How will you control your emerging supply chain risks without extra slides

HOW TO CONTROL SUPPLY CHAIN RISKS

March 13, 2013

Larry Smith & Neil Smith

from

RISK-REWARD FRAMEWORKS6

RISK-REWARDDECISIONS

RISK-REWARDCOMMUNICATIONS

RISKCONTROL

RISKANALYSIS

RISKMONITORING

VALUECREATION

Strengthen your business capabilities.

Quick BackgroundAbou

t

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•Production planners•Production control

managers•Purchasing managers•Customer service

managers• Inventory managers

When something goes wrong in your supply chain, people connected to the supply chain experience the burden.

The issue results in a domino effect of problems for dependent stakeholders. You experience these risks through:

How can you gain control over the risks that exist, hide and emerge in your supply chain?

• A lack of control over your day-to-day process• More stress in your work life• Internal debates• Lack of clarity for decision-making• And other experiences

Internal & external risks affect your job, your company and other stakeholders.

HOW TO CONTROL SUPPLY CHAIN RISKS

•Supply chain managers • Financial managers•CEO, CFO, COO, CRO•Your customers•AND YOU

•Warehousing managers•Distribution managers•Business partners•Product development•Product management


How to Control Supply Chain Risks

1.What is the definition of supply chain risk?

2.Why supply chain risk controls are important to minimize current & future

disruptions

3.What is the difference between Supply Chain:

a.Risk identification & assessment

b.Risk control & monitoring

1.How to develop a risk control & monitoring framework for your supply

chain

Topics for Today’s Discussion

What is the definition of supply chain risk?

Something in your supply chain that may:

1.go out of control and•impact your business


Implications

Depressed stock priceMarket losses to competitionCompany sold

Chapter 7Criminal law suits

Damaged reputationRevenue losses

Damaged reputation

Business Impacted

Genzyme Corporation

Peanut Corporation of America

Toyota

Tyson Foods

iRobot

Issue

Virus

Salmonella

Brake recall

Beef recall

Defense spending Loss of customer base

Examples

Industry

Drug

Food

Automotive

Food

Robotics

44 DeathsCompany closureLitigation

NECC Compounding Center Meningitis poisoningDrug

People DiedLitigation

Big Dig Tunnel Ceiling Collapse

Loose Ceiling PlateConstruction

What is the definition of supply chain risk?


Why supply chain risk controls are important to minimize current & future disruptions

Manufacturers

Distributors Resellers

LogisticsProviders

Customer

LogisticsProvider

LogisticsProvider

LogisticsProvider

Raw material suppliers

FarmerGrower

ImporterFood

Warehouser

WholesalerSupermarketRestaurant

HotelFood

Producer Consumer

LP

2 4

31

23

1 3

2

LP LP

1 112

32



flow of operational information


Example: Food Industry

Manufacturers


LogisticsProviders

Customer

LogisticsProvider

LogisticsProvider

LogisticsProvider


FarmerGrower

ImporterFood

Warehouser


HotelFood

Producer Consumer

LP

2 4

31

23

1 3

2

LP LP

1 112

32


flow of risk information




Manufacturers


LogisticsProviders

Customer

LogisticsProvider

LogisticsProvider

LogisticsProvider


FarmerGrower

ImporterFood

Warehouser


HotelFood

Producer Consumer

LP

2 4

31

23

1 3

2

LP LP

1 112

32



flow of operational information



flow of risk information

Manufacturers


LogisticsProviders

Customer

LogisticsProvider

LogisticsProvider

LogisticsProvider


FarmerGrower

ImporterFood

Warehouser


HotelFood

Producer Consumer

LP

2 4

31

23

1 3

2

LP LP

1 112

32


flow of riskinformation


1 1

1 3

2

LP LP

12

32


Flow of risk Information

EXTERNAL RISKSEXTERNAL RISKS

market risks

regulatory risks

economic risks

environmental risks

legal risks

financial risks

operational risks

Manufacturer

INTERNAL RISKSINTERNAL RISKS 1 Business Risks

flow of riskinformation



Manufacturer

Risk Information

EXTERNAL RISKSEXTERNAL RISKSINTERNAL RISKSINTERNAL RISKS

1 Business Risks



financial risks

operational risks

market risksregulatory risksenvironmental riskslegal riskseconomic risks

Credit rating

Margin generation

Unplanned costs

Financing availability

Manufacturer

Risk Information


1 Business Risks



Engineering changes

Product contamination

Change in raw materialTransportation

merger

Capacity constraints

Financial credit

Supplier quality

Security breach

Smart grid outage

Product delays

supplier risks

operational risks

EXTERNAL RISKSEXTERNAL RISKS

market risksregulatory risksenvironmental riskslegal riskseconomic risks

financial risks

Manufacturer

Risk Information


1 Business Risks



Manufacturer

market risks

regulatory risksenvironmental riskslegal riskseconomic risks

operational risks

Stock prices

Oil prices

Interest rates

Foreign exchange prices

Defense spendingCommodity pricesLabor shortage

Market consolidation

Union strikes

financial risks

1

Manufacturer

Risk Information


1 Business Risks



economic risks

market risksenvironmental riskslegal risksregulatory risks

Policy reform

Border securityGovernment sequesterChanging government regulations

operational risks

financial risks

Manufacturer

Risk Information


1 Business Risks



environmental risks

market riskseconomic risksregulatory riskslegal risksoperational risks

financial risks

Floods

Fires

Hurricanes

Earthquakes

Tsunamis

Manufacturer

Risk Information


1 Business Risks



regulatory risks

market risksenvironmental riskslegal riskseconomic risks

operational risks

financial risks

Tax reformMinimum wage changesLogistical restrictionsTrade barriers

RegulatorRegulator Modifyregulatory

policies

Regulator PerspectiveInformation Shapes Decisions that Impact Dependent Stakeholders

Foreseeeconomic risks

Notify corporations

Information Shapes Decisions and Impact Interconnected Stakeholders in the Supply Chain

Manufacturer’s Perspective

Manage financial condition

Manage financial condition

Manage operational stateManage operational state

riskinformati

on

riskinformati

on

BUSINESS PERFORMANCE MANAGEMENT

BUSINESS PERFORMANCE MANAGEMENT

Manufacturer 1Manufacturer 1Perception:

Regulation will impact our

margins

We can then maintain our margins

receive change in regulatory policy

Reaction: find a lower price supplier

Risk control status of your supply chain

...capture risk information across your supply chain that can impact your business?

...store the risks in a central risk register?

...implement risk control measures at the process level?

...monitor risk thresholds?

...evaluate the cause and effect of the risks?

...communicate risk violations to impacted stakeholders?

NO

out of control

YES

YES

YES

YES

YES

YES

YES

In Control

Does your company...Does your company...

Risk Control & Monitoring

Risk Identification & Assessment

Risk control status of your supply chainDoes your company...Does your company...

...capture risk information across your supply chain that can impact your business?

...store the risks in a central risk register?

...implement risk control measures at the process level?

...monitor risk thresholds?

...evaluate the cause and effect of the risks?

...communicate risk violations to impacted stakeholders?

...shape decisions based on current and future risk states?

Risk Information

BUSINESS PROCESS MANAGEMENT


RISK-REWARD DECISIONS

RISK-REWARD DECISIONSSTAKEHOLDER COMMUNICATIONS

STAKEHOLDER COMMUNICATIONS

RISK-REWARD PROCESSESRISK-REWARD PROCESSES

YOU



Risk Information

Risk perspective



RISK-REWARD DECISIONS

RISK-REWARD DECISIONSSTAKEHOLDER COMMUNICATIONS

STAKEHOLDER COMMUNICATIONS

RISK-REWARD PROCESSESRISK-REWARD PROCESSES


RISK-REWARD PROCESSES

RISK-REWARD PROCESSES

YOU

Who has experienced supply chain risks in their business?

Audience question


What types of supply chain risks have you experienced?

Audience question


What are some challenges you’ve experienced to control those risks?

Audience question


How could your supply chain risks affect your business?

Audience question


How to develop a Risk Control & Monitoring

FrameworkFor your supply chain

How to Develop a Risk Control & Monitoring Framework

For Your Supply Chain

attainadaptability

attainadaptability

REALIZEefficiency

REALIZEefficiency

ACHIEVEeffectiveness


RISK CONTROLEXCELLENCERISK CONTROLEXCELLENCE

Analytics Analytics

Process ExecutionFrameworks


Risk technologycapabilities

Risk-centricprocesses

Risk-focusedpeople skills



Risk technologycapabilities Analytics Analytics




attainadaptability

attainadaptability

REALIZEefficiency

REALIZEefficiency






risk analysts

decision makers

risk monitor

s

businessstakeholder

s

businessstakeholder

communicators


riskcommunicato

rs

Supply Chain Risk Control

Skills

2

3

riskaggregator

s1

5

7

6

4



Analytics Analytics





attainadaptability

attainadaptability

REALIZEefficiency

REALIZEefficiency






riskaggregatio

n

risk analysi

s

risk-baseddecision-making

risk monitorin

g

stakeholdercommunicati

on

Supply ChainRisk ControlProcesses

Risk-centric processes

riskcommunicati

on

2

3

1

4

6

5



Risk technologycapabilities Analytics Analytics




attainadaptability

attainadaptability

REALIZEefficiency

REALIZEefficiency






Profile supply chain

participants

Capture risk measures

Pre-experience

decision implications

Monitorchanging

risks

Illustratestakeholderviewpoints

Supply ChainRisk

Technology

Manage riskscenariosVisualize

changing risk

conditions


2

3

1

5

7

6

4

Larry Smith & Neil Smith

from

Thank you for your time.