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Apics 2013: You Shockproof Value Chain
The document discusses the complexities and risks in modern value chains, highlighting the rise in catastrophic risks due to global operations and interconnected organizations. It emphasizes the need for proactive risk management and the adoption of high reliability organization (HRO) principles to mitigate failures, referencing events like the BP Deepwater Horizon disaster. The summary underscores the implementation of five pillars of operational discipline to foster a culture of continuous improvement and risk management.
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Apics 2013: You Shockproof Value Chain
- 1. Eliminating Sources of CatastrophicRisk Your Shockproof Value Chain
- 2. Scott is aseasoned management consultant with broad experience in manufacturing, supply chain, finance and strategy functions. His industry experience includes automotive, medical devices, oil & gas, food & beverage, financial services and non-profit. Bio: Scott Stallbaum Scott has a strong analytical and strategic background and a history of successfully addressing complex issues facing organizations and mitigating risk. He brings a unique perspective to solving problems thanks to his experience in a variety of roles across different industries. Before entering the consulting industry, Scott led the manufacturing organization and supported the CEO with projects focused on business process improvement and corporate strategy. He also managed new vehicle launches at a major automotive firm.
- 3. Agenda • Global trends •The complex organization • Moving beyond FMEAs • High reliability organizations • BP Deepwater Horizon • Summary • Q&A
- 4. Global Trends • ModernValue Chain Trends – Shift to value web/network – Long, dispersed value chains – Tight value chains – SKU expansion – Channel expansion – Design & engineering outsourcing
- 5. Global Trends • Additionaltrends – Higher overall number of suppliers/customers – Dispersed supplier/customer locations – Supplier concentration – Expanded and distributed inventory – Increased coupling – Increased complexity
- 6. Global Trends • Thesetrends and characteristics of modern value chains increase the likelihood and severity of failure – Global operations are more vulnerable than ever – Sources of critical risk are unknown, ignored or viewed as permanent fixtures
- 7. Global Trends • Highprofile operational failures – Boeing 787 Dreamliner – BP Deepwater Horizon • Typically a lack of proactive risk management capability…when we need it the most
- 8. The Complex Organization •Why is risk management so hard? – Product complexity • Number of products/services offered – Process complexity • Number of processes, steps, handoffs, etc. – Organizational complexity • Number of facilities, assets, business units, etc. Complexity results from a large # of interconnected “items”: #Items #links 1 0 2 1 3 3 4 6 5 10 … 10 45
- 9. The Complex Organization •Complexity exists along the dimensions – Can be good or bad • Complexity costs exist on the faces and within – Result from interactions between dimensions – Grow geometricallyOrganization Value add Non-value add Complexity Cube
- 10. The Complex Organization •The typical process: – Large number of handoffs, NVA steps, products competing for resource capacity
- 11. The Complex Organization •Even our organizations are more complex than we realize • Expand this further to our end-to-end supply chains We look like this on paper But operate like this
- 12. Moving Beyond FMEAs •Traditional tools like FMEA are: – Time & resource intensive – Snap-shot views of risk – Locally focused • In today’s environment, need real-time issue identification and prevention/reaction • Deep understanding of processes, players and relationships is needed to act quickly
- 13. High Reliability Organizations(HROs) • Characteristics of HROs – Preoccupation with failure – Drive deeper than symptoms – Sensitivity to operations – Commitment to resilience – Deference to expertise
- 14. High Reliability Organizations(HROs) • Creating a learning culture is foundational to developing an HRO • Learning cultures: – Build a system of dynamic discovery – Solve problems as they arise and proactively prevent reoccurrence – Disseminate knowledge rapidly – Develop managers who drive continuous improvement
- 15. The Nuclear Navy& HROs • US Nuclear Navy – Operates more reactors than anyone else (150) – Operates in remote, dynamic, harsh environments – Young personnel with high turnover • No accidents in 50 years (6000 reactor-years) – Compare this to: • Three Mile Island • Loss of Space Shuttle Columbia • USAF lapse in nuclear accountability
- 16. Nuclear Navy –Defense in depth Robust Equipment Rigorous Procedures Well-Trained Operators Impossible to design equipment that will never fail Impossible to devise procedures to cover all possibilities Training operators to have thorough understanding is the only logical course Defense in depth is the multilayered approach to safety and operational performance:
- 17. 5 Pillars ofHigh Reliability OrganizationsLEVELOFKNOWLEDGE FORMALITY QUESTIONINGATTITUDE FORCEFULBACKUP INTEGRITY HRO 5 Pillars of HROs •Level of knowledge •Formality •Questioning attitude •Forceful backup •Integrity
- 18. BP Deepwater Horizon •April 20, 2010: explosion aboard BP Deepwater Horizon drilling rig • Seafloor oil gusher during capping phase • 11 workers killed by explosion • 4.9mm barrels of crude oil released • Management visibility tour onboard that day
- 19. BP Deepwater Horizon •VIP team arrive on rig • Team attends safety orientation • Follow-up to previous safety improvement recommendations • Tour begins with visit to riser skate to observe adoption of lessons learned from another rig – slip/trip • Tour continues to Driller’s control room • One VIP notices “confusion” • VIPs conduct “light-hearted” meeting w/ personnel in galley • Discuss safety goals, emphasizing “hand safety” and “dropped objects” campaigns • VIP follows up with Rig Manager and asks "Everything all right up on the rig floor there? Get everything sorted out?“ • Rig Manager responds with thumbs up 3 PM 4 PM 5 PM 6 PM 7 PM 8 PM 9 PM • Rig staff misinterpreted results of negative pressure test
- 20. BP Deepwater Horizon •“Good” behaviors exhibited by VIPs – Attended safety orientation – Pointed out slip/fall, harness, etc. issues – Shared lessons learned from other rigs – Visible leadership
- 21. BP Deepwater Horizon •Those good behaviors alone are not enough – VIPs arrived w/o agenda or explicit purpose – Focus on trips/falls, PPE, etc. • Also need 5 Pillars of operational discipline: – Drive deeper understanding of intent – Provide direction for all actions – Apply to all employees
- 22. BP Deepwater Horizon •Impact 5 Pillars would have had on Deepwater Horizon – Level of knowledge – Formality – Questioning attitude – Forceful back-up – Integrity
- 23. Summary • We operatein a very complex environment • Catastrophic events are more likely, including: – Events like Deepwater Horizon – Supply chain disruptions like Toyota’s brake pressure valve supplier fire • Implementing 5-Pillars removes and manages risk – Builds an organizational culture that continually refines its understanding, leading to reduced risk
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Editor's Notes
- #17 “Teaching” conveys knowledge; “Training” changes peoples behavior