supply chain risk management: practical application · 2015-01-20 · – media frenzy as scandal...
TRANSCRIPT
Ms Victoria Bales and Dr Richard Gibson
CILT London Networking Event 19th January 2015
1
Supply Chain Risk Management: Practical Application
Agenda
• What is risk in supply chains?
• An example of not doing it properly
• Toolbox: – Enterprise risk management
– Business continuity management
– Contract risk management
– Risk appetite
– Assurance mapping
• Questions
2
Context What is happening within the supply chain?
• Pressures on businesses and service providers – Save money, add value, be green, be ethical……
– Dual sourcing; Asset sharing; Outsourcing; Rapid manufacture
• Supply chain becoming more complex – Fewer and larger key suppliers
– More sub-tier suppliers
– More single points of failure
– Changing risk environment
3
• What is SCRM?
• Example of poor SCRM
• Toolbox
First Step:
Agree terminology and scope
• Define the “supply chain” within your organisation
– What and who are your suppliers, providers, Tier 1 etc.
– How far down the chain do you need to look?
– Supply chain not all one way: consider interdependencies
• Define “risk” and “disruption” – At what point is “business as usual” disrupted?
– How bad is unacceptable?
– What do your key stakeholders consider to be acceptable?
4
• What is SCRM?
• Example of poor SCRM
• Toolbox
Risk and Risk Management
5
• A risk is something that could happen in the future and has an impact on objectives and outcomes – The combination of the probability of an event and its consequences (ISO
31000)
• An issue is something that is happening or has already happened – An issue may have been previously identified as a risk
• An event that happens which has not previously been foreseen is sometimes known as a “Black Swan” (
• What is SCRM?
• Example of poor SCRM
• Toolbox
Risks and Consequences
6
Research revealed that
companies recorded at least one supply
chain disruption in 2014, with service
failures by outsourcers one of the top
three causes after IT telecoms failure and
adverse weather (the BCI)
three in four
• Financial
• Service Delivery
• Reputational
• Recruitment and Retention
• Competitive Edge
• Footfall
• >>>RG
7
• What is SCRM?
• Example of poor SCRM
• Toolbox
Horse Meat – UK Timeline
• December 2012 - First traces of horse and pig DNA in beef products
• January 2013
– 29% Horse meat found in a Tesco burger
– Media frenzy as scandal erupts – radio, television, newspapers and social media
– Tesco start apologizing
– Parliamentary Select Committee appointed
– Traces of pork DNA in halal prison food
• February 2013
– 28 Local Authorities testing for horse meat
– 60%+ horsemeat confirmed in Findus lasagne ready meal (confirmed 100%)
– Retailers Aldi, Asda & Tesco withdraw products supplied by Comigel (France)
– Food Standards Authority invites UK and EU Police to investigate
– FSA & Police raid two meat plants and arrests are made
– A testing regime is implemented across the EU
• March 2013
– Major ports commence the sampling of beef products from countries external to the EU
– Food Standards Authority and Industry meet to agree how this will be prevented in the future
8
Horsemeat Supply Chain
9
• What is SCRM?
• Example of poor SCRM
• Toolbox
What Does Good Look Like?
The management team of a resilient supply chain:
1. Identifies and manages the risks
2. Has good contract management skills
3. Has contingency arrangements and a good crisis management plan for if it does go wrong
4. Identifies and meets stakeholder expectations e.g. corporate social responsibility
10
• What is SCRM?
• Example of poor SCRM
• Toolbox
1. Identify and Manage the Risks
11
Objectives
Identification Description
Evaluation Assessment
Options Decisions
Reporting Threats & Opportunities
Monitor Review
• What is SCRM?
• Example of poor SCRM
• Toolbox
12 12
• Supplier Analysis - Know the supplier, their financial position, competitors, customers, SWOT analysis etc. S
• Understanding the Relationship - supplier mapping. Is the relationship strategic?. How does each party view the other? 360 feedback U
• Performance Monitoring - Set SMART objectives & agree credible criteria to measure performance against them. P
• Early Warning Signals – Identify potential “red flags” and adopt a framework to help to foresee and manage them E
• Regular Reviews - Plan regular reviews as appropriate with agendas to cover performance and development. R
• Innovation - Encourage innovation with supplier. Don’t leave it to chance, set development objectives and stretch targets. I
• Open Communication - Develop a planned communication strategy with both the suppliers and the business. O
• Review & Re-visit Annually - Conduct a formal review every year to confirm value added and set new objectives. R
2. Contract Management: Critical Success Factors
• What is SCRM?
• Example of poor SCRM
• Toolbox
Risk Appetite: What Does Your Risk Matrix Say About Yours?
5
4
3
2
1
L 1 2 3 4 5
13
I
• Are parameters
consistently
applied?
• Does matrix
reflect current
appetite?
• Is the risk
acceptable or
not?
• Is your appetite
the only
consideration?
Like
liho
od
/Po
ssib
ility
Impact/Severity
• What is SCRM?
• Example of poor SCRM
• Toolbox
3. Contingency Arrangements: BCM
14
• What is SCRM?
• Example of poor SCRM
• Toolbox
Communications and Crisis Management
15
• What is SCRM?
• Example of poor SCRM
• Toolbox
4. Stakeholder Expectations
Who are your key stakeholders and how do you need to engage with/communicate to them? This might change as a situation progresses. Use a simple matrix to map the changes.
16
I
nte
rest
Influence
Least important
Meet their needs
Show consideration
Key player
• What is SCRM?
• Example of poor SCRM
• Toolbox
Assurances
17
• Where are your assurances coming from?
• How do you know they are adequate/accurate?
• Consider making an extra challenge
• What is SCRM?
• Example of poor SCRM
• Toolbox
Assurance Map: The “Three Lines of Defence”
1. Business Operations 2. Corporate Oversight 3. Independent Assurance
Management reviews
Management Info
Scrutiny Panel
Programme Board
HSE External Audit
Procurement Processes
Stakeholder Engagement
Finance
Level of assurance:
18
Assurance
source
Risks
Low Medium High None
• What is SCRM?
• Example of poor SCRM
• Toolbox
Summary
• Ignorance is bliss – though only for a very brief moment!
• Can you afford not to do risk management? – What could happen and how bad will it be?
– Proportionate response
• There are many fronts to work upon – Understanding the supply chain and what it means to you
– Identifying and managing the risks
– Gaining assurance
– Engaging with your customers and suppliers and talking risk
• Remember: – We compete on the strengths of our supply chains and disruption
opportunity has to be mitigated
19
Thank You
20
Biography
Dr Richard Gibson is a seasoned operator currently working within global pharmaceutical supply chains. His research interests include the areas of logistics service provision, supply chain risk management and logistics procurement tools and techniques.
Contact details: [email protected]
21
Ms Victoria Bales is an experienced risk and business continuity manager, currently working within the UK and EU insurance industry.
Contact details: [email protected]