Lora & David's Risk Management Webinar Presentation
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Transcript of Lora & David's Risk Management Webinar Presentation
4/11/2014
1
Supply Chain Insights LLC Copyright © 2014, p. 1
Supply Chain Risk Management
Supply Chain Insights LLC Copyright © 2014, p. 2
Speakers
Lora CecereFounder
Supply Chain [email protected]
David Simchi-Levi MIT ProfessorFounder Ops [email protected]
4/11/2014
2
Supply Chain Insights LLC Copyright © 2014, p. 3
Definition Given to Respondents
Supply Chain Insights LLC Copyright © 2014, p. 4
Study Overview
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Supply Chain Insights LLC Copyright © 2014, p. 5
Reporting Relationship
Supply Chain Insights LLC Copyright © 2014, p. 6
• The What• The So What• Recommendations• Wrap-up
Agenda
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Supply Chain Insights LLC Copyright © 2014, p. 7
Current State
Supply Chain Insights LLC Copyright © 2014, p. 8
Risk Management Low on the List
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Supply Chain Insights LLC Copyright © 2014, p. 9
But, Should it Be? Gap Analysis
Supply Chain Insights LLC Copyright © 2014, p. 10
Major Supply Chain Disruptions
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Supply Chain Insights LLC Copyright © 2014, p. 11
An Issue
Supply Chain Insights LLC Copyright © 2014, p. 12
Top Two Supply Chain Disruptions in 5 Years:2011’s Tsunami in Japan and 2012’s Hurricane Sandy
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Supply Chain Insights LLC Copyright © 2014, p. 13
Importance to Supply Chain Strategy
Supply Chain Insights LLC Copyright © 2014, p. 14
• The What• The So What• Recommendations• Wrap-up
Agenda
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Supply Chain Insights LLC Copyright © 2014, p. 15
Current Assessment
Supply Chain Insights LLC Copyright © 2014, p. 16
Demand Volatility Is Only Top 3 Driver in Past, Present and Future
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Supply Chain Insights LLC Copyright © 2014, p. 17
• The What• The So What• Recommendations• Work from MIT• Wrap-up
Agenda
Supply Chain Insights LLC Copyright © 2014, p. 18
Disruption: Current Visibility
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Supply Chain Insights LLC Copyright © 2014, p. 19
Financial Health: Monitoring
Supply Chain Insights LLC Copyright © 2014, p. 20
Most Important Risk Management Techniques
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David Simchi-Levi
E-mail: [email protected]
21
What We’ll Cover …
• Introduction� The Risk Exposure Index
• Supplier Segmentation � Implementation at Ford
• Wrap-up
22
4/11/2014
12
Many Sources of Risks
• Natural disasters
• Geopolitical risks
• Epidemics
• Terrorist attacks
• Environmental risks
• Volatile fuel prices
• Rising Labor costs
• Currency fluctuations
• Counterfeit parts and products
• Port delays
• Market changes
• Suppliers’ performance
• Forecasting accuracy
• Execution problems
Unknown-Unknown
Known-Unknown
Uncontrollable
Controllable
23
Many Sources of Risks
• Natural disasters
• Geopolitical risks
• Epidemics
• Terrorist attacks
• Environmental risks
• Volatile fuel prices
• Rising Labor costs
• Currency fluctuations
• Counterfeit parts and products
• Port delays
• Market changes
• Suppliers’ performance
• Forecasting accuracy
• Execution problems
Unknown-Unknown
Known-Unknown
Uncontrollable
Controllable
24
4/11/2014
13
Many Sources of Risks
• Natural disasters
• Geopolitical risks
• Epidemics
• Terrorist attacks
• Environmental risks
• Volatile fuel prices
• Rising Labor costs
• Currency fluctuations
• Counterfeit parts and products
• Port delays
• Market changes
• Suppliers’ performance
• Forecasting accuracy
• Execution problems
Unknown-Unknown
Known-Unknown
Uncontrollable
Controllable
25
Epidemics
Fuel Prices
GeopoliticalProblems
Currency Fluctuations
Commodity Prices
Port Delays Product Design
Problems
Forecast Accuracy
Suppliers‘Performance
The Risk Framework
Expected Impact
Ability to ControlLOWUnknown-Unknown
HIGH
HIGHKnown-Unknown
LOW
Counterfeits
Government Regulations
Natural Disasters
Environmental Risks
26
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Managing Supply Chain Risk: The Challenge
• Very difficult to predict many sources of risk, especially the unknown-unknown
• Impact of disruption can be devastating
• Large investment in identifying every possible risk in the supply chain
• Existing tools and techniques have been inadequate� Mostly ad-hoc, intuition, gut feeling
� Exposure to risk may reside in unlikely places
� May lead to the wrong actions and waste resources
� No ability to prioritize mitigation investment
27
Case Study 1: The Risk Exposure Index
• High tech manufacturing company
• Contract manufacturers in Asia
• Assembly plants in North America
• Many suppliers all over the world
• Sells its products directly and through distributors
28©Copyright 2014 D. Simchi-Levi
4/11/2014
15
Case Study 1: The Risk Exposure Index
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PAtrem
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•Time-To-Recovery (TTR): The time it takes to recover to full functionality after a disruption
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©Copyright 2014 D. Simchi-Levi
Case Study 1: The Risk Exposure Index
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•Time-To-Recovery (TTR): The time it takes to recover to full functionality after a disruption
2 Weeks
1 Week 2 Weeks
2 Weeks
2 Weeks
TTR =2 Weeks
2 Weeks
©Copyright 2014 D. Simchi-Levi
4/11/2014
16
Case Study 1: The Risk Exposure Index
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PAtrem
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•Time-To-Recovery (TTR): The time it takes to recover to full functionality after a disruption• Financial Impact (FI): Lost sales during TTR
2 Weeks
1 Week 2 Weeks
2 Weeks
2 Weeks
TTR =2 Weeks
2 Weeks
©Copyright 2014 D. Simchi-Levi
Case Study 1: The Risk Exposure Index
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•Time-To-Recovery (TTR): The time it takes to recover to full functionality after a disruption• Financial Impact (FI): Lost sales during TTR
2 Weeks$400M
1 Week$100M
2 Weeks$1.5B
2 Weeks$100M
2 Weeks$2.5B
TTR =2 WeeksFI = $400M
2 Weeks$300M
©Copyright 2014 D. Simchi-Levi
4/11/2014
17
Case Study 1: The Risk Exposure Index
cimArilLAitCTier+1Tier+2U
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PAtrem
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•Time-To-Recovery (TTR): The time it takes to recover to full functionality after a disruption• Financial Impact (FI): Lost sales during TTR•The Risk Exposure Index (REI) is the maximum FI over all nodes in the supply chain
2 Weeks$400M
1 Week$100M
2 Weeks$1.5B
2 Weeks$100M
2 Weeks$2.5B
TTR =2 WeeksFI = $400M
2 Weeks$300M
©Copyright 2014 D. Simchi-Levi
Case Study 1: The Risk Exposure Index
cimArilLAitCTier+1Tier+2U
SP+otrA
smmeblya+oynCAm
smmeblya uLmAtberm
TD
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34
PAtrem
cimArilLAtrm
•Time-To-Recovery (TTR): The time it takes to recover to full functionality after a disruption• Financial Impact (FI): Lost sales during TTR•The Risk Exposure Index (REI) is the maximum FI over all nodes in the supply chain
2 Weeks$400M
1 Week$100M
2 Weeks$1.5B
2 Weeks$100M
2 Weeks$2.5B
TTR =2 WeeksFI = $400M
2 Weeks$300M
©Copyright 2014 D. Simchi-Levi
4/11/2014
18
The benefits of using the Risk Exposure Index
• It provides a $ measure of risk--it estimate the cost of risk;
• It is based on the entire network rather;
• It avoids the need to forecast the unknown-unknown;
• It forces a discussion to understand why TTR for similar facilities or suppliers is different;
• It forces a process to reduce TTR in various stages of the supply chain;
• It makes sure you have a good understanding of supply chain dependencies.
35
©Copyright 2014 D. Simchi-Levi
What We’ll Cover …
• Introduction� The Risk Exposure Index
• Supplier Segmentation � Implementation at Ford
• Wrap-up
36
4/11/2014
19
Case Study 2: Ford Motor Company
• Global automotive industry leader based in Dearborn, MI.
• Manufactures and distributes automobiles in 200 markets across six continents.
37©Copyright 2014 D. Simchi-Levi
Ford Brands
38©Copyright 2014 D. Simchi-Levi
4/11/2014
20
Ford Supply Chain
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40
4/11/2014
21
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Number of Sites
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Another 2K+ sites with negligible Impact
41
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Disruption Impact and Total Spend by Supplier Facility
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lier
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Disclaimer: Data shown here is for demonstration only . It does not represent real numbers used in analysis
42
4/11/2014
22
Disruption Impact and Total Spend by Supplier Facility
Financial Impact (Profit)
8192 58192 108192 158192 208192 258192 308192
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Disclaimer: Data shown here is for demonstration only . It does not represent real numbers used in analysis
43
Supplier Segmentation
Financial Impact (Profit)
8192 58192 108192 158192 208192 258192 308192
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44
4/11/2014
23
Supplier Segmentation
Financial Impact (Profit)
8192 58192 108192 158192 208192 258192 308192
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• Long Term Contracts• Track Inventory
• Partnership• Risk Sharing Contracts• Track Performance• Require Multiple Sites
• Inventory • Dual Sourcing• New Product Design
Disclaimer: Data shown here is for demonstration only . It does not represent real numbers used in analysis
45
Supplier Segmentation
Financial Impact (Profit)
8192 58192 108192 158192 208192 258192 308192
o stImprasnI10ImSuuumleaa���nml�I�t
Tota
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end
by
Su
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lier
Sit
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• Long Term Contracts• Track Inventory
• Partnership• Risk Sharing Contracts• Track Performance• Require Multiple Sites
• Inventory • Dual Sourcing• New Product Design
Disclaimer: Data shown here is for demonstration only . It does not represent real numbers used in analysis
46
4/11/2014
24
Impact on Automotive Manufacturer
• Optimization model identified at-risk suppliers� Identified the hidden risk of high volume-low margin
components
• Segment suppliers � Some suppliers are required to have alternate plants in different
regions
� Implement new product design strategy to consolidate similar parts & provide suppliers with economies of scale to set up a second plant
� Track daily inventory levels for some suppliers
47
What We’ll Cover …
• Introduction� The Risk Exposure Index
• Supplier Segmentation � Automotive Manufacturer
• Wrap-up
48
4/11/2014
25
49
Key Observations
• Invest Now or Pay Later� Firms need to invest in Risk Mitigation Strategies or they will
pay the price later.
• Managing Supply Chain Risks� Dealing with the Unknown-Unknown
� Measuring the Risk Exposure Index
� Implementing Supply Chain Flexibility
� Implementing Supplier Segmentation
Your Turn!
How to contact me:David Simchi-Levi
4/11/2014
26
Supply Chain Insights LLC Copyright © 2014, p. 51
Questions?
Supply Chain Insights LLC Copyright © 2014, p. 52
Public Training
www.supplychaininsights.com/services/training
• Chicago, IL – June 18-19, 2014• Philadelphia, PA – August 6-7, 2014• Dallas, TX – November 5-6, 2014
4/11/2014
27
Supply Chain Insights LLC Copyright © 2014, p. 53
Complimentary Webinars
www.supplychaininsights.com/upcoming-webinarswww.supplychaininsights.com/upcoming-webinars
UPCOMING WEBINARSApril 10, 2014: Risk Management
April 24, 2014: Supply Chain Resiliency
May 8, 2014: Our Research Difference
May 15, 2014: Metrics That Matter Book
June 12, 2014: Digital Supply Chain
PAST WEBINARS: ON DEMANDFrom Mar. 6, 2014: Voice of the Supply Chain
From Nov. 14, 2013: Healthcare Value Chain
From Nov. 13, 2013: The Shaman’s Circle
From Oct. 10, 2013: Metrics That Matter
From Aug. 30, 2013: Supply Chain Matters
Supply Chain Insights LLC Copyright © 2014, p. 54
Annual Event September 2014
4/11/2014
28
Supply Chain Insights LLC Copyright © 2014, p. 55
Who is Lora?
• Founder of Supply Chain Insights
• Partner at Altimeter Group (leader in open research)
• 7 years of Management Experience leading Analyst Teams at Gartner and AMR Research
• 8 years Experience in Marketing and Selling Supply Chain Software at Descartes Systems Group and Manugistics (now JDA)
• 15 Years Leading teams in Manufacturing and Distribution operations for Clorox, Kraft/General Foods, Nestle/Dreyers Grand Ice Cream andProcter & Gamble.
Supply Chain Insights LLC Copyright © 2014, p. 56
Where Do You Find Lora?
Contact Information: [email protected]
Blog: 100 Posts/Year www.supplychainshaman.com (10000 pageviews/month)
Forbes: Write 2X/Month http://www.forbes.com/search/?q=lora+cecere
Twitter: lcecere 4800 followers.
LinkedIn: linkedin.com/pub/lora-cecere/0/196/573 (Linkedin Influencer over 6000 followers in the network)
4/11/2014
29
Supply Chain Insights LLC Copyright © 2014, p. 57
Two in Five Report the Head of the Supply Chain IsResponsible for Supply Chain Risk Management