Supply Chain Resilience & supply chain strategy

Transcription

1 Supply Chain Resilience & supply chain strategy Professor Richard Wilding Cranfield School of Management Prof. Dr. Richard Wilding Centre for Logistics & Supply Chain Management Cranfield School of Management, Cranfield, Bedford, England, MK43 0AL. Tel: +44 (0) Fax: +44 (0) Cranfield School of Management is One of the largest postgraduate management schools in Europe Cranfield University.. Established TO 136m 2,000 employees 3,000 postgraduate students: - 73% on taught degrees - 27% research Two 3/4 hotels on campus Over 10,000 alumni in 110 countries 2 4th busiest airport in the UK! 1

2 Themes & Agenda The sources of Supply Chain Risk. Linking Supply Chain Risk Management to the strategic process Risk mitigation strategies within the supply chain. Competitive Supply Chain Resilience Relating Supply Chain Risks to wider business consequences classifying your competitive processes. Instigating action to involve all stakeholders in improving Supply Chain Resilience and Competitiveness by Dr Richard Wilding Innovation & Risk Reduction Innovation is all about creating value, economic value, social value and/or environmental value through the application of ideas that are new to YOU. 4 2

3 Better Together! My Linkedin Network. 5 We live in a networked world! The Nespresso Coffee Supply Chain Network Ecom Proj Ecom Proj SAN Mex Ecom Guat Processors and or exporter NGO International development agency Source: Alvarez, Pilbeam and Wilding 2009 SAN Guat Ecom Mex Ecom LGiorgia EC Caldas Ecom Ecom CRica Ecom Orosi IFC RFA Expocafé/ Cafexport EC Jardín? Local National Nespresso CA Global Nespresso RFA CRica Funda natura Volcafé Other? Nesp Colombia FNC Cauca EFICO Neumann Fed Nac Café Colb Volcafé CRica FNC Nariño Volcafé S Dgo Neumann Colb? Cooxupé Imaflora Cooxupé Neumann Huila? 3

4 How are the following related? The Seven Valley Steam Railway Gilbert Presentation Rugby Ball 7 Leather Luxury Car Seat How are the following related? 8 4

5 What can destroy your supply chain? 9 What can destroy your Supply Chain? 10 5

6 What events destroy your Supply Chain? 11 What events destroy your Supply Chain? 12 6

7 What can destroy your Supply Chain? 13 Are you happy with the iphone supply chain? Audit reveals child labour, poisoned workers at Apple Suppliers 137 workers at the Suzhou facility of Wintek had suffered n- hexane poisoning. 91 cases of underage workers were found in ten factories. In one plant, 42 children were discovered. Apple Supplier Responsibility 2011 Progress Report Source: 7

8 What resources are you currently experiencing shortages of? Oil Energy People Food Metals Land Money 15 Not long now until Coffee! 16 WWF

9 Water is the new CO2!? 0.1 for the water itself 2.5 to make the plastic lid 5.5 to make the paper cup and sleeve 7.5 to grow the sugar for one teaspoon to feed the cows that make the milk 143 to grow the coffee WWF Litres 17 Peak Oil Changing the Risk Profile of the Supply Chain 18 Source: Professor Martin Christopher, Cranfield School of Management

10 Peak Oil 19 Source: Professor Martin Christopher, Cranfield School of Management As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and without timely mitigation, the economic, social and political costs will be unprecedented. US Department of Energy, Source: Professor Martin Christopher, Cranfield School of Management

11 Options for reducing the risk of peak oil on your supply chain. More local for local manufacturing based on small footprint manufacturing practices Greater levels of collaborative working and asset sharing to improve transport utilisation Leverage economies of scale through bigger vehicles and vessels (e.g. Emma Maersk) Utilise postponement techniques to enable low cost country sourcing of vanilla products to be moved in bulk for local finishing Re-work network optimisation calculations based on a $200 barrel of oil cost and realistic carbon cost 21 Source: Professor Martin Christopher, Cranfield School of Management Sources of Supply Chain Risk EXTERNAL INTERNAL Demand Uncertainty within the lead time, margin and markdown management Process Forecasting, Flow control, Documentation, IT integration, Costing Environmental, Government Regulations, Security, Customs, Tariffs & Quotas Ethics Vulnerability = RISK + EXPOSURE Mitigation / Contingency Planning, Back up, Safety cover, disposal channel Supply Lead times, unreliability, visibility, IPR leakage, ethics Control Communication, Contracts, IPR, Organisation, Compliance, KPIs 22 11

12 Uncertainty Generation in Supply Chains. Amplification Supply chain Uncertainty Deterministic chaos Parallel Interactions The Supply Chain Complexity Triangle Amplification CAPACITY REQUIRED APPARENT REAL Shortages TIME Demand Distortion Over Ordering Safety Stock Increase Unreliable Delivery 12

13 EFFECT OF A ONCE OFF STEP INCREASE OF 10% IN DEMAND ORDER OSCILLATIONS DOWN THE SUPPLY CHAIN Order or Target Quantity Simulation Days Car Build Target Orders by A on B Orders to Supplier A Production Target B Production Target A Hoarding Mentality due to Japan ''Clearly, chipmakers are attempting to hoard inventory given increased risk of supply side dislocations up and down the entire chain, impacting end product availability.'' Steven Pelayo, Analyst HSBC 28/03/

14 Deterministic Chaos Well defined, rational behaviour can generate chaos! 23% of managers generate chaos! Costs 500% greater than optimal! Aggressive Stock Management generates chaos. Low target inventory. Little consideration of pipeline. Rapid correction of discrepancies between actual and desired. 14

15 Parallel Interactions Rover Group Metro Brake Servo Assembly AP Brakes Division Shell and cover Fluid Reservoir Body Diaphragm Tandem Master Cylinder Body AP Pressings Division AP Rubber Division Qualcast (Foundaries) Ltd. W.H.Smiths (Tools) Ltd. Parallel interaction describe interactions that occur between different channels in a supply network. Extended chains accumulate risk Suppliers suppliers Supplier Inbound Manufacturer Intermediate Distribution / Finishing Distribution Retail 30 15

16 Supply Chain Risk Management The identification and management of risks within the supply chain and risks external to it through a coordinated approach amongst supply chain members to reduce supply chain vulnerability as a whole this is not a single company concept. 31 Supply Chain events destroy Share Value! Average shareholder returns (%) Trading day relative to announcement date % -17.5% Source: Singhal and Hendricks December Georgia Tech & Univ of Western Ontario 32 16

17 The destruction of Competitive Advantage Types of Vulnerability Ericsson Nokia Corporate Implications of corporate culture and policy setting on supply chain vulnerability. single supplier left the mobile handset market $400m lost in missed sales multiple suppliers met demand used power to get outcome executive hit squad Supply Network Those networks that represent high exposure to the organisation. common platform didn t have a plan B bad news travelled slowly various platforms product re-design reviewed daily from weekly Bad news travelled fast Specific Individual symptoms or events that cause disruption to the supply chain event tracking found out via a technician event tracking found out via an executive Fire at Philips 33 Factors contributing to Supply Chain Risk & Organisational Stability. The adoption of Lean anorexic practices. The globalisation of Supply Chains Focussed Factories and Centralised Distribution The trend to outsourcing Reduction in the supplier base Volatility of demand Lack of transparency and control procedures 34 17

18 Building the Resilient Supply Chain. THE RESILIENT SUPPLY CHAIN CONTINUOUS MONITORING AND INTELLIGENCE SUPPLY CHAIN TRANSPARENCY SUPPLY CHAIN COLLABORATION SUPPLY CHAIN DESIGN & ENGINEERING SUPPLY CHAIN RISK MANAGEMENT CULTURE AGILITY PRODUCT DESIGN FOR THE SUPPLY CHAIN THE FOUNDATION OF EFFECTIVE SUPPLY CHAIN STRATEGY Copyright Professor Richard Wilding 2011 Cranfield School of Management -The Demand Chain Management Community Marketing Logistics & Supply Chain Management Demand Creation Demand Fulfilment Demand Creation Demand Fulfilment Demand Chain Management The alignment of demand creation and fulfilment processes across functional and organisational boundaries 36 18

19 Supply Chain Strategy Process, Infrastructure, Information Systems and Organisation Corporate Strategy Competitive Strategy Supply Chain Strategy Supply Chain Process & Product Design Supply Chain Infrastructure Design Supply Chain Information System Design Supply Chain Organisation Design 37 Linking customer value to supply chain strategy Identify value segments What do our customers value? Define the value proposition How do we translate these requirements into an offer? Identify the market winners What does it take to succeed In this market? Develop the supply chain strategy How do we deliver against this proposition? 38 19

20 Competitive Supply Chain Resilience A unique way to increase resilience in your supply chain Focused on improving competitiveness The CSCR Method is Successful in delivering value Modular and flexible in design & use Built on cross industry experience and world class tools Takes an end-to-end and integrated view of the supply chain. Recognises that supply chain must change to meet future visions Action SELECT SOLUTIONS OPTIONS COMPETITIVE SUPPLY CHAIN RESILIENCE LOCATE SUPPLY CHAIN RISKS Understanding 39 Defining the Success factors for the segment/market. Task 1 1. Brief description of customer segment/market 2. Critical Success Factors for this segment/market Importance 3. Comments or Observations 100% 2008 by Prof. Richard Wilding 40 20

21 Task 2 - Identifying Supply Chain Processes that Support the Success Factors Key Success Factor Supply Chain Processes that enable Key Success Factors by Dr Richard Wilding 2008 by Prof. Richard Wilding Task 3 - Classify the Supply Chain processes that support the key success factors for each segment/market. Classify the processes using the triangle. Competitive Processes Innovation Processes Qualifying Processes Underpinning Processes by Prof. Richard Wilding 21

22 Task 4 - Sources of Supply Chain Risk Brain Storm the sources of Vulnerability to your Supply Chain. Environmental, EXTERNAL Demand Supply Process Vulnerability = RISK + EXPOSURE Control INTERNAL Mitigation / Contingency by Prof. Richard Wilding Task 5 Prioritise Key Supply Chain Vulnerabilities Key Processes Vulnerabilities Key Process Vulnerability Ratings Process Group Vulnerability Ratings Competitive Processes Transformation Processes Qualifying Processes Underpinning Processes Vulnerability Priority Ratings by Prof. Richard Wilding 22

23 Task 6 - Vulnerability Action Plan Exercise (Top 3 Vulnerabilities from Task 5) Vulnerability What Capability is required to address this vulnerability? Perfect world! What capability do we have now? How do we bridge the Gap? What is the impact of this capability on the Key Success Factors (Task 1)? by Prof. Richard Wilding Competitive Supply Chain Resilience 1. Understand what are the success factors for a market or segment. 2. Identify the Supply Chain Processes that support these success factors 3. Classify the Processes using the Process Triangle. 4. Identify the risks/vulnerabilities in the Supply Chain 5. Understand how these risks/vulnerabilities impact on the Supply Chain Processes. 6. Understand our current capability to deal with the risk and what capability is required to remove this. 7. By investing in the capability to deal with the risk/vulnerability how this will impact on the success factors for the market or segment? 46 Demonstrating the link between Supply Chain Risk Management and the success factors in a market and therefore improving our competitive position 23

24 A key message on Risk within Supply Chains. Accept uncertainty is inherent in supply chains. If a man presumes certainty, he shall end with doubts, but if he will be content with doubts, he will end with certainties. Francis Bacon Links & Further Information Cranfield School of Management Professor Richard Wilding Download the free podcasts and itunesu course easy link via or visit itunes.com View free Videos on and

25 A world-class business school Financial Times Executive Education Rankings 2010 Ranked by clients as the top UK business school for customised executive development and amongst the world s top 10. In the top 3 business schools globally for international delivery Ranked 1st in the UK for programme preparation; flexibility in programme design, contemporary and relevant teaching materials; the quality of faculty and level of programme follow-up. Economist Ranking of MBA Programmes 1st in the UK, 4th in Europe Europe's largest faculty specialising in the management of Logistics & Supply Chains Globally recognised Centre of Excellence Internationally recognised MSc in Logistics and Supply Chain Management. Accreditations One of an elite group of business schools worldwide to be triple AMBA, EQUIS and AACSB accredited Please keep in touch! If you would like further information on the techniques described in this presentation, for example, supporting journal articles, or would like to discuss the content further, please don t hesitate to contact the author at the following address: Professor Richard Wilding Cranfield School of Management Cranfield, Bedford, England, MK43 0AL. Tel: +44 (0) Fax: +44 (0) Richard.Wilding@cranfield.ac.uk Web: by Dr Richard Wilding 25

26 Professor Richard Wilding, BSc, PhD, CEng, Eur Ing, FIET, FCILT. Full Professor and Chair in Supply Chain Strategy. As Chair (Full Professor) in Supply Chain Strategy at the Centre for Logistics and Supply Chain Management, Cranfield School of Management U.K. Richard works with European and International companies on logistics and supply chain projects in all sectors including pharmaceutical, retail, automotive, high technology, food drink and professional services to name a few. He is a highly acclaimed presenter and regularly speaks at Industrial Conferences and has undertaken lecture tours of Europe and Asia at the invitation of local Universities & Confederations of Industry. He has published widely in the area of supply chain management and is Editorial Advisor to a number of top journals in the area. Professor Wilding was winner of the Individual Contribution Award at the European Supply Chain Excellence Awards 2010 this is presented to the individual who has made an outstanding contribution to supply chain excellence. In 2009 his biography was entered into the 162 nd edition of Who s Who described as "Britain's most famous reference book" for those who have "reached the pinnacle of excellence in their field". At the European Supply Chain Distinction Awards 2008, received the `Distinguished Service Award for Thought Leadership and Service to Supply Chain Management`. Richard was appointed in 2005 as the first ever Full Professor and Chair of "Supply Chain Risk Management" in the World. This was in recognition of his significant contribution to this subject area. Supply chain risk is still a key focus of his research within the context of an organisations overall Supply Chain Strategy, thus enabling companies to create sustainable and resilient competitive advantage. His Doctoral research, undertaken while employed at the University of Warwick, applied chaos and complexity science to logistics and supply chain management and resulted in the development of new management guidelines for supply chain re-engineering to mitigate risk. This innovative research received international media coverage including features on the BBC World Service and articles in the Times, Financial Times and New Scientist. More recently his research into inventory policies of organisations in times of risk & uncertainty resulted in international media coverage including live interviews on BBC1 television news, BBC News 24, BBC Television s The Money Programme, BBC 5 live and Independent Radio News. The research was also covered by the print media including the Financial Times, Sunday Times, The Guardian, and The Independent newspapers. Richard is both a European and Chartered Engineer, he is a chartered fellow of both the Institute of Engineering and Technology (Manufacturing Division) and the Chartered Institute of Logistics & Transport (CILT). Professor Wilding was elected by the 20,000 members of the CILT U.K. to the Board, and is a Director and Trustee of the institute. He is a founder & steering Committee Member of the CILT "Logistics Research Network", a global network of academics and practitioners involved in state-of-the-art logistics and supply chain research. He is also Co-Chairman of the CILT "Leaders in Supply Chain" Forum, a group limited to the top 120 Logistics and Supply Chain Directors from Europe. Richard is also a Member of The Higher Education Academy in recognition of his innovative approaches to teaching and course design. Richard s special areas of interest include the creation of collaborative business environments, reducing supply chain vulnerability & risk, time compression and techniques for aligning supply chains to maximise customer value and reduce cost. Web: and LinkedIn Profile