Supply Risk Assessment Process

• Day 2 and 3: Auditing Supply Chain Risks: The DRK Method

 

 • This will be a day long workshop on Supply Chain Risk

Management Audit Principles/Practices using Risk Simulator Software led by Dr. Kevin McCormack, CEO & founder of DRK and Supply Chain Council Black Belt In Risk Management

 

 • Read:

 • Handfield & McCormack, pp 1-118

 

PerformancePerformance

CAUSES (Categories of

Predictive Measures)

DISRUPTIONEVENTS

CONSEQUENCES (Impacts)

Human ResourcesHuman Resources

Supply Chain Disruption

Supply Chain Disruption

Financial HealthFinancial Health

EnvironmentalEnvironmental

RelationshipRelationship

Quality, Delivery, Service ProblemsQuality, Delivery, Service Problems

Supplier Union Strike,Ownership Change, Workforce Disruption

Supplier Union Strike,Ownership Change, Workforce Disruption

Supplier LockedTier II StoppageSupplier LockedTier II Stoppage

Supplier Bankruptcy (or financial distress)Supplier Bankruptcy (or financial distress)

Disasters (Weather, Earthquake, Terrorists)Disasters (Weather,

Earthquake, Terrorists)

Misalignment of Interests

Misalignment of Interests

Finished Goods Shipments Stopped Finished Goods

Shipments Stopped

Locate and Ramp Up Back up Supplier

Locate and Ramp Up Back up Supplier

Emergency Buy and Shipments

Emergency Buy and Shipments

ReputationReputation

Market Share LossMarket Share Loss

EFFECTSRevenueLosses

and Recovery Expenses

OTHERIMPACTSForegoneIncome

Emergency Rework and

Rushed FG Shipments

Emergency Rework and

Rushed FG Shipments

Recall for Quality Issues

Recall for Quality Issues

Sudden Loss of Supplier

Sudden Loss of Supplier

Copyright© 2007 DRK Research and Consulting LLC

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The Supply Risk Model

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SC Network

Organizer

Interactions and Relationship

Supplier Attributes

Supplier Environment

Supply Chain Network/Commodity Category

Supply Risk Assessment - Units of Analysis

Copyright© 2007 Supply Chain Redesign, LLC

PerformancePerformance

Human ResourcesHuman Resources

Supply Chain Disruption

Supply Chain Disruption

Financial HealthFinancial Health

RelationshipRelationship

EnvironmentalEnvironmental

The customer’s reputationwith suppliers is also a critical factor.

Geographic, market, transportation, etc.

Week 0 Week 1-2 Week 3-4 Week 5-6 Week 7 Week 7 Week 8

Data Collection

Follow up

Preparation Analyze MitigateReport

4.0Analyze

Survey Data Collection

Validate 6.0

Mitigate

Supplier Information Set UpInternal Information Set Up

Report

Note:Cycle Time – 6-8 weeks1 Category = 30 suppliers

- Manual Process

- IT Enabled Process - Combination

Ass

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Tea

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1.0 Kick off

2.0 Preparation

5.0 Report

Kick Off

Rev

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Tea

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Provide Set up information

Category Manager and Suppliers

Set up Survey Internal Data

3.0 Data Collection

Survey Review & Event Probability

Subject Matter Experts and Suppliers

Review/ Validate Preliminary Data

Category Manager and Risk Manager

ID and Begin Mitigation

Category Manager and Risk Manager

Supply Chain Risk Assessment Process

Risk Wheel

Structure

Behaviors

Exercise Teams

1 2

3 4

5 6

Commodity TeamsRisk ManagementSupplier ImprovementStrategic Sourcing

Supplier TeamsSupplier 1Supplier 2Supplier 3Supplier 4Supplier 5Supplier 6Supplier 7

www.neurasurvey.comUser: supplier 1Password: freightliner

www.neuratool.comUser: simulatorPassword: results

Finished Product

FTL Revenue Impact by Supplier Spend AnalysisSupplier Revenue Impacted (000's) Percent of Total 2005 Spend Percent of TotalAD Plastics $2,879,762 2.0% $710,626 0.5%Supplier 1 $2,800,000 $100,000

Supplier 2 $7,000,000 $3,000,000

Supplier 3 $3,000,000 $5,000,000

Supplier 4 $6,000,000 $2,000,000

C Products $4,766,938 3.3% $605,000 0.0%DK Company $6,241,090 4.3% $2,832,093 2.0%Supplier 5 $1,316,054 0.9% $9,004,424 6.2%Supplier 6 $625,258 0.4% $20,658 0.0%Con Co $8,209,295 5.7% $54,933,867 38.1%Doug Co. $8,738,330 6.1% $1,121,308 0.9%End Co. $6,612,661 4.6% $440,086 0.3%Guard Co. $2,879,762 2.0% $924,432 0.6%Supplier 7 $8,000,000 $1,000,000

Supplier 8 $1,316,054 0.9% $101,804 0.1%Kas Co $7,652,221 5.3% $1,674,475 1.2%Suplier 9Kurz Co. $1,149,406 0.8% $5,579 0.0%Lac Co. $4,992,914 3.5% $10,338,144 7.2%Lomg Co.Ma Co. $7,686,293 5.3% $7,531,394 5.2%Mer Co $6,314,461 4.4% $2,025,549 1.4%Norm Co. $625,258 0.4% $22,854 0.0%Ny Co. $1,596,634 1.1% $232 0.0%Ol Co. $4,815,657 3.3% $1,652 0.0%On Co. $8,095,335 5.6% $2,141,434 1.5%Pa Co. $32,926 0.0% $4,739 0.0%Plas Co. $2,086,710 1.4% $1,824,515 1.3%Pol Co. $5,296,607 3.7% $3,214,140 2.2%Pur Co. $32,926 2.2% $116,661 7.7%Rev Co $625,258 0.4% $21,777 0.0%So Co $523,002 34.5% $40,840 2.7%South Co. $625,258 0.4% $66,671 0.0%SP Co $1,515,599 1.1% $159,597 0.1%Su Co. $1,563,708 1.1% $249,647 0.2%Sur Co. $1,563,708 92.3% $109,621 6.5%Tru Co $1,693,629 1.2% $179,242 0.1%Vis Co $1,563,708 1.1% $7,080,074 4.9%Wi Co $2,831,653 2.0% $176,284 0.1%Plas Eng Co.Wil Co $8,848,539 6.1% $11,000,000 7.6%Wil Therm Co $523,002 0.4% $31,303 0.0%Wil IMP Co. $1,563,708 1.1% $34,916 0.0%

$144,203,324 209% $129,845,639 99%

Portfolio View

Agenda