The Competitive Edge - CIPS Speaker... · 2016. 6. 29. · a competitive edge as a bidder. If you are bidding to public sector bodies it will provide a resilience distinguisher,

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Resilience - The Competitive Edge


Competitive Edge Through Resilience

Achieving resilience within your supply chain will give you a competitive edge

If you are a public sector body it will provide a resilient service to the public

However resilience in supply chain comes at a cost to the organisation

Clearly a resilient supply chain would also provide added value to your contractual arrangements and your organisation

Resilient supply chains will be resilient in the event of changes or disruption, they will resist supply chain failures and if affected by disruption, will recover rapidly


Competitive Edge Through Resilience

Achieving resilience within your supply chain will give you a competitive edge as a bidder.

If you are bidding to public sector bodies it will provide a resilience distinguisher, however resilience in your bid adds cost to the offering

Clearly a resilient supply chain would also provide added value to your contractual arrangements and your organisation

Clearly a resilient supply chain would also provide added value to your clients

Having resilient supply chains will be selling point, offering confidence to your clients that you will survive supply chain disruptions or recover quickly


Taking a Chance or Managing Outcomes? Click Mouse Reveal Next Phase

Do you know how much of the value in your contractual arrangements is attributable to resilience-if any?

Do you know how much of that value is split between managing the chance of something adverse happening, the prevention? How much on getting back to normal after something has happened, the cure?

Do you know how much not having any resilience arrangements in place in your contractual arrangements could cost your organisation?

Could you make a judgement on how much your paying to protect or recovery your supply chains and a cost benefit analysis to know if its too much or too little?


• Estimate the losses to your organisation through management information that comes from supplier relationship management, through financial management, project management, to name a few. Good Category management.

• Estimate them over the time of a disruption to the supply chain. Good Business Continuity Management.

• Evaluate the costs associated with threat mitigation strategies, tactics and unusual resource requirements. Good Risk Management.

• Ask questions of your supply chain tiers about breakdowns of costs and expose cost associated with resilience within your contractual arrangements. Good Supply Chain Resilience Management.

Cost Benefit Analysis


Risk Analysis

• Low Impact

• High Likelihood

• Low Impact

• Low Likelihood

• High Impact

• High Likelihood

• High Impact

• Low Likelihood

Amber Red

Amber Green

• List threats to the Category

• Analyse Impacts using an approved scale of costs over the contractual period

• Estimate likelihood over the contractual period

• Design mitigations that are expected to lower the likelihood and impact of a disruptive change to the contract during the period


Business Impact Analysis

Supply Chain for? 1 2 3 4

Contract outturn increase

1254 1873 1015 2284

Logistics outturn increase

324 310 300 419

Production outturn increase

15 18 13 20

External compensation payments

6 3 4 7

Insurance excess payments

1 .5 .5 2

TOTALS 1600 2205 1333 2732

• Analyse potential losses over a predetermined timeline

• Create impact categories appropriate to the Category you are managing

• The categories shown are indicative not exhaustive

• The values shown would be in the currency of your choosing

• The timeframe in the headline, could be hours/days/months

• The top left box indicates the chain of supply you are Analysing i.e. supply chain for the supply and delivery of raw materials


4.3

2.5

3.5

4.5

2.4

4.4

1.8

2.8

2 2

3

5 Proactive Vs Responsive

Loss/Impact Proactive responsive

The Loss vs the Investment

• Each triad of columns is a potential supply chain or tier of a supply chain

• The first column represents the loss or impact

• The second column represents the threat mitigation cost invested in by the organisation proactively, prior to any change or disruption

• The third column represents the investment in strategies that are responsive in nature and take place during the change or disruption

• There is a clear set of relationships to be evaluated to understand the return on the investment


Impacts, mitigations, contingency and value added

The Cost Benefit Analysis

• An appropriate cost benefit relationship would be one where the cost avoidance of the loss or impact is a ratio that the organisation is content to invest in.

• Investing in proactive controls measures Utilising risk management techniques and responsive measures using Business Continuity Management techniques.

• Knowing the total value of resilience in each contractual arrangement therefore is important cost benefit data analysis

• Costs attributable to prevention and cure against a loss profile over time

• A known margin of estimate error +/-

• A Resilience Assessed Total cost of ownership


Investment profile

0

1

2

3

4

5

6

7

8

9

10

Proactive Vs Responsive controls

Proactive Responsive

• Understanding the costs you wish to invest and what to invest in.

• Some organisations invest very little in risk management and some very little in business continuity management

• By investment it is understood that these are incurred costs organisations are willing to expend to firstly attempt to reduce the chance of disruptive changes and secondly to recover from a disruptive change

• What percentage of overall contractual outturn costs and what split of investment between risk and continuity?

• What percentage of the overall contract outturn represents resilience expenditure proactively?

• What would the cost of a response to a disruptive change be?


11

Costs of Resilience Vs Frequency/Longevity of Impacts

The Resilience Benefit

• Annual fixed contract costs risk and continuity management maintenance

• Annual contract costs including those created by additional risk controls

• Highest curve, event frequency/impacts without control over the contract timeline.

• Lowest curve, reduced events frequency and impacts.

• Highest impact curve, without continuity measures

• Lowest impact curve with continuity measures

Fixed Controls Events 1

Events 2 Impacts 1 Impacts 2

0

7

6

5

4

3

2

1

0

Fixed cost of resilience

Variable cost of

resilience

Volume of events

Risk mitigations

Event impacts

Volume of events

Event impacts

1 2 3 4 5


Fixed costs Vs variable costs of investment

0123456Impacts

ResponseTimeline

BusinessContinuity

RiskManagement

The cost relationships

Impacts Risk

• Annual fixed costs of risk and business continuity maintenance

• Annual excess costs created by disruptive changes, causing costs to rise through response strategies

• Project investment costs on instigating new threat mitigation strategies

• The estimated costs of the negative impacts

• The Resilience Assessed Total cost of ownership


Embedding into category management processes

• Understand, category threats, risks, impacts, response time

Risk/Continuity/ Impacts

• Understand the time criticality of the project Specification

• Investigate current resilience capability Prequalification

• Insert appropriately costed terms and conditions Invitation

• Use resilience as a “distinguisher” Analysis

• Manage resilience SRM

• Manage resilience Transition

• Specification: Seek to understand the priorities associated with the category.

• Prequalification: Seek to understand the capability of the potential bidders in relation to risk and continuity management.

• Invitation: Seek to understand the service levels required during a disruptive change

• Analysis: Seek to discover the “distinguisher” based on resilience of the competitors and the associated added value

• SRM: Manage the levels of resilience you are paying for including any required variations

• Manage transition during the next round of competition


Risk and Continuity

Threats inherent in

the Category

Risk Analysed

(Likelihood)

Impacts Analysis over

time

Time criticality Analysed

• List the threats to your Category

• Understand your inherent risks in your Category, apply an assessment of likelihood

• Undertake a Business impact Analysis.

• Use common impact categories between risks and continuity analysis

• Understand the “Time” criticality, the urgency, the priority of the supply chain

• Assess the need for and cost of proactive risk controls and responsive continuity controls to reduce both likelihood and impacts


The Combined Process

Build risk and continuity analysis

into Category Management

Continuity Impact

Analysis

Design Continuity Mitigations

Analyse overall

resilience Cost/Benefit

Category management

Threat Analysis

(inherent)

Risk Analysis (Includes

impact cost)

Design Risk Mitigations

(Cost/benefit)


Cost Avoidance through investment in-

Risk and continuity management combined and embedded into Category Management

Documents

The Competitive Edge - CIPS Speaker... · 2016. 6. 29. · a competitive edge as a bidder. If you are bidding to public sector bodies it will provide a resilience distinguisher,