Adrian Segens supply chain risk mitigation
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Here's my presentation from the SusMatCrit Autumn School at TU Delft this morning. Please feel free to contact me with further questions and thanks for all your feedback
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Adrian Segens supply chain risk mitigation
- 1. MITIGATING SUPPLY RISK SUSCRITMAT AUTUMN SCHOOL FOR PROFESSIONALS OCTOBER 24-26, 2018, TU DELFT, NETHERLANDS ADRIAN SEGENS © Adrian Segens2018
- 2. © Risk Management Cycle Identify 1 • Scope • SWOT • Stakeholder Prioritise 2 • Impact • Probability • Perception Categorise 3 • Environmental • Social • Financial Strategies • Mitigate risk • Take opportunities • Measure results 4 Monitor • Triggers • Assumptions • Emerging 5
- 3. © 1 challenge 3 disruptors 2 concepts EnablingTechnology 1 challenge Circular Economy Natural Capital Risk - redefined3 disruptors Value Chain Engagement LifecycleThinking2 concepts
- 4. © The way in which perceive and manage supply chain risk is facing 3 disruptors Circular Economy Supply chains aren’t linear! Circular Economy • New material streams – with new risks… • Solution to many (not all!) material scarcity risks “Scarcity in manufacturing:The ticking time bomb” “the supply of many minerals and metals is struggling to keep up with rapid increases in consumption, resulting in price hikes and delivery delays.” Aluminium Copper Cobalt REE 34% 32% 93% 4% London Metal Exchange Cash Purchase Index October 2016 – October 2018
- 5. © The way in which perceive and manage supply chain risk is facing 3 disruptors Circular Economy Supply chains aren’t linear! Circular Economy • New material streams – with new risks… • Solution to many (not all!) material scarcity risks Aluminium Copper Cobalt REE 34% 32% 93% 4% Apple Sustainability Report 2017 “We’re going deeper to pioneer a closed-loop supply chain, where products are made using only renewable resources or recycled material” 1900 Kg 800 Kg 550 Kg 24 Kg Apple Sustainability Report 2017
- 6. © Circular Economy Risk Location, condition and availability of materials ? ? ? To mitigate supply risk, stakeholders must know Condition Availability Location
- 7. © The way in which perceive and manage supply chain risk is facing 3 disruptors Natural Capital • Ecosystem services have an economic value = ‘Natural Capital’ • Most sustainability thinking is around impact not dependency • Dependency on materials = risk • Measurable and actionable “Natural capital is another term for the stock of renewable and non-renewable resources (e.g. plants, animals, air, water, soils, minerals) that combine to yield a flow of benefits to people.” Natural Capital Dependency as risk
- 8. © Natural Capital in action Operations € 205 m Material € 785 m End of Life € 10 m Use Phase € 6,200 m 90% Metal & Electronics 10% Plastics €7,200m Philips Environmental Profit & Loss - 2017 • Impact is understandable - €, $, £ not ‘KgCFC-11-eq’ • Different impact categories are made comparable • Managers are able to measure RoI with environmental insights • Risk of dependency on environmental resources is highlighted • Strategic focus can be understood at a glance
- 9. © The Challenge (lack of) supply chain visibility Tier 1 engagement • “Beyond compliance” • Audit fatigue • Questionnaires have limited function • Motivation – comply NOT excel • New ways to engage and motivate the suppliers Risk “Carbon = cost” Value Chain Engagement
- 10. © The Challenge (lack of) supply chain visibility PRODUCT DATA IS FRAGMENTED SUPPLY CHAIN IS A SECRET REQUIRED DATA IS UNKNOWN CENTRALISATION IS UNWANTED
- 11. © Product impact and provenance • Supply chains are dynamic • Material traceability and chain of custody vital for mitigation Batch #1 Batch #2 Risk The Challenge (lack of) supply chain visibility
- 12. © Product impact and provenance • Jeans rivets • Electroplated steel • High risk, toxic process • Vital to brand reputation • Counterfeit risk • 12 Suppliers @T2 • 3 - Sourcing agents – eliminated • 4 - Did not respond – eliminated • 5 – Assessed • 3 - Selected Risk • Risk to brand mitigated • 3 excellent suppliers • Rewarded by 4x revenue The Challenge (lack of) supply chain visibility
- 13. © Supplier concentration • Dependency • Critical path Risk • October 2011 • HDD prices rose by 200% in 14 days • 50% of world production in Thailand • Devastated by flooding The Challenge (lack of) supply chain visibility
- 14. © Technology to the rescue? PRODUCT DATA IS FRAGMENTED SUPPLY CHAIN IS A SECRET REQUIRED DATA IS UNKNOWN CENTRALISATION IS UNWANTED Blockchain has the potential to provide the verifiable link between materials and their provenance
- 15. © IoTBlockchain Technology to the rescue? Guided maintenance Route planning Optimised supplyExtended use cycle Predictive maintenance Localised sharing networks Shared use Increased utilisation Precise input requirements Reverse logistics Local sources for secondary users Enables digital market for available material Loop and cascade Accurate valuation Re-use / recycle? Predictive remanufacturing Identify sources Regenerate natural capital Identification of degradation 2016
- 16. © Every value chain activity contributes to making and distributing products 1 Every value chain activity has environmental impact 2 Every product embodies impact 3 Every value chain activity has different magnitudes and nature of impact4 Every value chain activity has consequences at other stages of the life cycle - risk of “burden shift” 5 LifecycleThinking
- 18. © Understanding materiality Importance to stakeholders High Low Impact on Business High (mitigation – weighted by probability and importance) Environmental Social Governance Light-weighting Reduced power Recover EoL product 100% renewable Reduced power
- 19. © Adrian Segens t: +44 (0) 7768 726310 e: adrian@segens.uk