Supply Chain Management: from a necessary evil to a core organisational competency

Transcription

1 Supply Chain : from a necessary evil to a core organisational competency Dr Sinéad Roden Senior Lecturer in Operations & Supply Director of Studies for MSc in Global Supply Chain Percentage of world revenues of 40 largest consultancy firms Financial 6 Marketing/sales 2 Organisational design 11 Supply Chain 31 Benefits/Actuarial 16 IT strategy 17 Corporate strategy 17 1

2 Agenda for this evening Defining supply chain and supply chain management The challenges in managing supply chains Supply chain risk management What is it and how can it be implemented? 2

3 What is Supply Chain A supply chain is the flow of physical goods, information, people and finance Physical goods Information Finance Suppliers/ Mfg plants Distribution centres Warehouses Retail stores Head office Managing the information flow is becoming increasingly important. Definition of SCM Supply chain management is concerned with the efficient integration of suppliers, factories, warehouses and stores so that goods and services are produced and distributed: In the right quantities To the right locations At the right time In order to Minimize total system cost Satisfy customer service requirements 3

4 The Evolution of SCM Old paradigm - Firm gained synergy as a vertically integrated firm encompassing the ownership and coordination of several supply chain activities. Focus on mass production; purchasing efficiency & aggressive negotiation. New paradigm - Firms in a supply chain focus activities in their area of specialization (core competency) and enter into voluntary and trust-based relationships with supplier and customer firms Focus on sensing customer demand & responding (agility) 4

5 Supply Chain Disruption Map Why are Supply Chains Increasingly Vulnerable? What is making supply chain management difficult: Global Sourcing Increasing number of hand-offs, not necessarily location Lean Operations Reduced inventories; JIT Supply Chain Complexity Globalisation and outsourcing Supply Base Reduction Prevalence of sole sourcing 5

6 Supply Risks Dependency on key suppliers Intellectual property risk Supply delays / labour disputes East coast port Strike Inbound quality Inventory risks Dangers of obsolescence IT / information risks Demand Risks Short lifecycles Global economy Forecasting Drop in demand Product disaster (recalls) Fad Volatility New Product Uncertainty 6

7 Economic Risks Environmental Riskssks Economic fluctuations, such as exchange rates Commodity price shifts Regulatory changes Terrorism & war Weather Natural disasters Source: UN Environment Programme 7

8 What is Supply Chain Risk the management of supply chain risks through coordination or collaboration among the supply chain partners so as to ensure profitability and continuity (Tang, 2006). a supply chain is only as strong as its weakest link! What is the state of SCRM in industry today? Studies indicate a lack of preparation Tenure of SC Risk Programme Assessment of SC Risks 28% 15% 24% 17% 55% 27% 34% No formal programme In place < 12 months In place > 12 months No formal assessment Rough Quant Estimate Qualitatively/Intuitviely Detailed models Sources: Aberdeen Group, McKinsey Quarterly 8

9 Disruption Probability 3/6/2014 How can we manage increasing risk and vulnerability? Assessing Risk High HIGH VULNERABILITY LOW VULNERABILITY Low Light Consequences 9

10 Disruption Probability 3/6/2014 High Loss of key supplier Transportation Link Disruption Computer Virus Avian Flu Product failure IT System Failure Avian Flu Earthquake Low Employee Sabotage Light Consequences Product Supply Risk Demand Information (Tang, 2006) 10

11 Product Supply Managemen t Risk Manageme nt Demand Information Supply Demand Product Information Strategic plans Supply network design. Product rollovers, and product pricing. Product variety. Supply chain visibility. Tactical plans Supplier selection, supplier order allocation, and supply contracts. Shift demand across time, markets, and products Postponement, process sequencing. Information sharing, Vendor Managed Inventory, Collaborative forecasting. Strategies based on Redundancy and Flexibility (Tang, 2006) Redundancy 1. Inject safety stock Buffer uncertain and variable demand and supply Not lean 2. Add excess capacity Operational equivalent of safety stock Internal or through supply network Flexibility 1. Interchangeability Modular plants Modular processes Modular products 2. Visibility 3. Increase agility 4. Postponement 11

12 Contingency Planning Establishing a pre-set course of action for an anticipated scenario. i.e. virtual buffering, because it involves securing buffers only when needed, rather than holding them continuously in advance. Use when the risk from an event becomes more severe. Do not hold resources, but instead develop a plan for obtaining them when needed. E.g. flexible supply contracts, multi-sourcing, reserve shipping capacity, temporary workers. E.g. contracts with alternative suppliers to provide backup in case of disruption. Contingency Planning: The Mobile Phone Supply Chain Shipment discrepancies noticed within 3 days. Philips is pushed hard. New supply sources. New chip design. Global capacity grab. Problem undiscovered for weeks. Slow chain of command. Slow response. Capacity already taken. $400M revenue loss. Exits phone manufacture. Philips Chip Factory Ericsson Mobile Phones Nokia Mobile Phones 12

13 Conclusions Supply chains are increasingly vulnerable to disruption due to macro trends and supply chain design There is a lack of preparation within industry today To be a global business, supply chain risk management is a necessity. The key is to determine how to do it efficiently and effectively. 13