Industry Challenges Attracting and retaining employees Workforce productivity Data security Network interruption Working Capital Cost allocation High consumer debt Globalisation Foreign sourcing/outsourcing Vendor indemnification management Product recall Creating a “customer experience” Consolidation Innovation Training Business continuity “ Shrink” and other product losses Workplace violence High cost of employee benefits Employment practices Logistics and transportation issues Brand integrity Quality assurance Supply chain disruptions Product/brand mix complexity 2 6 7 4 3 9 8 1 10 5 High Low Relative Cost Manage Business Impact 11 High 12 13 14 15 16 17 18 19 21 20 24 22 23 25
Ideal World !! Store In-Stock Channel Design Network Rationalisation Flow of Merchandise Distribution Operations/ Transportation Planning, Buying, Allocation Supporting Infrastructure Right goods, right place, right time, right cost The optimum combination of facilities and transportation modes that achieve service targets The cost effective Distribution Channels at the lowest cost Synchronised flow of merchandise to optimise inventories and meet customer demand The most appropriate operational linkage between client and vendors Functions and processes consistent with vendor operating strengths and needs The most appropriate information systems and support areas to plan and manage the flow of goods strategy “ Survival of the fittest” Increase in cost / losses Loss of reputation / image Civil and criminal penalties Liquidation / Chapter 11 Customer unhappy & lost to competition Fall in revenue, profit, market share ĪMR Research 2008 - SC Risk Mitigation 44% 33% 31% 29% 27% 42% 27% 10% 4% 10% 12% 5% 14% 10% Performance-based contracts with suppliers or service providers Increase in IT investment for better visibility across the supply chain Closer collaborative relations with trading partners Utilising modeling tools (optimisation, simulation) to be proactive about risk by conducting what-if analysis Outsourcing logistics function Dual/multi sourcing strategies and using redundant suppliers Outsourcing manufacturing function Top 10 methods used to mitigate risk Most successful method used to mitigate risk Risk Exposure – SC Network Design Top Pressures Driving Supply Risk Management 82% 79% 78% 77% 73% 70% 69% 59% 58% SC Disruption within past 24 mos Longer lead times Pressure from executives Customer pressures Global sourcing Lean/JIT initiatives Supply assurance outweighs cost Supply base reduction Regulatory pressures Transportation constraints 73% 20% 12% 10% 8% Supply Chain Price Fluctuations Labor Issues IT Systems Mgt Malfeasance 8% #1 Threat Factor To Revenue Source: Managing Business Risk 2006 & Beyond, FM Global & Harris / USA Today, 2006 Survey 602 Global CFOs / Financial ExecutivesĪMR Research 2008 on Risk Change in level of risk from 1 year ago Riskier !! Faster (Growth, Innovation) Stronger (Competition) Cheaper (Lean, Efficient, Savings $$) Quicker (JIT, Short Product Lifecycle, Agile) Shorter (Effective, Lead Times) Wider (Globalisation) Lesser ( Back up Vendor, VMI, Resources) Changing (Demands, CPFR, Technology) Heavier ( Requirements, Workload)
SC & Risk - Realities Internal & External Drivers Managing Risk Exposure Risks Managing Suppliers Risk Planning SC Risk Framework Risk – Tools, Techniques, Checklists
“Only those who risk going too far can possibly find out how far one can go.' - T.S. Supply Chain Risk Management Minimising Risk Exposure in Supply Chain Anand Subramaniam