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Ways to develop a robust supply chain
Jens Schumacher FHV
Content } Statement of problem & motivation } Definitions } Risk management for supply chains } Stabilization on the different management levels } Conclusion
Statement of problem & motivation
Statement of problem } Increasing number of natural disasters
} 2011:Tsunami Japan, Flood Thailand, Drought East Africa, Typhoon Philippines, Storms USA
} They lead to disruptions in production & trade } Flood Thailand 2011- Example: Sony
} Flooded the factories for (external) hard disk drives away } Worldwide increase of prices & delivery delays of hard disks } Product introductions had to be postponed (components have
not been available) } Loss of 25 billion Yen (233 million €) due to flood and weak Yen } And still not recovered
} Disruptions become of greater impact } For a single company
} For its supply chain } For its market & consumers
How and in which manner can a SC be stabilized? And how is intelligent cargo
influencing on this positively?
} Find holistic approach } On strategic, tactical,
operational level } Interaction of each
management level } Outline reasons and
ways how intelligent cargo can lead to … } Stabilization } General and competitive
advantages } Optimization } Sustainability
Motivation
Stabilized SC
SC controlling
SC risk management
Methods on management
levels
Definitions
The supply chain Stabilization
Robust, reliable, resilient
The Supply Chain } Linkages
} Supplier } Manufacturer } Consumer } Transport in-between
} Environment } International } Information exchange } Dynamic & changing } Complex
Supplier Manufacturer Consumer Transport Transport
} Stabilization } Stability = The absence of strong fluctuations (as
opposed to foreign influences)1 à minimize influences; strengthen again influences; measure fluctuations and act when necessary
} Against internal, micro and macro risks influencing the SC } Make the supply chain robust, reliable and resilient!
1 DWDS-Projekt, Berlin-Brandenburgische Akademie der Wissenschaften. (2011). Digitales Wörterbuch der deutschen Sprache. Retrieved 04 01, 2012, from http://www.dwds.de/?kompakt=1&qu=Stabilit%C3%A4t
Aim is to have a supply chain that is…
• SC performs well with respect to uncertain future conditions1
• For example, costs or travel times Robust
• SC performs well when parts of the system fail2
• For example, when a distribution center becomes unavailable because of poor weather Reliable
• Ability to, and speed at which they can, return to their normal performance level following a disruption3
• Not only continue operating, but also to turn this resilience into competitive advantage
Resilient
1 Investopedia. (n.s.). robust. Retrieved 03 22, 2012, from Investopedia: http://www.investopedia.com/terms/r/robust.asp#ixzz1vDKFUgZF 2 Snyder, L. V. (2003). Dissertation: Supply Chain Robustness and Reliability: Models and Algorithms. Evanston: n.s. 3 Sheffi, J. (2006). Resilience reduces risks. Logistics Quarterly, 12-15
Risk management for supply chains
Introduction Residual risk
Occurrence of risk in a supply chain Aim and procedure Generic strategies
Types of risks Risks in logistics on management levels
General } What is risk management
for supply chains? } „The management of
supply chain risk through coordination and collaboration among the supply chain partners so as to ensure profitability and continuity“1
} How is this risk defined? } A damage that is weighted
with its probability of occurrence and this damage affects more than one company of the supply chain. The causes of such damages can be within a company, within the supply chain or in their environment2
} For the assessment of risks two dimensions are taken into account: The extent of damage and the probability3
1 C.S. Tang (2006). Perspectives in Supply Chain Risk Management: A Review. Los Angeles: UCLA Anderson School 2 Dipl.-Kfm. Kemmerling, R. (2008, 04 17). European Association for Defence Public Private Partnership. Retrieved 04 15, 2012, from http://www.eppp.org/cms/attachments/087_Vortrag_Kemmlering.pdf 3 ISCM. (n.s.). Institute for Supply Chain Management . Retrieved 05 18, 2012, from http://www.ebs.edu/smi/2520.html
Residual risk1
} selecting a suitable risk appearing encounter in implementing the strategy and subsequent action } Risk is always ≠ 0 !!
} For the residual risk once again, a risk strategy meeting will be elected until the risk of volume reduced to an acceptable level for the company } Individual for each company (e.g. risk appetite of
managers)
1 BITKOM. (n.s.). BITKOM Bundesverband Informationswirtschaft, Telekommunikation und neue Medien e.V. Retrieved 5 8, 2012, from http://www.bitkom.org/de/publikationen/38337_39864.aspx
Occurrence of risk in a supply chain
Supplier Manufacturer Consumer Transport Transport
Supplier risk Manufacturer risk Consumer risk
Control risk Control risk
Inte
rnal
Mic
ro
Mac
ro
Culture
Interest rates
Fore
ign
com
petit
ion
Governm
ent
Aim and procedure of SCRM } It is the aim of supply
chain risk management to recognize potential damages from the supply side for the company at an early stage and to counteract them1.
} Expenses for SCRM must be relative to the prevented risk / loss!
} Procedure2
Risk identification and
modeling
Risk analysis, assesment and
impact measurement
Risk mangement
Risk monitoring and evalutation
1 ISCM. (n.s.). Institute for Supply Chain Management . Retrieved 05 18, 2012, from http://www.ebs.edu/smi/2520.html 2 Zsidsin, B. R. (2009). Supply Chain Risk – A Handbook of Assessment, Management, and Performance. New York: Springer Science + Business Media
Generic strategies for SCRM1 } Risk reduction / avoidance
} Risk transfer
} Risk control
1 Institut für Logistik und Unternehmensführung. (n.s.). Technische Universität Hamburg-Harburg. Retrieved 04 06, 2012, from http://www.logu.tu-harburg.de/de/forschung/supply-chain-risk-management
Types of risks1
Natural disasters
Accidents Disasters perpetrated by humans
Nature of global trade
Hurricanes Earthquakes Tsunamis
In any form Terrorist attacks Sabotage
Labour disputes Border inspection delays Traffic congestions
1 Sheffi, J. (2006). Resilience reduces riks. Logistics Quarterly, 12-15.
Risks in logistics on management levels
Strategic risks
Tactical risks
Operational risks
Technical-related risks Smooth functioning of material, product and information flows and trouble-free operating of logistic infrastructure Personnel-related risks Qualifications of staff and process control by employees Organization-related risks Scheduling and feasibility of logistic processes Environment-related risks
Risks from the corporate strategy Risks of expansion and growth strategies; risks of location and capacity strategies Risks from the corporate logistics strategy Risks arising from strategic decisions of the procurement, production and distribution logistics; risks from non-optimal tuning of parameters of the logistical process Risks from the company's overall logistics strategy Configuration of the logistics chain / logistics network; Coordination and control mechanisms in the supply chain / in Logistics network; IT structures in the supply chain / logistics network
Technical-related risks Guarantee functioning of all flows and logistic infrastructure Quality-related risks Guarantee quality of products, services and processes Personnel-related risks Qualifications of staff and managerial behaviour Organization-related risks Scheduling and control security of logistic processes
Problems and importance of robustness on the management levels
Strategical, tactical & operational
Strategic
• Cost-effective design • Lay-out of entire network and individual logistic systems • Evaluation of investment decisions • Choosing right partners and linkages • Right way and depth of communication • Map strategies for corporate, logistics and overall logistics
Important tasks
• Results from strategic decisions like • JIT concepts • Global sourcing, single sourcing or combination of both
• Have far-reaching impact on company and supply chain members, too
Risks
• Finding good partners • Holding relationship • Profit of a partnership • Internal up- and downwards as well as external horizontal and vertical information exchange
Problems
Tactical
• Creation and execution of robust supply chain • Risk mitigation strategies • Increase flexibility in transportation and supply
Important tasks
• Corporate strategy and supply chain strategy as well as their execution need to be linked (for all members of supply chain)
• Communication and motivation may differ between members of supply chain • Too less trust between members of supply chain
Risks
• Develop network may be situated in uncertain conditions • The bigger the network the more the effect can be far-reaching, extensive, complex and
beyond one’s control
Problems
Operational
• Coordination and control of the movements in the supply chain in real-time • Focus on smoothly running processes
Important tasks
• All risks associated with the daily business • Transport risk, e.g. loss or damage of the goods by accident or other events • Seasonality (problematic for utilization rates) • Other liability-related issues
Risks
• React and respond quickly on problems • Too less integration of supply chain with no improved communication and too less flexibility
makes not resilient and transparent
Problems
Stabilization on the different management levels
Strategical, tactical & operational
Management levels
Strategic risks
Tactical risks
Operational risks
à Multisourcing
à Simulations à Synchroshipping/ Multimodal
à Intelligent cargo
Bottom Up
Approach
Certify origin and transit rights
Verify customs authorisation
Identify shipment
Qualify content
Track cargo conditions
EURIDICE: Service Combination on the Fly
} Combine required services : } Cargo observation } Customs handling } Transport controlling } ...
EURIDICE: Virtual representation of cargo
Real world
Virtual world truck container
item
item
item
Position Speed Latency …
Cargo Temp. Erruptions …
ID Condition Humidity …
…
= Sensors / Devices / RFID
} De-coupling of business-specific services from the distributed Multi-Agent-System } decouple from communication problem
} Robustness (+) } decouple from concurrent behavior problem
} robustness (+), maintainability (+), complexity (-)
} Share Cargo-specific knowledge also on server-side (see example) } Decrease communication amount
} Performance (+), communication-costs (-) } Overcome connection problems
} Performance (+), robustness (+)
EURIDICE: Intelligent Cargo Network - Benefits
The legacy of EURIDICE } EURIDICE showed that
} intelligent cargo can provide a unified concept for taking decisions at a local level
} intellient cargo and its role in the modern supply chain can play a central role in achieving customer satisfaction and a robust supply chain
} The EURIDICE vision of the future implies that } to achieve the full potential of intelligent cargo data and
information needs to be securely detached from its owner } ICT, esp. the cloud, can enable ubiquitious information
storage and retrieval
iCargo: Approach (1)
Common Framework
New low-CO2 services offer, Better utilization of resources
Less GHG emissions, Less traffic
Optimized solutions for environmental efficiency
Higher penetration of ICT-based services in the logistics market
Logistics Companies
Community
ICT for Transport
Research & Industry
Logistics users
No. 30 © Logica 2010. All rights reserved
iCargo: The idea visualised
Real-time automated event management
Interoperable cargo, vehicle and infrastructure
Dynamic multi-actor plans
Cooperative freight business ecosystem
Origin Destination
Terminal Carrier
Truck
Planner
Pallet Shipment Ship
Carrier Container
Forwarder
Truck Terminal
Customs
Package
Distr. Center
Container Truck
Traffic Mgmt
Infra- structure
Field operator
Package
Local Carrier
Distributor Distrib. Planner
Vehicle
Infrastructure Field user
Logistic Services
Authority Shipper
Cargo
Shipment from factory In-city delivery Long haul transport Road transport
Conclusion
Conclusion } Robust supply chains become more attractive as
the lead to a better utilization of the existing resources
} An integrated approach is needed to build interdisciplinary tools for robust supply chains
} At the operational level intelligent cargo can be used to support a coherent holistic towards environmental friendly robust supply chains
Thank you for your attention