Risk Management and Recovery

Transcription

1 Risk Management and Recovery Paul Clayton GlaxoSmithKline Chris Ferrell Tompkins International Tompkins Supply Chain Copyright Leadership 2014 Forum August 25-27, 2014 Your Supply Chain. The Right Way.

2 Session Agenda Topic Introduction Survey Results: Demographics Survey Results: Sources of Supply Chain Risk Survey Results: Risk Mitigation Planning for Low-Probability, High-Impact Events Assessment Index: Risk and Remedy Co-Facilitator Comments Potential Discussion Points 2

3 Topic Introduction This presentation is based on survey results from the Supply Chain Risk Management survey completed in March The data is being debuted today. Longer and more dynamic supply chains have dramatically increased the risk of disruption. Contingency plans tend to be focused on high-value suppliers and differentiators. There tends to be inadequate preparation for lowprobability, high-impact events. Node-based analysis can reveal hidden risk. 3

4 Participant Demographics Revenue by Region 66.2% 15.1% 9.6% 3.7% 1.9% 2.6% 4

5 Current Operations vs. 2 Years Ago More dependent on suppliers 3% 15% 24% 44% 14% More dependent on customers 2% 8% 20% 51% 19% More dependent on third-parties 4% 24% 28% 35% 10% Network changes occur more frequently 8% 13% 63% 17% New product introductions have become more frequent 1% 8% 15% 51% 25% Number of supply chain entities has increased 17% 24% 46% 14% Relationship between entities has become more transparent 1% 23% 34% 36% 6% Products and services offered by entities have become more standardized 2% 20% 32% 44% 2% 0% 20% 40% 60% 80% 100% Strongly Disagree Disagree Neutral/Unsure Agree Strongly Agree 5

6 External Sources of Risk Market changes Raw material availability/commodity price fluctuation Weather/Natural disaster disruption Increasing labor costs Energy/fuel price volatility 57.3% 54.4% 53.4% 51.5% 51.5% Currency fluctuation Change in technology Supplier solvency Geopolitical stability 42.7% 42.7% 36.9% 30.1% Telecommunications/IT disruptions Cyber attacks Counterfeiting Other 20.4% 14.6% 12.6% 6.8% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% 6

7 Major Supply Chain Risks to Current Operations Specialized skill sets and expertise of employees 42.3% Regional concentration of manufacturing operations 34.0% Regional concentration of supply base 33.0% Reliance on small supply base 26.8% Dependence on unique technology 22.7% Regional concentration of customers 22.7% Reliance on a small third-party base 14.4% Other 8.2% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 7

8 Current Risk Mitigation Strategies Supplier collaboration Dual sourcing 61.6% 67.7% Increase inventory levels/safety stock Written business continuity plan Demand collaboration with customers Forward buying/hedging 46.5% 42.4% 37.4% 31.3% DC redundancy Component substitution Near-shoring manufacturing Delayed differentiation/postponement 21.2% 20.2% 17.2% 12.1% Other 1.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% 8

9 Critical Factors to Supply Chain Risk Mitigation Internal structure, processes, & culture (for risk mgmt.) Integration with suppliers Alignment between supply chain entities Analytics, data, modeling Network flexibility and redundancy Internal integration between business functions Integration with customers Complexity management/rationalization 53.5% 52.5% 48.5% 48.5% 46.5% 40.6% 38.6% 32.7% Product flexibility (substitutions) 13.9% Other 1.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% 9

10 Low-Probability, High-Impact Events Difficult to quantify using traditional methods. Tend to focus on high-dollar suppliers and differentiators. Require a node-based (rather than event-based) type of evaluation to identify and reduce exposure. 10

11 Time to Recover (TTR) Questionnaire 1. Supplier by location (city/region/country) 2. Parts from site Cost Annual volume Inventory (days of supply) Total spend 3. End product Original equipment manufacturers (OEMs) that use this part Profit margin of end-product(s) 4. Lead times from supplier to OEM sites (days) Source: Harvard Business Review Magazine, Jan-Feb,

12 Time to Recover (TTR) Questionnaire 5. Time to recovery If site is down but not damaged If equipment is damaged 6. Cost of loss Expediting freight Overtime and additional shifts Alternate capacity Source: Harvard Business Review Magazine, Jan-Feb,

13 Supplier Risk Assessment Are there multiple locations/single locations? Are there alternate vendors available? Is it financially stable? Is there variability in performance? Lead time Fill rate Quality What is the mitigation strategy for each supplier/part combination? 13

14 Node-Based Assessments Identify hidden exposures. Avoid predictions about rare events. Reveal discrepancies and bottlenecks. Promote discussion and learning. 14

15 Risk Assessment Index Risk Obvious high risk - Expensive and/or differentiating components - Emphasis on traditional assessment Obvious low risk - Low spend, low financial impact Hidden risk - Low total spend but high disruptive impact Remedy - Strategic partnering - Multiple facilities in different regions - Performance tracking - Business continuity plans - Effectively managed with small amounts of excess inventory - Dual sourcing - Multiple facilities in different regions - Additional inventory 15

16 Co-Facilitator Comments 16

17 APPENDIX Survey Demographics Tompkins Supply Chain Copyright Leadership 2014 Forum August 25-27, 2014

18 Participant Demographics Company Type Company Size (annual revenue) 10.3% 20.7% 23.9% 19.7% 20.7% 25.9% 22.4% 19.7% 36.8% Retail Consumer Products Manufacturer Commercial/Industrial Manufacturer Wholesaler/Distributor Logistics Service Provider/3PL > $10 billion $1 billion to $10 billion $250 million to $1 billion <$250 million 18

19 Participant Demographics (cont d) Primary Industry 6.1% 14.8% 5.2% 7.0% 10.4% 5.2% 3.5% 5.2% 17.4% 17.4% 7.8% Apparel/textile Automotive/parts Consumer products Distributors Food & kindred product Furniture Industrial/commercial equipment Pharmaceutical/medical Technology/electronics Transportation services/3pl Other 19

20 Participant Demographics (cont d) Regional Presence Africa / Middle East 24.1% Asia 50.9% Australia / Pacific Rim 29.3% Europe 50.0% North America 94.0% South America 36.2% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 20