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Build Supply Chain Resilience: Zimmer Biomet Case Study on Reducing Supplier Risk


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Development and implementation of a resiliency plan are imperative to reduce supply chain risk. Zimmer Biomet’s formal program looks at single- and sole-source supplier risk, business continuity risk and financial risk. Leaders of Zimmer Biomet’s program shared a high-level view of their process and the ways that they assess different areas of risk, and offered best practices for internal and external stakeholders working together to eliminate supply chain risk and disruptions.

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Build Supply Chain Resilience: Zimmer Biomet Case Study on Reducing Supplier Risk

  1. 1. Reducing Supplier Risk Presented by John Manning and Jason Stone Zimmer Biomet Build Supply Chain Resilience – A Team Effort
  2. 2. Agenda • Our Journey • Risk Management Strategies • Lessons Learned • Next Steps for Zimmer Biomet Build Supply Chain Resilience – A Team Effort
  3. 3. Zimmer Biomet started a Formal Supplier Risk Management Program in Fall 2016 Initial Focus – Build the Foundation 1. Risk Management Team 2. Risk Policy and Procedures Created Our Journey
  4. 4. • Executive Sponsorship • Risk Management Consultant Hired • Program Manager Identified • Category Team Members #1 Building the Team
  5. 5. Developed in an Effort to: • Promote Risk Awareness and Supply Risk Management • Establish Key Responsibilities and Methods for Managing Risk • Maintain Continuity of Supply / Revenue Risk • Protect Global Business Operations • Provide Structure for the Risk Team – Follow a Process #2 Global Supply Risk Management Policy/ Procedure
  6. 6. Global Procedure Process Flow
  7. 7. Executive Sponsorship - Essential Element for Success - Resources - Cross Functional Support Company Culture - Embrace Change Risk Management Policy/Procedures - Structure/Cadence Foundation Building Lessons Learned
  8. 8. Our Journey Risk Reduction Utilizing Three Strategies – Internal/External Engagement Required 1. Single/Sole Sources of Supply 2. Supplier Business Continuity Planning 3. Supplier Financial Health
  9. 9. Strategy #1 Single/Sole Source Risk Database Documenting and Identifying Risk What information is needed? Where does it come from?
  10. 10. Risk Assessment Essential Step in Classifying the Most Significant Sources of Threats and Risk Drivers Including Revenue Impact Probability of Occurrence 9 High *An event that happened in the past/is likely to reoccur *Happened in the last 7 years *Negative Information about the supplier has been located and issues continue to surface 3 Medium *Happened elsewhere in the same/different context * An event that is likely to occur given current information/knowledge via due diligence 1 Low *An event that is highly unlikely to occur *No information existing about a similar event and no negative information has been received via due diligence Severity of Occurrence 9 Devastating *Product is delayed with over a 6 month remedy * There is not an additional source currently qualified or second source qualification will take longer than 6 months 3 Critical *Product is delayed with a 1-5 month remedy; * Alternative source identified and can be qualified 1 Controllable * Product supply is late occasionally, resolvable within the next 30 days; *VMI or ZB inventory is in place * Second Source is approved
  11. 11. Risk Mitigation • Most Efficient and Cost-Effective Mitigation Plan Implemented • Resources/Budget to Support Mitigation Must Be Vetted and Approved • Revenue Impact and Overall Risk Score Jointly Considered • Mitigation Approaches Can Be Classified into Four Categories:
  12. 12. Risk Reduction Strategies May Include one or more of the Following: • Dual Sourcing (Current Supplier or 2nd Source) • Vendor Managed Inventory • Company Held Inventory • Contractual Agreement – Most Favored Customer • Demonstrated Business Continuity Plan • Creative Strategies
  13. 13. Risk Monitoring High Risk Projects (Overall Risk Score of 27 or greater) have a Prioritized mitigation plan – Monthly Review Medium Risk Projects (Overall Risk Score of 9 points) have an Active mitigation plan – Quarterly Review Low Risk Projects (Overall Risk Score of 3 or below) have an Identified mitigation plan – Periodic Review Risk Projects that have been completed and mitigation is contained are classified as Complete
  14. 14. Risk Projects Lessons Learned Document Everything • Easiest Way to Remember • Team Member Changes Discipline of Information/Updates • Structure/Cadence to process
  15. 15. Risk Projects Lessons Learned Cross Functional Projects • Support and Resource Requests • Approval • No Surprises • Teamwork! Internal and External Mitigation Plans Can Vary Widely • One Size Does Not Fit All
  16. 16. Strategy #2 Supplier Business Continuity Plans (BCP) BCP Questionnaire 1. Gather Information on Suppliers’ Current Business Continuity and Risk Management Capability 2. 38 Total Questions Topics Include: Overall Program IT/Systems Supply Chain Communication Personnel Facilities 3. Suppliers with a BCP - Table of Contents is Requested
  17. 17. Supplier BCP Lessons Learned Expect a Wide Variety of Responses Need Supplier Participation No Two Suppliers Are Exactly The Same Table of Contents is Important Tiered Approach
  18. 18. Strategy #3 Financial Risk Assessment Avoid Surprise Closures Assess Public and Private Companies Actual Financial Data Easy to Use Easy to Interpret
  19. 19. Supplier Financial Risk Report Partnered with a Company to Conduct Financial Assessments Financial Assessment Reports: 1. 5 Risk Levels Allow an Efficient Review of a Large Number of Companies / Probability of Default 2. Focus is on Very High Risk and High Risk Categories 3. Provide Financial Dialogue Reports to Facilitate Mitigation Conversation
  20. 20. Financial Health Lessons Learned Expect (some) Private Supplier Resistance Global Team Message Should Be Consistent Supplier Participation is Important and Expected Partnership
  21. 21. Supplier Risk Management Program
  22. 22. Future State Increasing Depth and Breadth of 3 Strategies Risk Management Component in Supply Contracts Increased Technology Use – Event Monitoring Drive Supplier Risk Reduction throughout Supply Chain Tiered Approach War Room for Catastrophic Event Management
  23. 23. Overall Lessons Learned Who is responsible for Risk Management? Everyone needs to be Proactive and Aware Risk Awareness is a part of your Regular Responsibilities Risk Management must be Systematic and Continuous Internal and External Team Member Commitment Executive Sponsorship!
  24. 24. Risk Management Program Goal Fully Resilient Supply Chain That Minimizes or Eliminates Disruptive Events to the Business THANK YOU!
  25. 25. OMTEc· 2019 Learn from OMTEC speakers year-round. Subscribe to the eNewsletter to stay updated on industry best practices and trends.