Risk management in supply chain
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Risk management in supply chain

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    Risk management in supply chain Risk management in supply chain Presentation Transcript

    • Risk-based inventory classification
      OperationsPlanning.net
      Alex Rivlin
    • Agenda
      Agenda
      Goals of risk management
      Process of risk management
      Inventory risk management
    • Goals of risk management
      Goals of risk management
      Reduce loss of sales
      Reduce expenses
      Levels of risk management
      Maturity of risk management
      Drop in demand
      Expedite charge
      Management $$
      E & O
      Expedite charge
      Management $$
      Types of risks
      Missed Schedule
      Out of Stock
      Ability to grow
    • Agenda
      ouch
      No problems
    • Supply Chain Risk Management – history and background
      Philips fire
      • Philips FAB in New Mexico manufactured RF chips for cell phones.
      • Ericsson and Nokia accounted for 40% of production.
      Philips realized that extent of the damage is higher than expected
    • Supply Chain Risk Management – history and background
      Cisco example
      Gartner, “Case Study: Cisco Addresses Supply Chain Risk Management”, 2010
    • Supply Chain Risk Management – takeaway
      Or you invent all of the above after the fact?.....
    • Agenda
      Agenda
      Goals of risk management
      Process of risk management
      Inventory risk management
    • Inventory related risks: Sample supply chain
      Inventory related risks: controls and prevention
      Lets consider simple supply chain and identify controls that are required to monitor and minimize inventory related risks
      Sample supply chain
      Spend
      NOTES: Raw materials RM-1 and RM-2 are converted to Item 1 via operation S1.
      Item1 is combined with subassembly PP-1 or PP-2 to produce Item1-1, Item1-2, Item1-3 via operation S2
      The above items are converted to final items Item1-1-1 … Item1-3-4
    • Supplier side risk: sample supply chain
      Inventory related risks: controls and prevention
      Lets consider simple supply chain and identify controls that are required to monitor and minimize inventory related risks
      Sample supply chain
      Spend
      On sales side ABC is assigned by sales volume, on supplier side – by spent
    • Supplier side risk : sample supply chain
      Closer look
      Sample supply chain
      Spend
      Affects 95%
      Of sales
      Supplier side risk – PP-3 affects 95% of sales. If supplier delays/cancells/defaults on their commitment...
      Ensure healthy pipeline; establish second source.
    • Supplier side risk: sample supply chain
      Zoom in
      Sample supply chain
      We get healthy and reliable
      Profit. Supplier gets 0.1
      And has to invest 1.9
      Affects 95%
      Of sales
      .
      PP-2 costs $2. Supplier's fee is $0.01, and parts they need to buy are $1.99... Supplier may not carry enough
      Inventory to support volume, which affects $20 revenue for the company.
      Monitor supplier's inventory and ensure supplier has enough cash to deliver the goods.
    • Supplier side risk categorization
      Source: “Cisco addresses supply chain management”
      http://www.cisco.com/web/strategy/docs/manufacturing/Cisco_Case_Study_AMR_10-0917.pdf
    • Customer side risk : sample supply chain
      Zoom in
      Sample supply chain
      Spend
      Our highest runner is used
      By ONE customer and for
      ONE design only
      Used by one
      customer
      .
      Item 1-1-1 : If anything happens with customer's design, our entire WIP can become obsolete.
      Item 1-3-3 : If anything happens with [our relationships with ] the customer – back end wip will be obsolete
    • Customer side risk categorization
    • Summary
      Summary : Successful risk management is:
      Established practice
      • Supported by reliable process
      • Dedicated to direct attention to right risk areas
      • Includes teams from supplier, company, and customers
      • Well communicated and transparent
      • Has access to senior and executive level management