their idea is to buy some gas powered generators. They have a large number of
important clients that need help and need it quickly. For some unknown reason the
marketing department did not think of getting your help until now. By the time you
get all the details, every senior signing manager has left the office since it is already
4:00 pm. The total purchase is going to be greater than your authorization.
You have plans for the evening and would like to go home. If you spend another
Friday night at work, you are in deep trouble. On the other hand if you can pull off a
small miracle you will have done wonders for the image of your department and
company.
You have 15 minutes or less to decide what to do and how you are going to execute
your plan.
Good luck.
How would you assess the capability of your company to mitigate the key supply chain risks it faces right now?
9
1
11
27
53
Extremely Capable
Somewhat Capable
Slightly Capable
Not Very Capable
Not at all Capable
% of respondents1
(n=3,079)
Somewhat Capable
1 All data weighted by GDP of constituent countries; figures do not sum to 100%, because of rounding; excludes respondents who answered “don’t know.”
Source: September 2006 McKinsey Quarterly Global Survey of Business Executives
How does your organisation assess the
risks to its supply chain?
24
34
28
15
There is no FormalAssessment
Qualitatively/Intuitively
With rough QuantativeEstimates
With Detailed Models ofCash Flow at Risk
% of respondents1
(n=2,924)
On a wing and a prayer
1 All data weighted by GDP of constituent countries; figures do not sum to 100%, because of rounding; excludes respondents who answered “don’t know.” Source: September 2006
McKinsey Quarterly Global Survey of Business Executives
The challenge of global logistics
PRODUCTION
DISPERSION
PRODUCT
LINE DIVERSITY MARKET
CONCENTRATION
Techno-
logy / dev-
elopment Parts /
Components Inbound
supply Assembly Physical
distribution
Marketing
/retailing
Custo-
mer
• Shorter product
life cycles
• Product / model
proliferation
• Global sourcing
• Focused factories
• Concentrated
demand
• Price erosion
The risk management challenge
High
Low
Low High
Probability of Occurence
Consequence/
Impact
• Where can we reduce the probability? • How can we reduce the consequence?
Supply Risk Mitigation Strategies
Low Occurrence, Low Impact
Review and improve
quality assurance process
Low Occurrence, High Impact
Implement joint process
improvements with suppliers,
have emergency plans, buy
contingent business
interruption insurance
High Occurrence, Low Impact
Monitor supplier
performance
High Occurrence, High Impact
Begin resourcing
efforts on these SKUs
redesign product
or find new suppliers
Low
High
Risk
Impact
Risk Occurrence Low High
Assessing Suppliers (Diagram from workbook by Mike Fogg)
Assessing
suppliers
Pre contract award
a pre-commitment
assessment of a
potential supplier’s
capability of
controlling quality,
delivery, cost and all
other factors
forming part of a
buyer’s requirement
Supplier
Appraisal
Post contract award
is an objective
assessment, often
expressed as an index,
of a supplier’s
performance in meeting
standards agreed with
the buyer in the supply
of goods, works
materials or services
during the lifetime of a
contract
Vendor
Rating
Pre contract award
The provision of finance,
technology or other
forms of assistance by
the buyer to a supplier
to enable the supplier to
offer a product or
service which meets the
buyer’s needs, or to
interface with the buying
organisation in a
mutually appropriate
way (Compton and
Jessop – CIPS
dictionary of terms and
conditions)
Supplier
Development
24
Obstacles to addressing risks
47
36 36
1814
6
0
10
20
30
40
50
60
Insuff icent time Inadequate
personnel
Insuff icient
budget
Not a priority No reason given Not recognized
% o
f firm
s
Survey done by Harris Interactive in 2005.
-25
-20
-15
-10
-5
0
-61 -49 -37 -25 -13 -1 11 23 35 47 59
Trading day relative to announcement date
Ave
rag
e s
ha
reh
old
er
retu
rns (
%)
Hendricks and Singhal,
2005
Impact of Major Supply Chain Disruption
on Stock Price
Source: The View of the Supply Chain From Wall Street – J. Stuart Francis - Lehman Brothers, February 2003
Large Reputation Impacts
APICS INSIGHTS AND INNOVATIONS 2014
28
Reasons for glitches
22.54
13.48
10.219.24
6.93
4.43
15.61
0
5
10
15
20
25
30
Part S
horta
ges
Cha
nges
by C
usto
mer
s
Produ
ctio
n pr
oblem
s
Ram
p/ro
ll-ou
t pro
blem
s
Qua
lity Pro
blem
s
Dev
elop
men
t pro
blem
s
Non
e Pro
vided
Nu
mb
er
of firm
s (
%)
• Be creative and think outside of the box but most of all have a plan in place
• Design SCM networks to sustain potential disruptions in the first place
• Use advanced supply-chain tools for a complete risk assessment
• Develop a solid, institutionalized business process that considers risks
• Build risk identification into everyday operations
• Create supply-chain agility
• Hire an expert :)
Final thoughts
