Supply chain risks mitigation: a collaborative approach

Ahmed A.L (MCIPS)

Presentation Outline

• Introduction

• Risk management

• Collaboration as a tool for supply chain risks mitigation

• Conclusion

Objective of the presentation

• To explain why supply chain

vulnerability is a critical concern to

business

• To also suggest how collaboration can

be used to mitigate supply risk from

the perspective of the resource based

view Theory (RBV)

Challenges in supply Chain today

• Faster (Growth, Innovation)

• Stronger (Competition)

• Cheaper (Lean, Efficient)

• Shorter (Effective, lead

times)

• Wider (Globalisation)

• Changing ( Customer

requirements, CPFR,

Technology)

Survey suggests that

Fact is The inter-connectivity of a supply chain makes it possible to achieve competitive advantage. (Christopher 2002 ;Harland, Brenchley and Walker 2002)

The dynamic and interconnected nature of industries and firms that form the supply chain has also made them vulnerable to disruptions - Lee (2004)

ALSO…

We have seen so many examples

• Ericsson (2000)o Fire halted Operationso Over $400 million lost revenue

• Samsung (2007)o Power outage disrupted operationso 15% NAND production shortageo Fall in stock price

• Matsushita battery (2007)o Fire halted operationo $85 million lost saleso Affected supply of batteries to many

electronic device OEMs

• Material,

• Information

• Cash Flows

Supply Chain risks can seriously disrupt or delay:

Any of which can damage sales, increase costs — or both.

The costs due to supply chain disruptions are HugeBusiness Continuity Institute (Survey report 2013)Survey shows that of 519 respondents • 75% of respondents experienced at least one

disruption incidence in the past 12 months• 15% suffered a cost of more than a $1.35

million US• 9% experience a single-event disruption that

cost in excess of $1.35 million US• 24% said they suffered brand and reputation

damage• 26% saw increased stakeholder concern• 3% witness a drop in their share price

Risk management Realities in O&G

For the Oil & Gas industry today projects are risky.

• We are pushing the technology envelope, and executing projects in increasing deep water and frontier areas.

• Owner/Operators want to receive a completed project that meets the desired function, in a defined timeframe, and within an acceptable cost

HOW CAN SUPPLY CHAIN

RISKS BE MITIGATED

?

Lets look at the issue from theoretical stand pointThe Resource Based View of the firm (RBV)

The Theory asserts that

• The essence of decision making is to determine how firm and supply chain resources can be configured to achieve inimitable advantage and superior performance

• Resources and capabilities can be configured for strategic flexibility as well as to control risks and disruption

• Achieving this requires collaboration among diverse members of a supply chain- (Alfred et al 2011).

CollaborationHas many definitions , but the can all be summed into the followingCollaboration is founded through the sharing of information among supply chain partners on the basis Mutuality of benefits, rewards and risks-

(Stank et al. 1999; Barratt and Oliveira 2001)

Why we need to collaborate

• Closer working relationships with suppliers is a key supply network risk management strategy. - Zsidisin and Ellram (2003) and Zsidisin et al. (2000)

• building resilience to supply chain risks requires a high degree of collaboration- (Christopher and Peck 2004)

• Krause (1999) finds that communication and early involvement of suppliers in strategic decision-making is an important element of SCRM.

Several authors have suggested that:Supply network risks must be mitigated through collaboration among supply network partners (Christopher 2002, Tang 2006)

Thus, a key element in any successful supply network risk management strategy is effective relationship management and a collaborative climate between supply network partners- (Kessler et al. 2012).

In a 2010 survey, CGN found that the top three risks companies battled in the past year included • Cost• General availability of product from their

supply base• lack of supplier alignment with their goalsAll three risks scream for an increase

in collaboration between corporations and their supply base.

Successful Collaboration Relies on

• Development of mutual interest between members of a collaborative team

• The willingness to share information that can benefit all members of the team

Treat all suppliers, outsourcing partners, customers and service providers as an extension of the organisation

Enhance mutual trust

through putting in

place

• Set of service level agreements

• Associated performance Measurement tools

Who can get involved in collaborative efforts?The answer is every company that wants to mitigate risk must make a sort of collaborative effort

It can be • Internal - involving different department

of a company• External – with other participating

groups with a company’s supply chain

Even competitors can collaborate (Horizontal collaboration)

Risks of collaboration

• Collaboration can be a risk on its self when combined with Competitive behaviours among supply chain partners (Srivastava, and Gnyawali 2014).

• Dependence on strategic suppliers is a key vulnerability factor (Pettit, Fiksel, and Croxton 2010).

Developing a close, collaborative relationship converts this dependency into interdependency, with shared goals and shared rewards

Benefits of collaboration• It allows companies to establish strategic partnerships with

its suppliers and trading partners in setting mutually beneficial goals.

• It encourages sharing of business processes and information which helps mitigate risks

• It assists in driving market share, sales and product adoption while maximising return on assets and investment

The collaboration game is ever increasing in relevance

“currently , almost every industry is experimenting with supply chain collaboration. Creatively adopting the concept to fit its specific needs”

SAP publication (2007)

For example

• Retail and consumer products industry - Lean and JIT using information systems for responsive replenishments

• Pharmaceutical industry – working together to prevent counterfeit products from entering into their supply chain

Collaboration is a common practice within the oil and Gas

Technip/Hereema joint venture can be seen as result of complexities associated with deep water exploration (Risk Hedging) Success from that collaboration

won the their biggest Subsea contract (Koambo project in Angola)

Conclusion

… and always remember

Never put too much expectation or demand on the process and know your limitations

Thank you for listening

ReferencesALLRED, C.R. et al., 2011. A Dynamic Collaboration Capability as a Source of Competitive Advantage. Decision Sciences, 42(1), pp. 129-161 BARRATT, M. and OLIVEIRA, A., 2001. Exploring the experiences of collaborative planning initiatives. International Journal of Physical Distribution & Logistics Management, 31(4), pp. 266-289 ZSIDISIN, G.A., ELIRAM, L.M. and OGDEN, J.A., 2003. The Relationship between Purchasing and Supply Management's Perceived Value and Participation in Strategic Supplier Cost Management Activities. Journal of Business Logistics, 24(2), pp. 129-154