Uncovering and Managing Supply Chain Risk ISM CV Triangle Meeting

Transcription

1 Uncovering and Managing Supply Chain Risk ISM CV Triangle Meeting Many types of risks and tools/processes - Product Environmental Compliance - Supply Chain Social Responsibility - Social & Environmental Management System - Pandemic Contingency Planning - Supplier Financial Risk Assessment Can be consolidated into a single tool Supplier Total Risk Tool and Process Source: Ital Florida Container Casualties / John Konrad 1 Louis Ferretti, IBM Project Executive & ISM CV Triangle Chapter Board Member rev1 Sept 13, 2011

2 Supply Chain Risks Currency Fuel Costs Social Responsibility Intellectual Property Labor Disputes Brand Impact Product Safety Political Responsiveness Taxes Regulatory Compliance Environmental Labor Costs 2 IBM Confidential Geophysical Supplier Failure Attrition Rates

3 Supply Chain Risk Management offers improved focus on risk and increased certainty to profitability Reduced risks and more effective risk mitigation Elimination of potential and unexpected costs Reduced disruptions and time to recovery Improved overall supply chain performance Competitive advantage and financial longevity 3

4 From IBM s recent Supply Chain Officer Study, Managing Risks, both operational and financial, is the #2 concern of supply chain executives worldwide 70% 55% 60% 56% 43% COST CONTAINMENT SUPPLY CHAIN VISIBILITY RISK MANAGEMENT INCREASING CUSTOMER DEMANDS GLOBALIZATION 4

5 Leaders are sharing risks across their supply chain network to reduce vulnerability 96% What types of and risk management practices have/are you implementing? 82% 92% 79% 80% 76% 72% 57% Integrating process controls in logistics and operations Compliance programs with suppliers and service providers Incorporating risk strategies and mitigation policies in supply chain planning Using supply chain event management techniques with tolerances to monitor disruptions Leaders Currently implemented/implementing Plan to implement in next 3 years Others Currently implemented/implementing Plan to implement in next 3 years 5

6 Enterprises face different types of Supply Chain Risks 6

7 As supply chains have become increasingly more global and complex, it follows that there are greater challenges and risks Ukraine / Russian gas supply shut down to Eastern Europe Thailand airport shut down due to civil unrest Fuel distribution in US disrupted after hurricane Katrina damaged pipelines UPS strike severely impacted ability to ship small packages in the US US saw significant disruptions from Long Beach harbor strike Kobe earthquake resulted in computer memory shortage, impacting multiple companies Japanese earthquake, tsunami, nuclear reactor meltdown supply shortages Political, economic, and societal changes, coupled with environmental, climate, safety, security and health concerns has set the stage for supply chain disruptions. 7

8 Setting the Context Client (executive) Perspective c will initiate a broad piece of work to evaluate the risks in our extended supply chain.. And will prioritize based upon known or anticipated issues. The gas supply. Israeli situation. ongoing issues in Thailand..effects of a lower economic growth rate on political and social stability And many other risks including but not limited to transportation costs/climatic/political/economic/social/environmental/health, etc.... globalized our supply chains.. introduced additional risks 8

9 Total Risk Assessment Landscape Council Lead Total Risk Assessment Supply Chain Risk Entities: Commodity Supplier Supplier Site SFRA Country Hub Pandemic Risk Entity: Supplier Site Risk Categories: Political, Legal & Social Security Supplier Financial Stability Country Economic & Financial Stability Infrastructure, Logistics & Energy Environment & Natural Hazards Labor & Health Union / Management Relations External Data Source Provider Country & Hub Questionnaires Supplier & Commodity Questionnaires GCM Supplier-Site & Pandemic Questionnaires Market Intelligence Country & Hub Questionnaires Supplier Financial Risk Assessment (SFRA) Tool (Determines Risk Rating for subset of entities and risks) Supplier and Financial Health Supplier List Supplier Financial Health rating Total Risk Assessment Tool (Determines Risk Rating for combination of all entities and risks) Risk Mitigation Plans Plans formulated to address identified risk Plans reviewed and approved by management Risk Identified Cognos BI Reporting Risk ratings by Country Hub Supplier Supplier Site Commodity Pandemic Readiness Reports Generated Global View Supply Chain Report Questionnaire Report Pandemic Questionnaire Report 9

10 Total Risk Tool Overview and Profile Cognos based Help Desk in place Impact likelihood model Country/Hub/Supplier/Site/Commodity Refinements to business processes and management system underway Developed ILog based instanteous alert functionality and process Patent Submitted Council education tool and process Deployment and bring up 1Q11 Output correlated with empircal experience wrt high/low risk suppliers Part of GBS s IPAC (Intellectual Property & Asset Commercialization) Strategic Tool Funding in Place - Increase/expand functionality and scope Tool Scope and Input Parameters Countries Hubs Suppliers Supplier Sites 28 (23 Growth Market) Questions Country Hub Supplier Supplier Site Commodity Pandemic EDSP / MI 14 6 n/a n/a n/a n/a Councils n/a n/a Alerts Categories -> Countries Hubs Commodities Supplier Other # Entities REM, Conflict Minerals 10

11 Total Risk Assessment Risk Categories Supplier Site Supplier Commodity Country Hub Pandemic Disaster (Production Stoppage) (includes Pandemic) Disaster (Raw Material) Disaster (War & Civil Unrest) Disaster (Shut Down) Communication & Cooperation Environment & Natural Hazards Environment & Natural Hazards Environment & Natural Hazards Financial Economic & Financial HR HR Infrastructure, Logistics & Energy Infrastructure, Logistics & Energy Infrastructure, Logistics & Energy Infrastructure, Logistics & Energy Labor & Health Labor & Health (includes Pandemic) Political, Legal & Social Political, Legal & Social Political, Legal & Social Product & Market Requirements Quality Security Strategic Importance 11

12 Impact-Likelihood Model Supplier Risk Assessment % % % % Impact I % % % % High Risk % Low Risk % Medium Risk 0.000% 0.00% 20.00% 40.00% 60.00% 80.00% % y = 1 / (10 * (x + 0,05)) + 0,1 y = 1 / (10 * (x + 0,20)) - 0,1 Supplier Likelihood Impact-Likelihood methodology is an industry standard for risk management. L 12

13 Total Risk Assessment process incorporates automated Alerts to notify Sourcing teams to pro-actively mitigate risks Externalized Business Rules: Automated Alert sent directly to appropriate recipient inbox TM1 cube infrastructure Alert rating threshold analysis Alert type determination Recipients analysis Based on which Entity requires an Alert Based on Alert type Entities Commodity Memory RSS etc Country China Taiwan etc Hub Dublin New York etc Supplier Samsung Intel Liteon Celestica etc Supplier Site Jabil - Penang - ECAT etc Supplier Site Pandemic LSI Shanghai OEMStorage etc Brand RSS Storage etc Data transfer from TM1 to ilog tables Every 2 hrs Subentity Current rating Memory Green Green Previous rating RSS Yellow Yellow China Yellow Yellow Null = did not previously exist Unassessed = currently no entity rating Alert Alert Type Taiwan Green Yellow Improvement Dublin Red Red New York Green Green Samsung Yellow Green Degradation Intel Green Green Liteon Unassessed Null New Questionnaire Celestica Green Unassessed Initial Rating Total Risk Assessment Alert History Alert notification log updated Multiple search capabilities 13

14 Total Risk Tool & Assessment Value Proposition Total Risk Assessment Tool Provides focus on the many risk categories and events that could impact continuity of supply Brings together multiple and diverse areas of concern together; provides systematic approach to assessing risk levels ilog instantaneous alert system provides automated notification when a change occurs in a supply chain risk element Value Proposition Eliminates manual data tracking Enables deeper understanding of all risks that may exist based on sourcing decisions Raises awareness of commodity council staff as various supply risks Provides an automated alert notification functionality triggered to specific end users based upon monitoring key data elements crossing specified threshold limits Delivers ability to alert specific end users re. pending risk(s) identified Automated alerts triggered to the Sourcing community facilitates immediate action Proactive mitigation as opposed to reactive and costly crisis mode Avoids supply disruption, potential loss of revenue and maintains client sat Delivers benefit to business in savings through automation 14

15 Presented at External Supply Chain Forums International Institute for Advanced Purchasing & Supply John Paterson - Nov 2010, London Procurement Risk Summit Louis Ferretti - Dec 2010, New Orleans John Paterson. IBM Global Supply, VP & CPO Procurement Leaders Risk Forum Louis Ferretti - March 2011, Chicago The Conference Board Enterprise Risk Management Louis Ferretti Oct 12, 2011, Chicago Lou Ferretti, IBM Project Executive (far right) 15

16 Supply Chain Risk Management Key Takeaways Risk management is a fundamental building block to a supply chain strategy Supply Chain Leaders are integrating process controls in their logistics and operations, supplier compliance programs and planning process Procurement can deliver true value using an intelligent and comprehensive risk assessment program with suppliers Objective of these processes is not to eliminate risk without risk there is no progress instead it is to ensure we can manage and mitigate risks Managing and reducing risk in the supply chain will be key to IBM s global growth in the future - John Paterson, IBM VP & CPO 16