An Agile Supply Chain to deal with Global Challenges November 22 nd, 2012
Antonio Galvao Vice President Global Supply Chain at Diversey, now part of Sealed Air Author of the "Working Green" department in APICS magazine since 2008. More than 21 years of experience encompassing planning, logistics, sourcing, manufacturing, engineering, customer service, product portfolio management, and marketing operations. Degree in production engineering and MBA from the Federal University of Rio de Janeiro in Brazil. Brazilian (born and raised in Rio), lived in 5 different countries, married, 2 kids and a tortoise.
My biggest logistics challenge
APICS Certification, Education and Membership APICS certifications are the global standard of excellence APICS Certified in Production and Inventory Management (CPIM) APICS Certified Supply Chain Professional (CSCP) APICS education provides opportunities for every career level APICS offers online, on site, and self study options International conferences and seminars APICS membership connects you to a network of professionals and APICS partners in France and worldwide. Visit apics.org/membership to learn more.
Agenda What is supply chain risk and related terminology What are the most common supply chain risks? What strategies can mitigate these risks? What is a resilient supply chain? Key take aways Questions
What is risk? Many definitions Possibility of something happening that impacts your objectives. Effect of uncertainty on objectives. Risk = ƒ(probability,consequences) But there is always uncertainty to assess P or C Also linked to risk scenario, involving a source, likelihood and an impact. What can happen and what is the cause? How likely is it to happen? If it does happen, what are the consequences? Aven, T (2007), Husdal, J (2011), Kaplan, S & Garrick, B.J. (1981, 1997)
What is Supply Chain risk?
Business continuity institute Nov 2011 Survey results for 2011: 85 percent of survey respondents experienced at least one disruption Adverse weather was the main cause of disruption, with unplanned IT and telecommunication outages in second place at 41 percent. Transport network disruption came next with 21 percent and earthquake and tsunami at the same level. Cyber attack rose to become a top three source of disruption in the financial services sector. Only 8 percent of respondents could confirm that all of their key suppliers had business continuity programs in place to deal with disruption. Less than half of respondents check that these programs are likely to be effective in practice. The ability to demonstrate resilience is becoming a factor in purchasing decisions with 28 percent of respondents stating that they always or often have to provide assurance to prospective clients.
What is Supply Chain risk?
Supply Chain Global trends Trend towards just-in-time and lean practices Efficiency rather than effectiveness Trend towards reducing costs Globalization of supply chains, more complex and vulnerable Trend towards economies of scale Centralized distribution and manufacturing Lower costs but at the same time less flexibility Trend towards outsourcing non-core business activities Loss of control of the supply chain when it is most needed Trend towards consolidation of suppliers (intentional and M&A) Increased potential for supply failure Christopher, M (2011)
What is Supply Chain risk? Supply Chain risk definition: Decisions and activities that have outcomes that could negatively affect information or goods within a supply chain 1 Dimensions of risk: 2 -Flow of goods and services -Security of internal information systems -Flow of information -Risks with relationships forged among SC partners -Flow of money -Corporate social responsibility The list goes on and on : physical, informational, relational, innovative 1 Apics Dictionary 13th edition 2 Spekman & Davis (2004)
Supply Chain risk Risk sources: Consequences (impact) :of the risk sources Risk drivers : that turns risks into consequences Strategies: to address the risks Vehicle redesign Mitigative actions Bad weather Inadequate road maintenance Risk sources Risk drivers Impacts Late delivery Proactive mitigative actions address risk sources Reactive contingent actions address risk consequences Contingency actions Rescue services Husdal, J (2010)
Supply Chain risk Supply Chains are becoming more vulnerable and increasingly at risk of disruption. How can it be managed?
Identifying sources of risks Internal Manufacturing bottlenecks Strikes Supply risk Bankruptcy of supplier Quality problems Process risk Demand risk Volatile demand Bullwhip effect Risk profile is directly and indirectly impacted by the strategic decisions taken. Control risk Order quantities policies Batch sizes SS policies Environmental risk Natural disasters Political instability Severe weather Christopher, M (2011)
Managing Supply Chain risk Understand the supply chain Improve the supply chain Identify the critical paths (nodes and links) Manage the critical paths Improve network visibility Establish a supply chain continuity team Work with suppliers and customers to improve supply chain risk management procedures Christopher, M (2011)
Strategies to mitigate risks Increase capacity Acquire redundant suppliers Increase responsiveness Increase inventory Increase flexibility Pool or aggregate demand Capability Chopra and Sodhi (2004)
Risk mitigation framework Makharia, M, Plenert, G, Sambukumar, R APICS magazine 2012
Supply Chain Resilience
Sandy readiness Photo: Daniel Case/Wikimedia Commons
Sandy readiness Photo: Walmart
Key takeaways Supply Chains are exposed to a wide range of risks that are distinctive for each and every supply chain. Disruptions can have severe consequences Supply chain risk management seeks to identify risks, assess their impact and then mitigate these risks Evaluate redundancy x efficiency trade offs and focus on collaboration are important strategies to mitigate risks Resilience is becoming a critical component in supply chain strategy and is already recognized as a major attribute for excellence in supply chain management Risk management might not be as appealing as other supply chain disciplines but neglecting it can be extremely costly
Questions? Antonio Galvao antonio.galvao@sealedair.com