assessing your risk exposure - automotive industry...
TRANSCRIPT
Assessing Your Risk Exposure Your Supplier’s Risk can become your own
Alisa Clemons, Supplier Performance - Team Lead
Gladyne Wiley Lynch, Supplier Performance – Lead
MMOG/LE Analyst
• Assess your Supplier Risk
Make the Connection…
Safeguard your corporate image and customer satisfaction
Small parts, BIG Impact
Even smaller suppliers matter. A study by the Massachusetts Institute of Technology in collaboration with Ford determined that 2 % of supplier sites comprising a relatively small amount of spend would have an ordinate amount of damage and impact the entire sales of the company in the event of a supply chain disruption. Making the case that ALL suppliers, locations, hubs, and warehouses should be included in risk monitoring.
Source: „From Superstorms to Factory Fires: Managing Unpredictable Supply-Chain Disruptions“, D. Simchi-Levi, W. Schmidt, Y. Wie; https://hbr.org/2014/01/from-superstorms-to-factory-fires-managing-unpredictable-supply-chain-disruptions
Inheriting Supplier Liability
• Tier-1 suppliers are being held accountable for the actions of their sub-tier suppliers.
• OEMs are exposed to risk of Tier 1 disruptions associated with a suppliers’ sub-suppliers.
• Suppliers must take a new approach to identify and manage sources of sub-tier supplier risk.
• MMOG/LE criterion 6.7.1
─ Requirement: • Regularly assess and monitor the
capability and performance of suppliers, subcontractors, and service providers
─ Why: • It provides the means to support the
organization’s SCM strategy, identify opportunities for improvement, and provides a valuable contribution to the achievement of high levels of customer satisfaction.
Take Chapter 6 requirements Serious
What Your Customer Expects
Comprehensive inventory (mapping) of sub-tier suppliers
OEMs now expect Tier-1s to know their sub-tier suppliers
Comprehensive catalog of sub-tier risks
Monitoring sub-tier risks to form the basis for KPIs, scorecards, audit routines, and other monitoring activities.
A risk-based segmentation
Segment suppliers by risk level. Ex. a simple system of high-, medium-, and low-risk categories can be useful.
Establish standard monitoring, measuring and escalation process
Proactively establish monitoring and scoring tools and processes to address nonconformance in real-time. Establish crisis recovery plan to quickly mitigate risks.
Automotive Supply Chain suppliers are under increased exposure to risk.
• Tier 1 suppliers exposed to risk of their sub-suppliers, vendors and service providers. – Many suppliers do not have a strategic discipline in risk management
– 51% of disruptions originate from below the first tier
• Most companies limit their risk analysis and mitigation activities to their tier-1 suppliers despite the fact that a disruption below the first tier has the same impact.
Source: Business Continuity Institute, SUPPLY CHAIN RESILIENCE REPORT, 2014
Supplier Risk Assessment & Monitoring
• Do you have a process to assess & monitor the capability of your supply chain partners?
– OEMs expectation is for suppliers to develop practices to mitigate risk during scheduled reviews.
– Develop a plan of action and establish a comprehensive overview of your SC network in a platform that is proactive and responsive to risk.
Supplier Risk Assessment & Monitoring
Process to Assess Capability
Things to consider: • Value your partnership with customers
– Protect your organization, protect your customer and avoid disruptions to maintain business relations
• Protect your organizations against disruptions and develop robust assessing capabilities
– Develop a process that gets transparency into potential risk
– Expose bottlenecks in your suppliers’ processes
• Shorten response time
– Analyze supplier locations and risk inherent within the geographical location or regional operations
– Determine what risks are unique to that location through continuous monitoring (i.e., earthquakes, political turmoil…etc.)
Regularly Measure & Review
Consider the following:
• Does your organization regularly measure & review supplier performance for SCM risk? – Is there a document process that address your process?
• Does your organization have a process that gets transparency into potential risk throughout the global supply chain? – Does your organization maintain historical records to track your sub-suppliers
performance?
• Does your organization map supplier location?
– Suppliers will be expected to analyze supplier locations and risk inherent within a region.
– Has your organization determined risk exposure and are there KPIs metrics for your suppliers (e.g. delivery performance, premium freight, transportation, and supplier disruptions)?
Bottom line: Continue to regularly review metrics for SCM trends and plan accordingly.
Leverage MMOG/LE - Basic
• The Basic Assessment is a tool for lower tier suppliers to verify that the ”basic” and most critical SCM processes are in place
• Used to establish a rapid diagnosis of critical areas (e.g. capacity planning, inventory management)
• Enables a targeted assessment (e.g. new plant launch readiness)
• Aids in aligning sub-tier suppliers’ with your organization’s objectives
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Paul Rossi, Supply Chain Risk Management
General Motors Global Purchasing and Supply Chain
Supply Chain Visibility The First Step to Understanding Your Exposure to Disruptive Events
Supply Chain Visibility
Continuous monitoring of global events
with potential to disrupt supply chains
• Natural Disasters
• Supplier Disruptions
• Labor/Transportation Disruptions
• Geopolitical/Regulatory Events
• Force Majeure Declarations
• Infrastructure Disruptions
Enabler to reactive speed during a crisis & proactive risk mitigation
Earthquakes in Japan
Hurricanes and Typhoons
Industrial Explosions
Increasing supply chain visibility allows for a
better understanding of your supplier network
GM has been able to…
• Understand supplier foot print to avoid and/or prepare for risks
• React and recover quickly to disruptive events
• Improve supplier collaboration during a disruptive event
• Provide ad-hoc reporting for other functions
• Cyber security, purchasing, labor relations (union contracts expiring), etc.
• Improve Contingent Business Interruption insurance position
Lower costs / more coverage
Sources of sub-tier visibility Data
Supplier Surveys
- High degree of data
accuracy
- Customer specific
- Secure, internal
environment
- Understanding of
MFG/SHIP & Billing
locations
- Slow process
- Dependent on supplier
compliance
3rd Party –
Public/Web/Social
- Fast illumination of
Tier n supply base
- Easily updated
- Not dependent on
supplier compliance
- Accuracy of data?
(implied
relationships)
- Correct MFG/SHIP
locations identified?
- Not customer specific
- Third-party data
security risk
3rd Party –
Proprietary
- High degree of data
accuracy
- Fast illumination of
Tier n supply base
- Easily updated
- Correct MFG/SHIP
locations identified?
- Not customer specific
- Third-party data
security risk
April Dines, Corporate Quality
Cascade Engineering (Grand Rapids, MI)
Sub-tier Supplier Management Case Study – Cascade Engineering
How Does CE Mitigate Risks?
1. Manage known / controllable risks
– Review risk for launches and changes
– Communicate expectations
– Document and communicate performance
– Supplier audit, as needed
2. Plan for unknown / uncontrollable risks
– Emergency response system
– Contingency plan
Review Risks for Launches / Changes
• New supplier
• New technology
• Material change
• Poor tooling condition
• Customer directed supplier
• Current supplier with concerns
• Supplier Manual
• Inspection Requirements
• Photos
Communicate Expectations
QAD QMS Supplier Portal
*Over 300 suppliers setup in system
Document Supplier Concerns
QAD QMS
• Create corrective action
• Assign tasks to supplier
• Notification sent to supplier
Supplier Name
Communicate Concerns
QAD QMS Supplier Portal
• Supplier response
• Checklist items
• Supporting documents
• Submit CPR
Supplier Scorecard Trends
• Review for consecutive months with low performance
– Possible financial risk
Scorecard Point Classifications
Category Description Point Scale Color
Preferred New business opportunities 95 - 100
Acceptable Possible new business 80-94
Sub-standard • Possible new business hold (> 3 months) • Meeting with supplier management • Supplier Audit • Corrective Actions • Possible de-sourcing
70-79
Probationary • New business hold • Corrective Actions • Possible de-sourcing
< 70
Review of Supplier Corrective Actions and Trends
QAD QMS
• Filter concerns (by supplier, date range, site, type of concern, etc.)
Supplier Name
QAD QMS – Audits
• Complete internal audits
• Conduct supplier audits, as needed
• Document concerns and actions needed
Emergency Situation – Natural Disaster (Typhoon)
QAD and eRFQ Systems
Evaluate Supplier locations
*Review of supplier location versus manufacturing location
Contact Tier 1 Suppliers in Concern Location
eRFQ
Notification to determine impact on delivery
• Feedback from suppliers within a week
• Use of eRFQ saves between 4-6 hours of actual work
Damage Assessment Team
Evaluate Situation
Impact to delivery - YES
• How long will supplier be down?
• Are there other qualified suppliers available?
• Can we change the schedule with customer?
Contingency Plan for Escalated Concerns
Approximately 80 Documents
*Flash drive given to Damage Assessment team every year
Annual Review / Update of Contingency Plan
QAD QMS – Document Control
• Documents controlled in central system
• Owners of documents make relevant updates
• Annual review of documents for accuracy
Benefits of Systems / Planning
• Supplier awareness of expectations
• Ability to address all concerns in one system
– Delivery, ASN, Quality, etc.
• Visibility of concerns and actions
• Elimination NVA activities - duplicate entries
• Faster reaction time for identified concerns
*Ultimate goal is to reduce CE and customer risk