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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
Su
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Sit
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The Supply Risk Model
s
s
s
s
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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
essm
ent
Tea
m
1.0 Kick off
2.0 Preparation
5.0 Report
Kick Off
Rev
iew
Tea
m
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