Managing Supply Chain Risks - StarChapter...Supply Chain Risk Management What Are Others Saying? CNN...

1 CONFIDENTIAL © StoneCross Group, LLC

Managing Supply Chain Risks Emerging Trends & Technologies

Jeff St. John

John R.C. Pearce

StoneCross Group, LLC


Agenda

Trends & “buzz” – what has changed?

What are major risk sources?

What technologies/resources are emerging?

What does “mapping risk” involve?

Benchmarking your firm’s risk?

A recommended approach to SCRM

Q&A


What Has Changed?


Supply Chain Risk Management What Are Others Saying?

CNN Money: The Global Supply Chain – So Very Fragile!

Forbes: Supply Chain Risk a Hidden Liability for Many Companies

IDC Manufacturing Insights: Supply Chain Resilience Research & Practice

Fortune: Supply Chain-Risk Management & Sustainability

SupplyChain 247: 6 Strategies to Prepare Your International Supply Chain for Disruption

MIT/PwC: Supply Chain & Risk Management 2013 Study


Evolutions of Supply Chain Complexity MIT Forum: Supply Chain & Risk Management

Studied 209 companies with global footprints

Dependencies between supply chain entities has increased

Changes in SC network occur more frequently

Increased product introductions

Products and services becoming less standard

Number of entities in supply chain has increased

What Would You Add?


Top Sources of Supply Chain Risks Massachusetts Institute of Technology 2013 Study

Raw Material Price Fluctuations

Currency Fluctuations

Market Changes

Energy/Fuel Price Volatility

Rising Material Scarcity

Rising Labor Costs

Geopolitical Instability

Supplier/Partner Bankruptcy

Technology Changes

Unplanned IT Disruptions


Real Time Incident / Event Awareness & Monitoring of a Global Nature

Knowledge of Mandatory Compliance with • Applicable Laws, Regulations and Practices

Complete, Up-To-Date Database & Mapping of • Primary, secondary and sub-tier areas of exposure

• Your locations – suppliers, partners, customers, people

Relevant KPI’s to tie back to SCR

Integrated knowledge of finished product components and relationship to supplier(s)

7

Elements to Controlling Risk


Supply Chain Mapping Visualizing Your Supply Chain – Amerigo


Supply Chain Risk Mapping

“It pays to have supply chain backup plans……..

……….providing you know what to backup!”

……SCAIRTM


RAW MATERIAL SOURCING

MANUFACTURING DISTRIBUTION &

LOGISTICS WAREHOUSING

Manual, Inefficient Processes for Tracking Risk

The SCRM Challenge Where Does Risk Exist – How Is It Addressed Today?


Emerging Technologies & Offerings Incident Tracking – Planning – Execution – Visibility – Mapping

Resilinc

Razient

Amerigo

InterSys Ltd (SCAIRTM)

GT Nexus

PW - KPMG – Deloitte

FM Global

MetricStream

Trade Merit

CDC/Aptean

Manhattan Associates

Marsh Risk Consulting

SCRLC

ISO 28002


Global Event Tracking - a Deeper Dive Courtesy of Razient Technologies


Event Tracking for Supply Chains A Technology Preview – What They Do

Provides timely, daily visibility of all relevant incident types and threats specific to your locations, supplier/sub-supplier, third parties and customer locations

Configurable action and response steps to quickly address risks and threats that may disrupt the flow of goods, materials or other supply chain activities

Tracks compliance against best practices, your company standards, applicable laws and regulations including global regulatory requirements of every vendor in your network

Opens new possibilities of pro-active management of risks and human capital via mobile capabilities


Defining Events to Track Incidents are Tailored for your Supply Chain


Going from Reactive to Pro-Active Alerts Monitoring

Global Incident

Management

Global threat

dashboard

Data feeds from

numerous data

sources

Immediate correlation

to locations

Determine which

locations/parts are

facing potential

threats

Crisis management

tracking, and

mitigation steps


Going from Reactive to Pro-Active Compliance Tracking

Compliance Management

Achieve regulatory

compliance and industry

best practices

Customize, distribute,

manage, and monitor risk

Surveys

Reduce cost of vendor

risk management

through automated

processes

Track and report on

compliance results

Utilize a library of

predefined assessments

Archive compliance

results

Centralized document

collection


Mobile Event Tracking Capability User Alerts – Incidents – Notifications – General Content


What is your SC Risk Maturity? How far do you have to go?

Prelimnary Discussions?

Risk Management integrated into your SC?

Mapped critical suppliers & associated risk?

On-going assessment strategy for Risk?

Suppliers chosen based on Risk elements?

Do you segment Risk strategies?

Risk mitigation strategy exist?

Are critical suppliers cooperative?

Are third-parties evaluated for Risk?

Suppliers periodically evaluated for Risk?

Do you know of critical “risk funnels” that you share with competitors?


SC Risk Maturity Benchmark MIT Study Results: 60-40-10

Reactionary

Awareness

Proactive

Integrated

Resilient

All Risks

Traditional risks

Non-traditional risks

“Black swan” events

Major emerging trends/risks


Define

Measure

Analyze

Improve

Control

• Improve processes and controls

• Identify ways to remove or avoid situations which affect

risk exposure

• Define risk area and scope

• Categorize the nature of the risk, i.e., (non)compliance or

incident

• Develop a baseline of current activities / performance

• Assess the current processes and controls environment

• Assign relative risk value to factors affecting risk in each

risk area

• Identify changes or other factors that can positively or

negatively affect the risk

• Develop processes and structure to manage and monitor

risk

• Develop reporting mechanisms to warn of situations or

incidents which affect risk exposure

20

SCRAM®

An Approach To Risk Management


Complete Initial Client Profile Background and Understanding

Document

Work with Executive Leadership to Complete the Risk Intelligence Maturity Model

• Identify key stakeholders in the organization

• Complete Individual Maturity Model Analysis with each stakeholder

• Compile and Analyze Results

• Work with organizational Leadership to interpret results

Identify Key Organization Stakeholders / Leadership Team to

participate in the Supply Chain Assessment & Management

(SCRAM®) process

Work with Stakeholders / Leadership to strategically identify “Critical Risk Areas” of focus to highlight during process

Define

Measure

Analyze

Improve

Control

21

SCRAM® Approach

Define risk area and scope / understand Client Business Practices


Deploy Subject Matter Expert(s) (“SME”) to conduct Risk

Assessments • Meet with key Client process and control owners • Remote and In-Field assessments of Client processes and controls

Document Risk Assessment results

• Document discussions with process and control owners • Document Client processes and controls pertaining to Risk assessments • Obtain supporting documentation, as necessary, to support processes and controls

Confirm Risk Assessment results with process / control owners

• Compile results of assessments • Follow-up discussions with process and control owners to validate findings

Define

Measure

Analyze

Improve

Control

22

SCRAM® Approach

Assess Current Processes and Controls Environment


Relatively Low

Probability of Occurring BUT Relatively High

Consequence

High Vulnerability to

Enterprise and Requires Constant Attention

Relatively Low

Probability of Occurring and Relatively Low

Consequence

Relatively High Probability of Occurring

BUT Relatively Low Consequence

Probability of Occurrence LOW

HIGH

HIGH

13 24

Co

nse

qu

en

ce

s

1

8

33 18

23

SCRAM® Approach

Define

Measure

Analyze

Improve

Control


Define

Measure

Analyze

Improve

Control

Affinity Diagram: Brainstorm improvement ideas around a risk

area and group ideas for the purpose of selecting the most

appropriate

Improvement Ideas

Cause and Effect Diagram: Identify the various changes and

initiatives that can affect the improvement effect desired

Interrelationship Diagram: Identify and analyze the cause and

effect relationships across the various issues initiatives to

highlight key drivers and outcomes in a holistic manner

Force Ranking: Force rank the improvement changes /

initiatives based upon severity of the risk outcomes from

not making the changes

24

SCRAM® Approach

Identify Improvement Initiatives Using Lean / Six Sigma Tools for Mitigating Risk


Define

Measure

Analyze

Improve

Control

Establish Official “Enterprise Risk Management” (ERM) Framework

• Document auditable Control Objectives and Control Activities within ERM – Entity-Level Controls – Controls Objectives and Activities by Risk Area

• Document Client Entities governed by ERM Framework • Establish Control Owners within Client organization • Establish Control Assessment Rotation Plan / Frequency

Consider Adoption of a Risk Management Tool for Ongoing Management and Monitoring of Organization-Wide Risks

25

SCRAM® Approach Develop Processes to Manage and Monitor Risk


ISO 28002


ISO 28002:2011 Latest Version of ISO Standards

“……specifies requirements for a resilience management system in the supply chain to enable an organization to develop and implement policies, objectives, and programs, taking into account legal, regulatory and other requirements to which the organization subscribes; information about significant risks, hazards and threats that may have consequences to the organization, its stakeholders, and on its supply chain; protection of its assets and processes; and management of disruptive incidents.”


SCRLC Supply Chain Risk Leadership Council

“A cross-industry organization including world-class manufacturing and services supply-chain organizations and academic institutions that work together to develop and share best practices in supply-chain risk management. Its mission is to create supply-chain risk management standards, processes, capabilities, and metrics that reflect current best practices and can be widely adopted.”


Benefits of a Mature SC Risk Program

“Companies with mature capabilities in supply chain management and risk management do better along all surveyed dimensions of operational and financial performance than immature companies.”

MIT Forum for Supply Chain Innovation 2013

[email protected]

Phone: 1-617-852-2708

mailto:[email protected]


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Managing Supply Chain Risks - StarChapter...Supply Chain Risk Management What Are Others Saying? CNN...

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