supply chain risk management and continuity planning...
TRANSCRIPT
9/7/2012
1
Supply Chain Risk Management
and Continuity Planning
Eric Wieczorek
Caroline Kolman
Bio - Caroline Kolman
• Licensed Professional Engineer (Industrial)
• Improving supply chains for over 20 years,
focused on healthcare industry for last 10
– Strategic sourcing: Identifying and implementing
efficiencies in the procure to pay cycle
– Technology solutions: SAP, Demand management
– Value analysis: Creating sustainable cost savings
for healthcare providers
9/7/2012
2
Bio – Eric Wieczorek
• 10 years pharmaceutical manufacturing at
Bristol Myers-Squibb
– Chemicals sourcing and procurement, RFP
management, global contract negotiations, lean
manufacturing
– Third party manufacturing management, sourcing
quality management, make versus buy analysis
• Supply chain risks consulting
Agenda
• The efficient supply chain – The risky supply chain
• Anatomy of a supply chain disruption – Thailand
floods
• Supply chain risk quantification and business
continuity planning– Manufacturing example
– Healthcare example
– Business continuity planning
• Best practices in supply chain risks management
• Questions and answers (10 min)
9/7/2012
3
Agenda
• The efficient supply chain – The risky supply chain
• Anatomy of a supply chain disruption – Thailand
floods
• Supply chain risk quantification and business
continuity planning– Manufacturing example
– Healthcare example
– Business continuity planning
• Best practices in supply chain risks management
• Questions and answers (10 min)
The efficient supply chain• Supply Chain management has its roots in
manufacturing and the quality evolution
– In the early 1900’s, Henry Ford developed the
assembly line system to focus on standardization and
elimination of waste in the car manufacturing process
– In response to US manufacturers losing market share
to Japan in the late 1970’s, Total Quality Management
(TQM) was adopted to improve manufacturing
performance
– In the 1990’s, General Electric (led by Jack Welch,
CEO) adopted Six Sigma to improve quality and
eliminate variance that caused defects
– Industries such as financial services, government, and
healthcare begin to adopt these principles and
techniques
• The successes achieved through the application of
these techniques continues to fuel the demand for
more efficiencies and cost savings
9/7/2012
4
Efficiencies and associated risks• By its very nature, the drive for a lean and efficient supply
chain creates risk, or the opportunity for disruption:
Supply Chain
Component
Past Strategy New "Lean" Strategy Risk
Strategic Sourcing Utilize many
sources/vendors to
obtain raw materials
and inputs
Reduce the number of
vendors to reduce
variability and increase
volume for low cost
Dependence on
one or few
suppliers
Globalization Maintain a vertical
supply chain - own or
have significant
influence on raw
materials and inputs
Utilize low-wage third
world countries to
reduce costs
Disruptions due to
violence/political
unrest, natural
disasters, etc.
Efficiencies and associated risks
Supply Chain
Component
Past Strategy New "Lean" Strategy Risk
Transportation
Deregulation &
Warehousing
Government regulated
shipping and
transportation inflated
costs, limiting
capabilities and
offerings
Carriers can charge
competitive rates to
their customers;
combining
warehousing with
transportation
companies leads to 3rd
party logistics (3PL)
and greater
outsourcing for moving
goods
Movement and
storage creates
opportunities for
delays, damage
9/7/2012
5
Efficiencies and associated risks
Supply Chain
Component
Past Strategy New "Lean" Strategy Risk
Information Technology Automation and
electronic
records/communication
did not exist - manual
processes
Technology automates
order filling and
processing
(procurement) through
fulfillment, delivery
and invoicing
(payment)
System errors
("garbage in,
garbage out"),
downtime (power
disruptions,
system crashes,
upgrades and
patch applications)
The impact of supply chain
disruptions
• Defects
• Delays / shut downs
• Additional costs
• Reduced perceived value
• Reduced real value (suppliers, customers)
• Fatalities (in extreme cases)
9/7/2012
6
Agenda
• The efficient supply chain – The risky supply chain
• Anatomy of a supply chain disruption – Thailand
floods
• Supply chain risk quantification and business
continuity planning– Manufacturing example
– Healthcare example
– Business continuity planning
• Best practices in supply chain risks management
• Questions and answers (10 min)
Anatomy of a supply chain
disruption
• What is a supply chain disruption?
• What are the key contributors in a supply
chain disruption?
• Impact from supply disruptions?
9/7/2012
7
What are supply chain risks? (examples - short
list)
Highly visible/ Less controllable
� Terrorism
� Natural catastrophes
� Widespread labor stoppage
� Port closures
� Diseases/ pandemics
� Foreign governments/ trade
disruption
� Country/ political risk
� Domestic & international laws
� Others…
Less visible/ More controllable
� Legal/ contract related
� Regulatory/ compliance
� Planning/ forecasting
� Sourcing/ procurement / quality
� Supplier interruption/
qualification / quality
� Customer service & satisfaction
� Inventory & obsolescence
� Technology/ systems
� Others…
� Potentially insurable risk (given certain conditions)
Last 10 years of supply chain disruptions –
related to natural events – selected few
• 2011 Japan earthquake ($300BB economic losses, $25BB
insured)
• 2011 Thailand floods ($45BB economic losses, $10BB insured)
• 2011 New Zealand earthquake ($13BB in losses)
• 2010 Iceland volcano ash cloud ($200MM/ day, uninsured)
• 2005 Hurricane Katrina ($62BB insured losses)
• 2008 Hurricane Ike ($18.5BB insured losses)
9/7/2012
8
Recent or notorious isolated event
supply disruption examples• Evonik plant Germany. Nylon 12 & Resins shortages impacts auto, sporting
and medical industries
• A 10-minute fire changes the industry for Nokia and Ericsson in March
2000- Ericsson is becomes SonyEricsson in October 2001
• Airbus A380 disruption of 2005
• Kellogg’s disruption in carton manufacturing plant (Labor issue)
• Mattel 2009 and 2010, SARS/ avian flu outbreak affects third party
manufacturers
• Dell supply chain glitches of 2007 (manufacturing quality)
• Genzyme March 2011, 2 unrelated supply disruptions at separate
manufacturing plants create drug shortages for Fabrazyne and Thyrogen
The four stages of a supply chain
disaster
Severity Blame
Resolution
Event
Denial
“It’s not that
few days!”
“It’s not that
bad! We”ll
be back in
business in a
few days!”
we thought!
Well, it’s
actually
worse than
we thought!
How did that
happen? And the
inevitable… Who is
responsible?
During that time a
solution is being worked
on.
Is a lesson learned?
9/7/2012
9
The Thailand floods supply disruption example in the
flash memory industry – summary of press conferences and
business leader quotes after the event
• Event takes place…
• Reactions from flash memory manufacturer business leaders a few days after
– “there will be minor disruptions because of logistics issues. Aside from that business as
usual thanks to inventory in the supply chain” (DENIAL….)
• A month later: Things get sorted out and the severity comes to light…
– “The industry will see supply shortages caused by the destruction of the Work In
progress inventory (WIP) at the time of the event” (SEVERITY…)
• Short-Term: More bad news…
– “ The industry will face further shortages due to reduced production capacity as a result
of production assets destroyed, factories unable to restart due to power supply
limitations, or lack of raw materials from their own suppliers” (SEVERITY & BLAME…)
• Long-Term (6 months later): Hope is coming back but it is not done yet….
– “ We will see further supply chain constraint while destroyed assets and factories get
repaired or replaced and new capacity comes online” (RESOLUTION…)
The Thailand floods supply disruption example in the
flash memory industry – Continued
• During that time… what was going on?• Firms directly hit by supply disruption are franticly canceling orders and trying to
book orders from alternate suppliers…
• Problem: manufacturing capacity was already pretty scarce before the event.
• Problem: qualifying and testing parts from new supplier is time and resource
consuming for most industry.
• Problem: the alternate supplier identified are in the same region of Japan;
impacted like any other supplier!
• Problem: manufacturing yield and quality with new supplier is not the same as
with the incumbent supplier.
• Problem: prices are also higher!
• What impact would a similar event have if it took place in Hong-Kong?
9/7/2012
10
The Thailand floods supply disruption example
– What happened there?
• Flash memory is a very competitive market
• Low global manufacturing capacity available
• High concentration of global supply base in
one geographical area
• Extended/ complex supply chain
• Low global inventory
The Thailand floods supply disruption
example – How did we get there?
• Low cost country sourcing
• Global sourcing… Yes but one supplier for each
component
• Lean/ Just-In-Time
• Wall street – inventory hinders company
performance, yet inventory is one way to
mitigate risk that also hinders company
performance
9/7/2012
11
The Thailand floods supply disruption
example – What could have been done about it?
• Recognize and monitor manufacturing capacity shortages
• Recognize end-to-end supply chain lead-times and plan inventory
accordingly
• Recognize that the world supply is geographically concentrated
• Negotiate supply contracts for emergency manufacturing capacity
allocation
• Maintain supplier relationships with multiple supply sources
• Qualify & test supplier components before an event happens
• Transform LEAN manufacturing to “risk-adjusted LEAN” supply chain
management
That’s Business
Planning! (BCP)
That’s Business
Continuity
Planning! (BCP)
Supply chain disruption response
scenariosEvent Start
Detection
Mitigation Strategy
Early Delayed
Planin
place
No responseplanned
Planin
place
No responseplanned
Organizational Performance
Recovery
FastEfficientLow cost
FastInefficient
Higher cost
SlowEfficient
Higher cost
SlowInefficientHigh cost
9/7/2012
12
The disruption recovery curve – The
benefits of continuity planningO
rgan
izat
iona
l per
form
ance
re
cove
ry
Time elapsed
Event start
Delayed response/ No mitigation strategy
Had no event happened!
Worst Case Scenario!
Detection Response Mitigation strategy
Lucky!
For illustration purposes only – not to scale
The disruption recovery curve – The
benefits of continuity planning
Org
aniz
atio
nal p
erfo
rman
ce
reco
very
Time elapsed
Event start
Delayed response/ No mitigation strategy
Had no event happened!
Delayed response/ mitigation strategy
Late Detection
For illustration purposes only – not to scale
9/7/2012
13
The disruption recovery curve – The
benefits of continuity planningO
rgan
izat
iona
l per
form
ance
re
cove
ry
Time elapsed
Event start
Delayed response/ No mitigation strategy
Had no event happened!
Worst Case Scenario!
Rapid response/ mitigation strategy
Early Detection
For illustration purposes only – not to scale
The disruption recovery curve – The
benefits of continuity planning
Org
aniz
atio
nal p
erfo
rman
ce
reco
very
Time elapsed
Event start
Delayed response/ No mitigation strategy
Early Detection
Rapid response/ mitigation strategy
Had no event happened!
Worst Case Scenario!
For illustration purposes only – not to scale
9/7/2012
14
The disruption recovery curve – The
benefits of continuity planningO
rgan
izat
iona
l per
form
ance
re
cove
ry
Time elapsed
Event start
Delayed response/ No mitigation strategy
Had no event happened!
Worst Case Scenario!
For illustration purposes only – not to scale
Value of
detecting &
planning for
disruption.
BCP!
Buying the umbrella before it rains
Business continuity planning (BCP) aims to help:
• Ensure the survival of the organization.
• Protect corporate assets and control financial loss.
• Minimize the loss of customers.
• Facilitate the resumption of operations.
• Improve the ability to salvage damaged equipment and
operations.
• Provide for the safety of personnel and the public before,
during, and after a disaster.
9/7/2012
15
Myths and realityMyth Reality
Our people know the business and will know
what to do in the event of a disaster.
When a disaster occurs, it is no longer
business as usual. People have to think in
terms of what is important to keeping the
business running.
We have insurance to cover our losses. Insurance is a part of your protection, but may
not fully compensate you for things like loss of
customers, loss of market share, set backs in
development or release of a new product in
the market.
We don’t have time to develop a Business
Continuity Plan.
Time spent developing and maintaining a
Business Continuity Plan is an investment in
the company.
Limitations of insurance
• 3 types of supply chain disruption insurance
– Property business interruption insurance (also called Time Element) may
include Contingent Business Interruption (CBI)
� Direct Damage is a pre-requisite (owned or supplier location); narrow coverage
� Usually limited to 12 months
� Only named suppliers or owned locations or limited coverage
� Expensive if located in natural catastrophe areas (i.e. earthquake, flood, storm);
high deductible
– Trade disruption insurance/ Supplier risk insurance
� Broader risk coverage, indirect risks (although some risks are not covered) but
typically low limits ($100MM)
� Sold per supplier, expensive
– Political risk insurance
� Confiscation of assets, lost income, currency inconvertibility
9/7/2012
16
What is the insurance industry
saying?
• After the Japan earthquake and suffering close
to $40BB in total insured losses insurance
companies are reacting:
– Munich Re/ Swiss Re: […] customers that they have 18 months from
January 1, 2012 to deliver far greater transparency on supply chains [...]and suppliers
[…]or else cover will be limited or even excluded. (Commercial Risk Europe- January 2012)
– Lloyds – reviewing its contingent business
interruption exposure
– Reduction in CBI coverage. CBI used to be a
“throw-in”, now it will cost policyholders.
Why plan?
• Can be the difference between survival or death of the organization (more
than 50% of organizations do not resume business after a major disaster-
International Risk Management Institute (IRMI) 2006
• To remain competitive
• To satisfy the company’s mission, its shareholders and customers
• Insurance is not THE answer!
• Minimize the severity of a disruption (financial losses, regulatory fines,
long term loss of customers, etc.)
• Minimize legal liability as a result of an accident
• Maintain the reputation of the organization
9/7/2012
17
“Dollarization” is key to BCP
• Can you demonstrate ($) the cost of not
planning for continuity?
• What would be the cost of a plan versus the
cost of a loss?
• Are there risks the organization must plan for
and others it can “deal with”?
• Which risk should we address first?
Can you demonstrate ($) the cost
of not planning for continuity?• A large Pharma client uncovers and “dollarizes” the
value of a key third party manufacturer (TPM) to its
#1 selling product
• A catastrophic loss at its TPM means the potential to
be out of business for at least 3 years
• Dollarization ($)= 3 years sales + continuing
expenses, interdependent plant inefficiencies, and
payroll to retain key employees, etc…
9/7/2012
18
What would be the cost of a plan
versus the cost of a loss?
• A large California Tech client hired us to
prepare their business interruption claim in
Thailand
• 30 days out of business = over $15MM loss
• $500K per day!
• Cost of a plan? A fraction of $500K
• If the plan reduces a loss by at least one day
the ROI is over 100%
Are there risks the organization must
plan for and others it can “deal with”?
• A large Pharma client identifies a bottleneck in its
manufacturing process at a location in earthquake prone
area.
• A laser manufactured (24 months normal lead time, 18
expedited) in Germany is key to its entire franchise.
Several $ billions at risk. Cost of an additional laser is
$2million.
• Contract packaging TPMs are also identified as
bottlenecks in the chain.
• Packaging can be moved (30 days) to another
suppliers easily by filing a CB30 with FDA.
Plan
Deal
with
9/7/2012
19
Which risk should we address
first?• “Dollarized” risk is a function of ($) severity and likelihood of
occurrence.
• Distinguish between assessment & quantification
Pag
e 37
Risk
High Spend/ Low Risk
High Spend/ High Risk
Low Spend/ Low Risk
Low Spend/ High Risk
Supplier Risk Heat Map (example)
Low Spend suppliers
generally not captured by
risk assessments
Spend
Agenda
• The efficient supply chain – The risky supply chain
• Anatomy of a supply chain disruption – Thailand
floods
• Supply chain risk quantification and business
continuity planning
– Manufacturing example
– Healthcare example
– Business continuity planning
• Best practices in supply chain risks management
• Questions and answers (10 min)
9/7/2012
20
Drug manufacturer supply chain
example
Dosage DistributionPackagingBulk Drug
Other markets
TPM Spain
Pen
Syringe
Puerto Rico
U.S. market
Back Up plant, Ireland
TPM, Germany
Location 1
TPM, Germany
Location 2
TPM UK
Boston, MA DC, USA
TPM Germany
DC, France
Owned location
Supplier location
Legend:
Drug manufacturer supply chain
example
Dosage DistributionPackagingBulk Drug
Other markets
TPM Spain
Pen
Syringe
Puerto Rico
U.S. market
Back Up plant, Ireland
TPM, Germany
Location 1
TPM, Germany
Location 2
TPM UK
Boston, MA DC, USA
TPM Germany
DC, France
Owned location
Supplier location
Legend:
9/7/2012
21
Drug manufacturer supply chain
example
Dosage DistributionPackagingBulk Drug
Other markets
TPM Spain
Pen
Syringe
Puerto Rico
U.S. market
Back Up plant, Ireland
TPM, Germany
Location 1
TPM, Germany
Location 2
TPM UK
Boston, MA DC, USA
TPM Germany
DC, France
Owned location
Supplier location
Legend:
• Spain TPM ramps up
production 20%, 60-day
lead time
• Ireland can provide 50%
of total world demand, 6
months lead time
• Tax impact from
manufacturing out of
Puerto Rico versus
Ireland/ Spain
($200MM)
Drug manufacturer supply chain
example
Dosage DistributionPackagingBulk Drug
Other markets
TPM Spain
Pen
Syringe
Puerto Rico
U.S. market
Back Up plant, Ireland
TPM, Germany
Location 1
TPM, Germany
Location 2
TPM UK
Boston, MA DC, USA
TPM Germany
DC, France
Owned location
Supplier location
Legend:
• Contract
penalties at TPMs
• $10MM
• Manufacturing slow
down.
• 60 % volumes from
Puerto Rico
• Interdependency total
$60MM
9/7/2012
22
Drug manufacturer supply chain
example
Dosage DistributionPackagingBulk Drug
Other markets
TPM Spain
Pen
Syringe
Puerto Rico
U.S. market
Back Up plant, Ireland
TPM, Germany
Location 1
TPM, Germany
Location 2
TPM UK
Boston, MA DC, USA
TPM Germany
DC, France
Owned location
Supplier location
Legend:
• 3 Months
Finished
Inventory
12 Months
to restart
Puerto Rico
Dollarization – Puerto Rico plant
loss$2BB
Value at risk(VaR)
MitigationStrategy
Cost($5MM)
$1.4BB
Spain TPMRamp up 20%
Production(60 Days)
$600
MM
Contract Penalties($10MM)
MitigatedVaR
Ireland50% capacity6 months to come online
$500
MM
$900MM
$910MM
ExpensesContinuing
Boston & DC($60MM)
$970MM
Taximpact
($200MM)
$200
MM
$1.17BB
Inventory($500MM)
$500
MM
$670MM
$675MM $675MM
9/7/2012
23
Dollarization – Puerto Rico Plant
loss$2BB
Value at risk(VaR)
MitigationStrategy
Cost($5MM)
$1.4BB
Spain TPMRamp up 20%
Production(60 Days)
$600
MM
Contract Penalties($10MM)
MitigatedVaR
Ireland50% capacity6 months to come online
$500
MM
$900MM
$910MM
ExpensesContinuing
Boston & DC($60MM)
$970MM
Taximpact
($200MM)
$200
MM
$1.17BB
Inventory($500MM)
$500
MM
$670MM
$675MM $675MM
Actions taken by the business continuity plan….
Scenario planning dashboard–
Puerto Rico location exampleScenario Exposure
($MM)
Time to
Recovery
Probability VaR
($MM)
comments
Windstorm $675 12
months
20% $135 Total Plant
shutdown!
Fire $250 12
Months
10% $25 Partial plant
shut down
Earthquake $675 12
Months
1% $6.75 unlikely
Manufacturing
Quality
$2BB 6 Months 5% $50 Transfer
manufacturing
9/7/2012
24
Agenda
• The efficient supply chain – The risky supply chain
• Anatomy of a supply chain disruption – Thailand
floods
• Supply chain risk quantification and business
continuity planning
– Manufacturing example
– Healthcare example
– Business continuity planning
• Best practices in supply chain risks management
• Questions and answers (10 min)
Health Care Provider
Supply Chain Example
9/7/2012
25
Health care provider exampleThe healthcare supply chain
Hospital Patient
Medical Supplies
Non ClinicalSupplies
Pharmaceuticals
Clinical Services
Non Clinical Services
ManufacturersandDistributors
ServiceProviders
• Products
– Clinical supplies (surgical, medical-surgical, laboratory)
– Pharmaceuticals
– Non clinical supplies (facilities, environmental,
food/nutrition)
• Services
– Repairs & maintenance (clinical, non clinical)
– Environmental/housekeeping
– Food service
Health care provider example Critical components of the healthcare supply chain
9/7/2012
26
Health care provider exampleWhat are the risks for healthcare providers?
� Natural catastrophes &
accidental destruction of assets
� Diseases/ pandemics
� Terrorism/violence
� Others…
� Medical malpractice, abuse, care
accountability
� Regulatory/ compliance/ medical
records protection
� Sourcing/ procurement / quality
� Supplier interruption/ quality
� Drug shortages/ recalls
� Customer service & satisfaction
� Technology/ systems/ patient
privacy/ medical records
protection (HIPAA violations)
� Others…
External Operational
Health care provider exampleDrug shortages
• Although the FDA takes great efforts, within its legal authority, to address
and prevent drug shortages, they still occur for many reasons:
– manufacturing and quality problems,
– delays
– discontinuations
• FDA actions:
– Communicate the issue and to help restore availability
– Work with other firms who manufacture the same drug, asking them
to increase production, if possible
– Many companies voluntarily provide shortage information that FDA
posts on its website
9/7/2012
27
Health care provider exampleDrug shortages – Planning and preparedness
Hospitals and health care providers have few options in drug shortage
situations:
• Ensure the hospital/system has a team or specific person assigned to
monitor, advise, and/or recommend actions associated with the current
drug shortage issue.
• Utilize drug shortage monitoring tools and daily updates for existing
shortages and ones to anticipate (Some of the shortages have lead time,
while others happen literally overnight)
• Utilize P&T Committee to regularly review drug protocols and usage;
investigate alternatives and review/approve as appropriate
Health care provider exampleOther disruption examples
• Product recalls
• Disaster recovery
planning
• Procedure for product
removal and
documentation
• Backup supplies in close
proximity
• Alternative
sources/suppliers
• Teaming with neighboring
hospitals for demand surges
9/7/2012
28
Agenda
• The efficient supply chain – The risky supply chain
• Anatomy of a supply chain disruption – Thailand
floods
• Supply chain risk quantification and business
continuity planning
– Manufacturing example
– Healthcare example
– Business continuity planning
• Best practices in supply chain risks management
• Questions and answers (10 min)
Business Continuity
Planning
9/7/2012
29
Managing the risks: What is
business continuity planning?
The process of:
• Preparing for
• Mitigating
• Responding to and
• Recovering from a crisis.
What is business continuity?
For the business continuity manager:
• The plans:
– Crisis
management
– Disaster recovery
– Contingency plan
• Scope:
– Management
– Production/
sales/ supply
chain
– Finance/
accounting
– Human resource
– Customer service
– R&D
– IT
– Marketing
– Legal
• Threats:
– Natural hazards
– Man-made
– Accidental
– Technological
– Utilities failures
– Regulatory
Source: IRMI practical risk management – Topic D-18
9/7/2012
30
The business continuity plans…
• Crisis management plan (emergency): actions taken
immediately before during and after a catastrophic
event that preserves lives, safeguard property and
reduce loss of resources
• Disaster recovery: actions take to recover from a
disaster and to resume business functions
• Contingency plans: actions taken to address the loss
of a specific key process , asset or resource
What is business continuity?
For the supply chain manager:
• The plans:
– Crisis management
�Disaster recovery
�Contingency plan
• Scope:
– Management
�Production/
sales/ supply
chain
– Finance/
accounting
– Human resource
– Customer service
– R&D
– IT
– Marketing
– Legal
• Threats:
�Natural hazards
�Man-made
�Accidental
�Technological
�Utilities failures
�Regulatory
Source: IRMI practical risk management – Topic D-18
9/7/2012
31
The supply chain BCP process
Threat analysis• Identify risks throughout the supply chain function
• Identify mitigation strategies, processes, equipment, locations, suppliers, customers
Value
At
risk analysis
•Quantify threat financial impacts
•Assess likelihood of threats
•Prioritize results
Continuation strategies
•Develop a risk register/ catalog
•Establish a response plans, checklists
•Evaluate cost/benefits
Emergency response
•Establish protocol for plan activation
•Develop communication plans(suppliers, customers, internal)
•Establish response teams based on threat
Testing & education
•Team members role
•Test plans with suppliers, customers, plant staff
•Review periodically
Additional strategies for improved
supply chain disruption recovery• Early detection & reaction
» Knowing where the threat is and which suppliers/ customers might be affected
» Keeping track of regional weather event development and knowing where your
suppliers are located
• Visibility & predictability
» Gaining knowledge about procured components and their raw materials sources
impact to your product or services
» Collaborating with suppliers and customers before and after an event
» Building supply contract in order to understand what parameters will govern a
relationship in case of a crisis
• Resiliency and sustainability
» Multi-sourcing, alternate suppliers, alternate processes, equipment, alternate
logistics routes, carriers
» Build flexibility in product design,
» Know your supplier / customers BCP, participate in collaborative emergency
response trainings
9/7/2012
32
Healthcare provider strategies
Understand and document the impact of disruptions by
developing a business continuity plan
• Assess the risk: measure the present vulnerabilities to
changes in the environment
• Determine the impact: evaluate the probable loss that
could result during a disaster or other disruption
Conduct regular reviews of these documents with staff to
ensure familiarity and relevance
Free resources for BCP
• www.contingencyplanning.com
• Department of Homeland Security:
www.ready.gov
• Disaster Recovery Journal: www.drj.com
9/7/2012
33
Agenda
• The efficient supply chain – the risky supply chain
• Anatomy of a supply chain disruption – Thailand
floods
• Supply chain risk quantification and business
continuity planning– Manufacturing example
– Healthcare example
– Business continuity planning
• Best practices in supply chain risks management
• Questions and answers (10 min)
Elements of organizational supply
chain risk management maturity
Supply Chain Risk Management Maturity Model
VISIBILITY PREDICTABILITY SUSTAINABILITY
TOOLS
TECHNIQUES
COMPLIANCEGOVERNANCE
•Assessment HEAT MAP •Supply Chain Network Map•VaR, Value-at-Risk Metric
•BCP Planning•Disruption/Insurance•SCRM Mitigation Tactics•SCRM Case Studies
•ISO SCRM Standards•SCRM Workshops•Knowledge Transfer
RESILIENCY
•Predictive Analytics Engines•Scenario Planning•Probabilistic Modeling•War Room Exercise
•ERM, Enterprise-Wide Risk Management Framework•Financial Risk Quantification•Supplier Risk Analysis
•Standards Institutionalized•Supplier Collaboration/Compliance•Embedded ERM in S&OP
•Real-time Global Risk Alert Dashboards•Web-based ERM Program Management Maturity•Scenario Risk Response Plans
•Formal BCP Process•Scenario/Risk Response Planning•Global Risk Register•Supplier collaboration Program
•Active/Effective SCRM-Assess/Mitigate/Manage•Standards of Compliance in S&OP•Embedded ERM/SRM/Metrics
•Predictive Analytic Engines•Global Risk/Threat Service•Real-time Risk Dashboards•ERM Web-based Tool•SRM Tool
•Real Time Risk Monitoring•New SCRM Metrics •Scenario/Risk Response Plans embedded in S&OP
•Ongoing SCRM Organization•Collaborative risk management and compliance•Formal SRM Program•Bi-Annual Risk Assessments
Avg. Companies
9/7/2012
34
Supply chain performance and risk
management• Why are these not mutually exclusive?
– Building a mitigation strategy designed to address a crisis can be used
as a strategy to mitigate the cost in the supply chain on a real time
basis. (i.e. ongoing auctioning of manufacturing capacity…)
– Scenario planning may aid in supply chain strategic decision
making.(i.e. What if the cost of fuel goes to…? What if the difference in
capital cost between China and the US is…?)
– Risk response strategies and BCP will help the organization recover
faster, more efficiently and minimize financial losses and maintain or
improve supply chain performance by building in flexibility,
preparedness and alternatives to day-to-day and long-term strategic
decision making
Conclusion
• SCRM and BCP is a journey not a race…
• Eisenhower once said “Plans are nothing,
Planning is everything”… you will come up
with the plans but you must start the planning
process.
• Or…
9/7/2012
35
Caroline KolmanManaging Director, Healthcare Supply Chain
Tel: 412-378-8701
Email: [email protected]
Eric WieczorekAssociate Director, Supply Chain Risk Analysis
Tel: 609-620-7855
Email: [email protected]