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This document discusses supply chain risks and disruptions that chief supply officers need to develop countermeasures for. It notes numerous risks around the world that have impacted supply chains, from extreme weather to political instability to labor issues. Globalization has increased supply chain complexity while improving cost efficiency, but with greater fragility. Risk visibility is often lacking in sub-tiers of the supply chain. Disruptions can have significant economic impacts on companies.

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@scguydan Concert Interrupted? – An agenda for the chief supply chain officer to develop countermeasures for supply chain risks and disruptions Danie Schoeman
Concert interrupted @scguydan #SAPICS2016 38th Annual Conference & Exhibition
@scguydan China Typhoon Philippines Typhoon Indonesia Forest fires Indonesia Sea piracy South Africa Hijacking violence Brazil Transport strikes India Child labour India Floods India Port strikes Germany Anti- Western terrorism Schengen States Border controls Turkey Working conditions & Border controls Japan Counter- feits China Port explosion China Factory strikes Guatemala Political instability Argentina Working conditions Peru Supply chain corruption USA Floods & Extreme weather Mexico UMC – Drugs Canal congestion Panama Colombia Cargo theft Border controls Chile Netherlands Cargo theft UK Cargo theft It can happen to you … BSI 2015 SCREEN Global Intelligence Report; DHL Resilience360 Mexico Hurricane Political instability Terrorism (ISIS attacks) Earth- quake
@scguydan At a hefty price tag $56 billion+ 2015 2014 2013 >$300 billion $57 billion BSI Global Intelligence Reports 0 20 40 60 80 100 120 140 160 CostinUS$billion 33 93 23
@scguydan “In one industry after another, supply chains have been stretched farther than they have ever been stretched in the past [with] few [that] have much experience managing supply risks across oceans and continents.” 5 1. BCI Supply Chain Resilience Survey 2014; 2. World Economic Forum Study 2012, Insurance News; 3. UPS Capital: Managing Risk in the Global Supply Chain 2014; 4. Deloitte 2012 Risk Management Report; 5. Ruud Bosman (2006) - The New Supply Chain Challenge: Risk Management in a Global Economy, Factor Mutual Insurance 90% We coulda, woulda, shoulda of respondents report at least one instance of supply chain disruption1 of companies DO NOT assess value and supply chain risk continuously4 of firms DO NOT quantify risk when outsourcing production3 of industry experts surveyed believe that supply chain and transport risk management are greater priorities in their companies today than 5 years ago2 81% 79% 90% have risk managers in their firms, either in legal or compliance, but virtually all of those internal functions ignores supply chain risk3 DO NOT have full visibility of their supply chains1 66% 74%
@scguydan The C-Suite is in the hot seat … CEO, 26% CFO / Treasurer, 23% CRO / Head of Risk, 19% Risk Committee (company level), 15% Legal / Compliance, 14% COO or CAO, 2% Other, 2% Primary responsibility for risk management Risk management is now a C-Suite issue, but “45% of executives lacks confidence in their supply chain risk management programmes.” Deloitte - Aftershock: Adjusting to the new world of risk management, 2012
@scguydan …yet commitment is low 34.2% 28.6% 40.8% 38.0% 21.1% 28.6% 1.3% 3.3% 2013 2014 Chart Title None Low Medium High BCI Supply Chain Resilience Survey 2014 How would you assess the current commitment (attention and priority) of Top Management in your organization to managing supply chain risk proactively?, % of respondents
@scguydan …and immaturity persists Supply chain risk management remains a relatively immature discipline with only a minority of companies (9%) fully prepared to address potential challenges from supply chain disruptions in increasingly complex environments. • No risk governance structure • Poor visibility into sources of supply chain risk and suppliers’ operations • Limited analysis of potential threats • No prior anticipation of positioning or response mechanisms • Risk management processes are documented and integrated internally • Basic threats and vulnerabilities are analysed • Scenarios concerning the base integrated plan are conducted to position inventory and capacity buffers • Postponement product design principles are explored to respond to changing demand • Minimal visibility of changes/ patterns outside the company • Formal quantitative methodologies for risk management • Collaboration across the supply chain • High levels of information sharing and visibility • Sensors and predictors used to proactively position response mechanisms • Products and processes rationalised to reduce complexity • Monitoring of resilience levels among suppliers • Business continuity plans are created • Risk governance is formal but flexible • Full alignment between supply chain partners • Supply chain is segmented to match customer value propositions • Risk sensors and predictors supported by real-time monitoring and analytics • Supplier segmentation to identify key risks • Risk strategies are segmented according to supplier profiles and product/ market characteristics Level 1 Ad hoc Level 3 Proactive Level 2 Integrated Level 4 Flexible 9%32%42%17% Less mature More mature PwC and the MIT Forum for Supply Chain Innovation - Making the right risk decisions to strengthen operations performance, 2013
@scguydan Consequences of supply chain disruptions are far reaching … BCI Supply Chain Resilience Survey 2014 5% 7% 7% 7% 18% 18% 24% 27% 34% 35% 38% 41% 45% 48% 59% Share price fall Product recall/withdrawal Regulatory fines for non-compliance Payment of service credits Increase in regulatory scrutiny Loss of regular customers Product release delay Stakeholder/shareholder concern Delayed cash flows Damage to brand reputation/image Service outcome impaired Customer complaints received Loss of revenue Increased cost of working Loss of productivity
@scguydan …with significant economic impact 39.6% 13.5% 7.7% 14.5% 2.9% 1.0% 0.0% 1.0% 0.0% 19.8% 46.0% 14.2% 8.5% 7.6% 1.0% 0.0% 0.0% 0.0% 0.0% 22.7% <€50K €50K-€250K €251K-€1M €1.1M-€10M €11M-€50M €51M-€100M €101M-€250M €251M-€500M >€500M Don't know Single event 12 Month cumulative BCI Supply Chain Resilience Survey 2014
The world is still not flat, but … @scguydan #SAPICS2016 38th Annual Conference & Exhibition
@scguydan The road to globalisation – and greater risk … “One of the very trends that has increased supply chain risk – globalisation – also provides opportunities to manage risk.” 2014 DHL Global Connectedness Index; R Bosman - The New Supply Chain Challenge: Risk Management in a Global Economy, FM Global 2006
@scguydan … increasing complexity Adapted from G. Linden, K.L. Kraemer, and J. Dedrick (2009), “Who Captures Value in a Global Innovation Network? The Case of Apple’s iPod”, Communications of the ACM, March 2009, Vol. 52, No. 3, pp. 140-144; World Economic Forum Global Risks 2015. $80 $75 $85 $19 $27 $7 $5 $1 $40 Apple (Margin) Distribution and Retail Major Components Other Inputs Japan (Margin) USA (Margin) Taiwan (Margin) Korea (Margin)$80 $75 $85 $19 $27 $7 $5 $1 $40
@scguydan Evolving supply chains to minimise cost … of companies had re- structured their distribution network in the last year. of the cases the distribution re-structuring had involved relocating distribution centres to a lower cost country. More Fewer National DCs 49.5% 50.5% Regional DCs 58.5% 41.5% Global DCs 52.8% 47.2% of respondents cited the main reasons for the distribution re-structuring were predominantly related to cost. indicated that they were establishing more regional (multi-country) distribution hubs. 75% 20% 50% 58% How has the structure of your distribution network changed? European supply chains are evolving to become more product- and/or channel- specific enabling them to adapt to different customer and product service level requirements. Transport Intelligence - Global Distribution Strategies Survey, 2008
@scguydan … causing complexity and fragility PwC and the MIT Forum for Supply Chain Innovation - Making the right risk decisions to strengthen operations performance, 2013 38% 74% 80% 87% 94% 95% The relationships between supply chain entities have become less transparent The number of entities in the supply chain has increased Products and services have become less standard New product introductions have been more frequent Changes in the extended supply chain network occur more frequently Dependencies between supply chain entities* have increased Chart Title Evolution of supply chain complexity over the past three years *suppliers, partners, customers Strongly Agree / Agree
@scguydan …with the cost efficiency chasers losing Difference in performance resilience measured by percentage of companies that suffered a 3% or higher impact on their performance indicators as a result of supply chain disruptions in the past twelve months -6%-5%-6% -21% -8% -14% -26% -24% -32%-33% PwC and the MIT Forum for Supply Chain Innovation - Making the right risk decisions to strengthen operations performance, 2013 46% 47% 36% 53% 71% 64% 67% 73% 80% 73% 13% 41% 31% 47% 50% 56% 53% 47% 56% 41% Market value Sales revenueMarket-share Total supply chain cost Supply chain asset utilisation Inventory turns Customer service level Total supply chain lead time Total supply chain lead time variability Order fulfilment lead time Mature (Level III—Level IV) cost efficient companies Mature (Level III—Level IV) flexible response companies
@scguydan Risk visibility in sub-tiers is lacking 17% 36% 79% 90% 78% 31% 31% Indirect suppliers Indirect suppliers Direct suppliers Internal plants & operations Direct customers Indirect customers Indirect customers Tier-3 + supplier Retailer End customer Whole- saler Whole- saler Retailer Retailer End customer End customer End customer Tier-2 supplier Tier-1 supplier Tier-3 + supplier Tier-3 + supplier Tier-3 + supplier Tier-2 supplier Tier-2 supplier Tier-1 supplier OEM SCMWorld - Innovative Approaches to Supply Chain Risk, 2014 Risk visibility across the value chain
@scguydan …making it the biggest challenge in moving goods Transport Intelligence - Supply Chain Risk & Visibility in the Movement of Goods, 2014 3.5% 3.9% 7.7% 8.2% 8.7% 11.0% 13.2% 13.9% 14.4% 15.5% Meeting the demands of Omni- channel Environmental programmes / CO2 reductions Complexity of handling multimodal transportation Schedule compliance Speed Competition Delivering to schedule Rising costs Transport reliability Supply chain visibility Chart Title The key challenges faced in moving goods, % of respondents
Anatomy of a supply chain disruption @scguydan #SAPICS2016 38th Annual Conference & Exhibition
@scguydan What happens with a supply chain disruption BusinessPerformanceIndicator Time Stable situation/ Business-as-usual Y Sheffi - The Resilient Enterprise - Overcoming Vulnerability for Competitive Advantage, 2005; B Asbjørnslett - Assessing the vulnerability of supply chains, 2008; David Simchi-Levi - A New Approach to Manage Supply Chain Risk, HBR, 2015 Disruptive event Time of full impact First response Preparation for recovery Recovery Initial impact New stable situation / Business-as-usual Time to Recovery (TTR) Performance Impact (PI)
@scguydan … with the actual residual effect BusinessPerformanceIndicator Time Stable situation/ Business-as-usual Y Sheffi - The Resilient Enterprise - Overcoming Vulnerability for Competitive Advantage, 2005; B Asbjørnslett - Assessing the vulnerability of supply chains, 2008; David Simchi-Levi - A New Approach to Manage Supply Chain Risk, HBR, 2015 Disruptive event Time of full impact First response Preparation for recovery Recovery Initial impact New stable situation / Business-as-usual Long-term impact Time to Recovery (TTR) Performance Impact (PI)
@scguydan Having a significant impact on business and financial performance 68% 72% 65% 64% 67% 66% 69% 40% 54% 35% Order fulfilment lead time Total supply chain lead time variability Total supply chain lead time Customer service level Inventory turns Supply chain asset utilisation Total supply chain cost Market-share Sales revenue Market value Chart Title Percentage of companies that suffered a 3% or higher negative impact on their performance indicators as a result of supply chain disruptions in the past twelve months PwC and the MIT Forum for Supply Chain Innovation - Making the right risk decisions to strengthen operations performance, 2013
@scguydan Disruptions can happen anywhere in the supply chain network “A collapse in one part of the network can have a magnifying effect on every part of the network. These interrelationships are either not well understood or are ignored by most companies.” - David Simchi-Levi, professor MIT Tier 2+ Tier 1 CustomersDistribution Assembly LTL FTL
@scguydan With sources of supply chain risks far beyond the company Macro environment risks Have potential effects across the entire supply chain Exist among enabling functions that support supply chain processes Functional risks Human resources Information technology LegalFinance Economic Environmental/ Social responsibility Infrastructure/ Resources Geopolitical Hazards SecurityRegulatory Supply Demand Tier N Tier 1 End usersDistributors3rd party services Operational risks DeliverDevelop Plan Source Make Return Relate to internal process risks Extended value chain risks Originate in upstream and downstream supply chain partners The risks to supply chains today are numerous and constantly evolving, and emanate both from within and outside of the company. Deloitte - Supply Chain Resilience: A Risk Intelligent approach to managing global supply chains, 2012
From the risk observatory @scguydan #SAPICS2016 38th Annual Conference & Exhibition
@scguydan Categorising sources of disruption to define strategies Business continuity • Natural disasters • Man-made disruptions • Supplier redundancy & contingency Security • Cargo disruption • Cargo theft • Hijacking exposure • Unmanifested cargo • Information/cyber attacks • Sea piracy • Supply chain terrorism • Anti-western terrorism Brand protection • Facility traceability (forced & child labour) • Compliance to social & human rights • Compliance to environmental, health & safety • Counterfeiting • Intellectual property violations Geopolitical • Political stability • Economic & financial stability • Corruption • Crime & government effectiveness • Employee screening practices
@scguydan Major causes of supply chain disruption 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Energy scarcity Lack of credit (cost, availability) Currency exchange rate volatility New laws or regulations Loss of talent/skills Environmental incident Intellectual Property violation Product quality incident Health & Safety incident Act of terrorism Fire Business ethics incident Data breach Cyber attack Transport network disruption Unplanned IT/telecoms outage Animal disease Earthquake/tsunami Insolvency (in the supply chain) Human illness Civil unrest/conflict Industrial dispute Outsourcer service failure Adverse weather High Impact Some Impact Low Impact Security risks Business continuity risks Brand protection risks Geopolitical risks
Business continuity disruptors @scguydan #SAPICS2016 38th Annual Conference & Exhibition
@scguydan Natural disasters have become more pervasive … EM-DAT: The CRED/OFDA International Disaster Database, 2016 0 100 200 300 400 500 600 1900 1907 1914 1921 1928 1935 1942 1949 1956 1963 1970 1977 1984 1991 1998 2005 2012 TitleNatural disasters reported 1900-2015
@scguydan …at a very high price Munich Re, NatCatSERVICE, 2016 760 8 000 18 500 16 000 15 300 29 500 300 3 000 60 500 40 000 28 000 30 000 38 000 43 000 44 000 68 500 85 000 100 000 125 000 210 000 Japan - Earthquake (2004) Chile - Earthquake, tsunami (2010) Caribbean / USA - Hurricane Ike (2008) Thailand - Floods, landslides (2011) United States - Earthquake (1994) Caribbean / N.A. - Hurricane Sandy (2012) China - Earthquake (2008) Japan - Earthquake (1995) United States - Hurricane Katrina (2005) Japan - Earthquake, tsunami (2011) Losses in US$ million original values Overall value Insured value 0 0 0 0 0 0 0 0 0 0 46 520 170 813 61 210 84 000 6 430 1 720 15 880 Fatalities Fatalities Dummy
@scguydan Old reliable have come under man- made disruptions Heavy manufacturing (steel, machinery, etc.) 25% Electronics 17% Garment and Textiles 17% Consumer Goods and Retail 11% Food 7% Footwear 6% Automotive 5% Pharmaceutical 2% Other 10% Chart TitleStrikes by Industry in China, 2015 Labour unrest in China grows with factory strikes increasing by 58.3 percent in 2015, as factory owners struggled to pay workers due to a slumping economy, leading to protests and walk-offs. BSI - Business Continuity Risk Index, 2016
@scguydan And even increasingly popular destinations are succumbing 34 121 147 108 118 2011 2012 2013 2014 2015 StrikesGarment Sector Strikes in Cambodia, 2011-2015 Historically wages have been a major cause of strikes in Cambodia, but workers in recent strikes have also cited more specific grievances such as the cost of living, labour contracts, and working conditions. BSI - Business Continuity Risk Index, 2016; Photo: Luc Forsyth
@scguydan Explosive negligence … Tianjin port
@scguydan Supply chain partner failure is the major supply chain network problem 3% 5% 13% 10% 13% 13% 24% 19% 8% 12% 9% 13% 14% 14% 13% 19% Downstream logistics partners Indirect customers Upstream logistics partners Company-owned support functions Direct customers Tier 2 suppliers Tier 1 (direct) suppliers or third parties Company-owned supply chain operations Chart Title Ranked #1 Ranked #2 Locations in the supply chain of the most costly outcomes of risk events over last three years 38% 37% 27% 22% 17% 27% 23% 11% Deloitte - The Ripple Effect - How manufacturing and retail executives view the growing challenge of supply chain risk, 2013 The most costly disruptions are caused by own supply chain, then failure at Tier 1 and Tier 2 suppliers. According to BCI respondents, 11.5% of disruptions are caused by suppliers at Tier 3 and lower. 3PLs are the third highest reason for failure.
Supply chain security disruptors @scguydan #SAPICS2016 38th Annual Conference & Exhibition
@scguydan 34% 35% 41% 44% 53% 68% 90% Conveyances not inspected Failure to screen business partners Containers, trailers, pallets, etc. not secured/properly inspected prior to loading Lack of seal procedures Inadequate transportation monitoring Security procedures not followed (lack of checks, balances, accountability) Involved “trucks” as the mode of transportation for breached cargo Major factors contributing to cargo breaches C-TPAT Program Study June 2009
@scguydan Global cargo theft risk levels FreightWatch International Risk level of cargo theft Highest level Lowest level
@scguydan Cargo theft in South Africa Crime Stats SA - Crime Stats Simplified Robbery: non-residential Number of incidents 2014 2015 18 476 19 170 3.8%
@scguydan Hijacking exposure in South Africa Truckjacking Number of incidents 2014 2015 989 1 279 29.3% Crime Stats SA - Crime Stats Simplified
@scguydan Omni-channel retailing has given the consumer newfound power … Forrester report: Welcome To The Era Of Agile Commerce, 2014
@scguydan Home Chore automation and security $200B−350B …and the Internet of Things (IoT) brings huge opportunity … Human Health and fitness $170B−1.6T Offices Security and energy $70B−150B Factories Operations and equipment optimization $1.2T−3.7T Vehicles Autonomous vehicles and condition-based maintenance $210B−740B Outside Logistics and navigation $560B−850B Cities Public health and transportation $930B−1.7T Worksites Operations optimization/ health and safety $160B−930B Retail environments Automated checkout $410B−1.2T Enable new business models For example, remote monitoring enables anything- as-a-service Transform business processes Predictive maintenance, better asset utilization, higher productivity Types of opportunities 9 settings gave us a cross-sector view of a total potential impact of $3.9 trillion–11.1 trillion per year in 2025 McKinsey Global Institute (MGI): The internet of things: mapping the value beyond the hype, 2015
@scguydan 0.1% 0.7% 0.8% 3.9% 4.1% 15.3% 20.6% 25.1% 29.4% Payment card skimmers Point of sale intrusions Cyber espionage Denial of service attacks Web app attacks Physical theft and loss Insider and privilege… Crime ware Miscellaneous errors … but it also creates great peril Almost all cyber attacks can be classified by 9 patterns Verizon 2015 Data Breach Investigations Report
@scguydan Typical cyber attack incidents for transport & logistics 24% 16% 16%Transportation Cyber-espionage Insider and privilege misuse Web app attacks WEB APP ATTACKS When attackers use stolen credentials or exploit vulnerabilities in web applications — such as content management systems (CMS) or e-commerce platforms. INSIDER AND PRIVILEGE MISUSE This is mainly by insider’s misuse, but outsiders (due to collusion) and partners (because they are granted privileges) show up as well. Potential culprits come from every level of the business, from the frontline to the boardroom. CYBER-ESPIONAGE When state-affiliated actors breach an organization, often via targeted phishing attacks, and after intellectual property. Verizon 2015 Data Breach Investigations Report 72% ON AVERAGE of the incidents in an industry can be described by just three of the nine patterns.
@scguydan Cyber attacks are physical Verizon 2014 & 2015 Data Breach Investigations Report of insider and privilege misuse attacks used the corporate LAN. of theft / loss happened at work. of miscellaneous errors involved printed documents. 49% 85% 55% A significant amount of cyber attacks are actually through physical means and can be mitigated through physical security systems.
@scguydan Look inside your company for cyber attack origins 31% 29% 16% 13% 12% 22% 12% 13% 23% 7% 5% 24% 35% 30% 18% 15% 13% 24% 15% 16% 24% 7% 6% 18% Unknown Domestic intelligence service Foreign nation-states Competitors Activists / activist organisations / hacktivist Organised crime Hackers Suppliers / business partners Former service providers / consultants / contractors Current service providers / consultants / contractors Former employees Current employees Likely sources of incidents All industries in all regions Transportation & Logistics PWC Global State of Information Security Survey 2015
@scguydan …making screening and vetting business critical PWC Global State of Information Security Survey 2015 47% 48% 55% 54% 52% 57% 58% 69% 51% 54% 55% 56% 56% 59% 60% 73% Accurate inventory of where personal data for employees and customers are collected, transmitted and stored Employee Chief Information Security Officer in charge of security Information security strategy that is aligned to the specific needs of the business Employee security awareness training programme Secure access-control measures Priviledged user access Conduct personnel background checks Require 3rd parties to comply with our privacy policies Security safeguards in place All industries in all regions Transportation & Logistics
@scguydan Sea piracy is still rife Based on info from IMO, IMB, ReCAAP
@scguydan …you survive pirates and then this Newsflare
@scguydan Countries effected by terrorism disruptions Institute for Economics and Peace , 2015 The impact of terrorism Highest impact of terrorism Lowest impact of terrorism
Brand reputation disruptors @scguydan #SAPICS2016 38th Annual Conference & Exhibition
@scguydan 7% 10% 17% 19% 15% 32% 10% 11% 15% 17% 25% 22% Social responsibility failure Regulatory non-compliance and/or worker-safety failure Product quality failure Physical product flow disruption Sudden demand change Margin erosion Chart Title Ranked#1 Ranked#2 Brand reputation is the most costly outcome of disruption …. 34% 19% 15% 32% 36% 17% 25% 22% Brand reputation damage Physical product flow disruption Sudden demand change Margin erosion Chart Title Ranked#1 Ranked#2 Most costly outcomes of risk events in the supply chain Most costly outcomes of risk events in the supply chain 54% 40% 32% 17% 36% 21% 54% 40% 70% 36%
@scguydan Wearing human rights is cheap 0.18 0.27 1.15 1.2 2.19 3.4 3.61 4.63 12.37 29 Sellingprice Paytogarmentworker Overheadcost ProfitfactoryBangladesh Intermediary Transportcost Materialcost Brandprofit Valueaddedtax Retail* Share in Euro: Share in %: 42.616.00.6100 0.9 4.0 4.1 7.6 11.7 12.5 Share of value – T-shirt from Bangladesh sold in Germany *Includes all costs at a retail level including staff, rent, store profit, etc. WEF: Beyond Supply Chains, Empowering Responsible Value Chains, 2015
@scguydan Bitter aftertaste of child labour in the cocoa supply chain • Small, family farms (>750 000) • Independent operation • Few cooperatives (<2% of crop) • Privately-funded operators • Pisteurs, Traitants • Fewer quality linkages • Various participants, including international companies • Includes semi-finished goods • Beans, small family farm products into global market • Further manufacturing of products • Retail outlets, restaurants, small businesses • Final customer Global Market Manufacturers Farmers Collectors Transporters Processors Exporters Customers Consumers Other Beans Cocoa Supply Chain - Côte d'Ivoire Center for Reflection, Education and Action (CREA)
@scguydan Counterfeiting - a global $600 billion epidemic Czech Republic Turkey Nigeria Nigeria loses N200 billion annually to sales and circulation of adulterated lubricants Saudi Arabia 50% of deaths in automobile accidents caused by counterfeit parts Philippines Korea France Georgia USA Brazil Paraguay Counterfeiting costs US businesses between $200 and $250 billion dollars annually One of the main sources of counterfeit agro-chemicals Alcoholic drink counterfeiting widely reported in Paraguay Sub-standard wines found in premium brand bottles 30 people died in 2012 from consuming counterfeit Rum containing methanol Pakistan Authorities fighting counterfeit motor-oil supply High volume producer of counterfeit bags and other fashion items China High volume producer of counterfeit branded clothing and leather goods One of the main sources globally of counterfeit cosmetics • 400 billion counterfeit cigarettes produced every year • Counterfeit baby food found in original packaging India One of the main contributors to global counterfeit medicines epidemic Increasing problems with counterfeit soft drink production HH Global - Brand Protection & Anti-Counterfeiting
Geopolitical disruptors @scguydan #SAPICS2016 38th Annual Conference & Exhibition
@scguydan Countries effected by disruptions due to political instability World Bank, 2015 Level of political stability Politically most stable Politically least stable
@scguydan Disruptions in countries effected by corruption 2014 Transparency International Level of corruption Highly corrupt Very clean
@scguydan Customs “integrity” of SA’s biggest trade partners Honest Joe’sHonest Crooks AngelsDark Horses DS&C Analysis, WEF ETI (2014) Zimbabwe Angola Zambia BotswanaMozambique Nigeria NamibiaMadagascar GhanaLebanon India Thailand Mauritius Saudi Arabia South AfricaChinaItaly United States Germany United Kingdom Japan Netherlands 0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7 Efficiencyandtransparencyofborder administration(1=inefficient,7=efficient) Irregular Payments (1 = common, 7 = never occurs)
@scguydan Government (in)effectiveness that can cause disruptions Level of government effectiveness Most effective Least effective World Bank, 2015
@scguydan The war for talent continues … 15% 19% 14% 22% 37% 43% 2011 2013 2014 Chart Title Easier More difficult 0% 5% 10% 15% 20% 25% 30% 2011 2012 2013 2014 Chart Title Career progression Retaining Developing Finding Hiring Measuring Knowledge worker challenges % of respondents saying ‘extremely challenging’ Knowledge worker challenges % of respondents saying ‘extremely challenging’ SCMWorld - The Chief Supply Chain Officer Report, 2014
@scguydan #SAPICS2016 38th Annual Conference & Exhibition Being able to bounce back
@scguydan A systematic approach to supply chain risk is required Identify Quantify MitigateRespond What types of risk are we exposed to and where are they in our supply chain? What financial impact could these risks have on our sales and profitability? How quickly can we recover from a disruptive event and return to normal operations? What strategies/tactics do we have in place to minimise the disruption to our business? Supply Chain Risk Effective supply chain risk management is not a static exercise or a linear process. It requires constant monitoring, ongoing assessment and the periodic re-evaluation of contingency plans, whether or not they have actually been implemented. SCMWorld - Innovative Approaches to Supply Chain Risk, 2014
@scguydan Identifying and assessing risk 19% 25% 38% 40% 42% 47% 48% 54% 58% 61% 72% Social media monitoring Business impact surveys Real-time data monitoring/analytics Segmentation of suppliers / customer value propositions Intuition or management insight Third-party research/intelligence Scenario planning/business simulations Risk mapping Regular/open dialogue with customers Analysis of historical data Regular/open dialogue with suppliers Chart Title SCMWorld - Innovative Approaches to Supply Chain Risk, 2014 Methods used to identify risk exposure % of respondents
@scguydan Data driven … a stark contrast to the normal intuition-based approach The power of predictive analytics Visual mapping and social media Innovators in supply chain risk use these tools and techniques within an enterprise- wide “culture of data driven decision making” that informs and shapes their risk mitigation strategies. When you are dealing with complex networks that have evolved over time, intuition can be misleading and take you in completely the wrong direction.” - David Simchi-Levi professor MIT SCMWorld - Innovative Approaches to Supply Chain Risk, 2014
@scguydan Tools of the risk trade … 29% 32% 35% 36% 42% 42% 44% 45% Business simulation Worst-case scenario modelling Risk sensing data Predictive modelling Risk intelligence data Supply chain mapping/visualization Supply chain operational modelling Financial risk modelling Chart Title Types of data/visualization/analytical tools used to manage risk within the supply chain Deloitte - The Ripple Effect - How manufacturing and retail executives view the growing challenge of supply chain risk, 2013
@scguydan Identifying and assessing risk - illustration Gartner - Case Study: Cisco Addresses Supply Chain Risk Management, 2010 How Cisco mapped the 2011 disaster in Japan No impact-low risk profile Significant impact reported-mitigate with higher priority Some impact reported-monitor and/or mitigate Capacity disabled or assumed highest risk-mitigate with highest priority
@scguydan Available supply chain risk solutions and services ChainLink Research - Supply Chain Risk Solutions: A Market Overview, 2013 Supply chain & business continuity consultants Supplier audit and monitoring services Supplier quality management Contract, SLA management Supplier performance management Hedging tools and instruments Trading partner / IT security/ identity management Supplier data subscription services Cargo security Sustainability/ CSR platforms, product analytics Supply chain insurance Event monitoring & alerting services Anti- counterfeiting solutions Cold chain Business continuity management Design collaboration/ IP protection Inventory optimisation, demand management Governance, risk management & compliance Supplier risk and compliance Logistics, visibility, TMS Traceability, chain of custody Supply chain mapping and monitoring
@scguydan Natural disasters Geopolitical risks Epidemics Terrorist attacks Environmental risks Volatile fuel prices Rising labour costs Currency fluctuations Counterfeit parts and products Port delays Market changes Suppliers’ performance Forecasting accuracy Execution problems Quantifying and prioritising risk This may work reasonably well in the case of recurring operational risks – the “controllable” or “known-unknown” risks where historical data is available, but not for the “uncontrollable” or “unknown-unknown” risks. Unknown- Unknown Uncontrollable Known- Unknown Controllable Likelihoodofoccurrence Business impact ModerateMinor Major Critical Possible Likely Highly likely Unlikely A typical risk evaluation matrix Sources of supply chain risk SCMWorld - Innovative Approaches to Supply Chain Risk, 2014; David Simchi-Levi, et al. - Identifying Risks and Mitigating Disruptions in the Automotive Supply Chain (Ford case study)
@scguydan The Risk Exposure Index as an alternative BusinessPerformanceIndicator Time Stable situation/ Business-as-usual Y Sheffi - The Resilient Enterprise - Overcoming Vulnerability for Competitive Advantage, 2005; B Asbjørnslett - Assessing the vulnerability of supply chains, 2008; David Simchi-Levi - A New Approach to Manage Supply Chain Risk, HBR, 2015 Disruptive event Time of full impact First response Preparation for recovery Recovery Initial impact New stable situation / Business-as-usual Time to Recovery (TTR) Performance Impact (PI) The Risk Exposure Index allows companies to understand the dependencies within their supply chains, estimate hard-dollar impacts and prioritise their risk mitigation efforts.
@scguydan The Risk Exposure Index illustrated Time-To-Recover (TTR): The time it takes to recover to full functionality after a disruption Performance Impact (PI): Impact of a disruption for the duration of TTR on a given performance measure Risk Exposure Index (REI): Normalizes the PI by the maximum PI over all disruption scenarios Tier 2+ Tier 1 CustomersDistribution Assembly TTR =2 Weeks PI = $400m 2 Weeks $300m 2 Weeks $100m 2 Weeks $400m 2 Weeks $2.5bn 1 Week $100m 2 Weeks $1.5bn LTL FTL Adapted from David Simchi-Levi, et al. - Identifying Risks and Mitigating Disruptions in the Automotive Supply Chain (Ford case study)
@scguydan The Risk Exposure Index illustrated Time-To-Recover (TTR): The time it takes to recover to full functionality after a disruption Performance Impact (PI): Impact of a disruption for the duration of TTR on a given performance measure Risk Exposure Index (REI): Normalizes the PI by the maximum PI over all disruption scenarios Tier 2+ Tier 1 CustomersDistribution Assembly TTR =2 Weeks PI = $400m 2 Weeks $300m 2 Weeks $100m 2 Weeks $400m 2 Weeks $2.5bn 1 Week $100m 2 Weeks $1.5bn LTL FTL Adapted from David Simchi-Levi, et al. - Identifying Risks and Mitigating Disruptions in the Automotive Supply Chain (Ford case study)
@scguydan The Risk Exposure Index illustrated Time-To-Recover (TTR): The time it takes to recover to full functionality after a disruption Performance Impact (PI): Impact of a disruption for the duration of TTR on a given performance measure Risk Exposure Index (REI): Normalizes the PI by the maximum PI over all disruption scenarios Tier 2+ Tier 1 CustomersDistribution Assembly TTR =2 Weeks PI = $400m 2 Weeks $300m 2 Weeks $100m 2 Weeks $400m 2 Weeks $2.5bn 1 Week $100m 2 Weeks $1.5bn LTL FTL Adapted from David Simchi-Levi, et al. - Identifying Risks and Mitigating Disruptions in the Automotive Supply Chain (Ford case study)
@scguydan The Risk Exposure Index illustrated Time-To-Recover (TTR): The time it takes to recover to full functionality after a disruption Performance Impact (PI): Impact of a disruption for the duration of TTR on a given performance measure Risk Exposure Index (REI): Normalizes the PI by the maximum PI over all disruption scenarios Tier 2+ Tier 1 CustomersDistribution Assembly TTR =2 Weeks REI = 0.16 2 Weeks 0.12 2 Weeks 0.04 2 Weeks 0.16 2 Weeks 1.0 1 Week 0.04 2 Weeks 0.6 LTL FTL Adapted from David Simchi-Levi, et al. - Identifying Risks and Mitigating Disruptions in the Automotive Supply Chain (Ford case study)
@scguydan 41% 59% Companies that do not segment their risk strategy Companies that segment their risk strategy Mitigating risk and speeding recovery 55% 70% 70% 64% 73% 88% 90% 80% 82% 80% 11% 32% 17% 46% 52% 50% 46% 50% 59% 46% Mature companies that do not segment their risk management strategy Mature companies that segment their risk management Mature companies that invest in risk segmentation are more resilient to disruptions than mature companies that don’t. -18%-53%-38% -21% -38% -44% -30% -23% -34%-44% Difference in performance resilience measured by percentage of companies that suffered a 3% or higher impact on their performance indicators as a result of supply chain disruptions in the past twelve months PwC and the MIT Forum for Supply Chain Innovation - Making the right risk decisions to strengthen operations performance, 2013
@scguydan Mitigating risk and speeding recovery – segmentation illustration • Partnerships • Risk-sharing contracts • Track performance • Share experience • Business continuity plans • Inventory • Long-term contracts • Inventory • Dual sourcing/sites • Flexibility • Standard components • Track performance Financial impact Totalspend High HighLow 20% of suppliers 80% of spend Using supplier segmentation to drive mitigation actions Mature companies that invest in risk segmentation are more resilient to disruptions than mature companies that don’t. David Simchi-Levi
@scguydan #SAPICS2016 38th Annual Conference & Exhibition Bouncing back without missing
@scguydan 43% 55% 56% 60% 70% Concentrating the CSCO’s priorities Cost Containment Supply Chain Visibility Globalization Customer Intimacy Risk Management IBM - The Smarter Supply Chain of the Future - Insights from the Global Chief Supply Chain Officer Study 2010
@scguydan 27% 33% 41% 48% 54% 59% 59% 60% 72% 72% 78% 79% 82% Other actions Use postponement or delayed differentiation strategy Use regional strategy only Use component substitution strategy Pursue near-shoring manufacturing strategy Establish distribution centres in multiple regions Increase inventory levels and safety stock Apply forward buying/hedging strategy Pursue demand collaboration with customers Pursue (1st and 2nd tier) supplier collaboration Use both regional and global strategy Implement dual sourcing strategy Create and implement a business continuity plan Chart Title Risk mitigation strategies Actions companies take to mitigate supply chain risk PwC and the MIT Forum for Supply Chain Innovation - Making the right risk decisions to strengthen operations performance, 2013
@scguydan Risk mitigation strategies 9% 10% 12% 15% 15% 15% 18% 19% 19% 21% 23% 24% Purchasing business interruption insurance Increasing hedging against currency or commodity volatility Participating in lobbying efforts to influence legislation Developing the capability to more rapidly deploy pipeline… Increasing the ability to protect the brand reputation and… Creating a more flexible workforce Enhancing the ability to intelligently collect and react to… Enhancing the ability to dynamically change product flow Building the ability to rapidly adapt the supply network Building the ability to rapidly adapt the production or… Developing business continuity and risk contingency plans Building stronger extended value chain relationships Chart Title Most effective strategies for preventing and recovering from negative outcomes of supply chain risk events Deloitte - The Ripple Effect - How manufacturing and retail executives view the growing challenge of supply chain risk, 2013
@scguydan The main themes • Proper developed supply chain strategy considering various trade-offs • Proactive vertical collaboration in the extended value chain • Network visibility and flexibility • Business continuity planning
@scguydan What happens when business continuity planning is in place BusinessPerformanceIndicator Time Stable situation/ Business-as-usual Y Sheffi - The Resilient Enterprise - Overcoming Vulnerability for Competitive Advantage, 2005; B Asbjørnslett - Assessing the vulnerability of supply chains, 2008; Wipro Consulting Services - Supply Chain Vulnerability in Times of Disaster, 2012; David Simchi-Levi - A New Approach to Manage Supply Chain Risk, HBR, 2015 Disruptive event New stable situation / Business-as-usual Time to Recovery (TTR)1 Effect of visibility systems Time to Recovery (TTR)2 Effect of swift action as per BCP Preparation for recovery2 Recovery1 Recovery2 Initial impact First response Preparation for recovery1
@scguydan Add some best practices • Supply chain security efforts such as TAPA, C-TPAT, AEO and Maritime ISPS • Business continuity management standards such as ISO 22301:2012, ISO/IEC 27001 information security management and ISO 28000 2007 supply chain security management standard • Supply chain security intelligence resources, including trade and compliance intelligence, global supply chain security risk data and analysis • Real-time trade interruption updates and reports on major disruption incidents • Country-specific reports on supply chain terrorism, cargo disruption, business and political climate, population and culture, economy and trade, transportation infrastructure, general governance, export control governance, employer security practices, and customs-trade supply chain security programs • Thorough vetting of your supply chain and participating firms’ supplier base
An agenda @scguydan #SAPICS2016 38th Annual Conference & Exhibition
@scguydan The CSCO Agenda • Never say never – it can happen to you • Know your network – 3 to 4 tiers deep • Flexibility trumps cost towards resilience • It’s not a guessing game – its data driven based on intelligence of specific risks • Supply chain visibility and supply chain risk walk hand in hand • Learn from best practice and others
@scguydan What are the three things you hope to achieve? “Demosthenes, the greatest of Athenian orators, was asked what the three tests of a great speech were. “Action, action and action‟ was his reply.” James C. Humes
@scguydan Danie Schoeman +27 82 940 6028 danie@danieschoeman.com www.danieschoeman.com There’s more to talk about, so let’s have coffee …
@scguydan
@scguydan Disclaimer This document has been prepared by Danie Schoeman and Company to provide background information on the subjects mentioned herein, the forecasts, opinions and expectations are entirely those of Danie Schoeman and Company. This presentation was prepared with the utmost due care and consideration for accuracy and factual information; the forecasts, opinions and expectations are deemed to be fair and reasonable. However there can be no assurance that future results or events will be consistent with any such forecasts, opinions and expectations. Therefore the authors will not incur any liability for any loss arising from any use of this presentation or its contents or otherwise arising in connection herewith. Neither will the sources of information or any other related parties be held responsible for any form of action that is taken as a result of the proliferation of this document.

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SAPICS 2016 DSchoeman Ver2.3 Final lin

  • 1.
    @scguydan Concert Interrupted? –An agenda for the chief supply chain officer to develop countermeasures for supply chain risks and disruptions Danie Schoeman
  • 2.
  • 3.
  • 4.
    @scguydan At a heftyprice tag $56 billion+ 2015 2014 2013 >$300 billion $57 billion BSI Global Intelligence Reports 0 20 40 60 80 100 120 140 160 CostinUS$billion 33 93 23
  • 5.
    @scguydan “In one industryafter another, supply chains have been stretched farther than they have ever been stretched in the past [with] few [that] have much experience managing supply risks across oceans and continents.” 5 1. BCI Supply Chain Resilience Survey 2014; 2. World Economic Forum Study 2012, Insurance News; 3. UPS Capital: Managing Risk in the Global Supply Chain 2014; 4. Deloitte 2012 Risk Management Report; 5. Ruud Bosman (2006) - The New Supply Chain Challenge: Risk Management in a Global Economy, Factor Mutual Insurance 90% We coulda, woulda, shoulda of respondents report at least one instance of supply chain disruption1 of companies DO NOT assess value and supply chain risk continuously4 of firms DO NOT quantify risk when outsourcing production3 of industry experts surveyed believe that supply chain and transport risk management are greater priorities in their companies today than 5 years ago2 81% 79% 90% have risk managers in their firms, either in legal or compliance, but virtually all of those internal functions ignores supply chain risk3 DO NOT have full visibility of their supply chains1 66% 74%
  • 6.
    @scguydan The C-Suite isin the hot seat … CEO, 26% CFO / Treasurer, 23% CRO / Head of Risk, 19% Risk Committee (company level), 15% Legal / Compliance, 14% COO or CAO, 2% Other, 2% Primary responsibility for risk management Risk management is now a C-Suite issue, but “45% of executives lacks confidence in their supply chain risk management programmes.” Deloitte - Aftershock: Adjusting to the new world of risk management, 2012
  • 7.
    @scguydan …yet commitment islow 34.2% 28.6% 40.8% 38.0% 21.1% 28.6% 1.3% 3.3% 2013 2014 Chart Title None Low Medium High BCI Supply Chain Resilience Survey 2014 How would you assess the current commitment (attention and priority) of Top Management in your organization to managing supply chain risk proactively?, % of respondents
  • 8.
    @scguydan …and immaturity persists Supplychain risk management remains a relatively immature discipline with only a minority of companies (9%) fully prepared to address potential challenges from supply chain disruptions in increasingly complex environments. • No risk governance structure • Poor visibility into sources of supply chain risk and suppliers’ operations • Limited analysis of potential threats • No prior anticipation of positioning or response mechanisms • Risk management processes are documented and integrated internally • Basic threats and vulnerabilities are analysed • Scenarios concerning the base integrated plan are conducted to position inventory and capacity buffers • Postponement product design principles are explored to respond to changing demand • Minimal visibility of changes/ patterns outside the company • Formal quantitative methodologies for risk management • Collaboration across the supply chain • High levels of information sharing and visibility • Sensors and predictors used to proactively position response mechanisms • Products and processes rationalised to reduce complexity • Monitoring of resilience levels among suppliers • Business continuity plans are created • Risk governance is formal but flexible • Full alignment between supply chain partners • Supply chain is segmented to match customer value propositions • Risk sensors and predictors supported by real-time monitoring and analytics • Supplier segmentation to identify key risks • Risk strategies are segmented according to supplier profiles and product/ market characteristics Level 1 Ad hoc Level 3 Proactive Level 2 Integrated Level 4 Flexible 9%32%42%17% Less mature More mature PwC and the MIT Forum for Supply Chain Innovation - Making the right risk decisions to strengthen operations performance, 2013
  • 9.
    @scguydan Consequences of supplychain disruptions are far reaching … BCI Supply Chain Resilience Survey 2014 5% 7% 7% 7% 18% 18% 24% 27% 34% 35% 38% 41% 45% 48% 59% Share price fall Product recall/withdrawal Regulatory fines for non-compliance Payment of service credits Increase in regulatory scrutiny Loss of regular customers Product release delay Stakeholder/shareholder concern Delayed cash flows Damage to brand reputation/image Service outcome impaired Customer complaints received Loss of revenue Increased cost of working Loss of productivity
  • 10.
    @scguydan …with significant economicimpact 39.6% 13.5% 7.7% 14.5% 2.9% 1.0% 0.0% 1.0% 0.0% 19.8% 46.0% 14.2% 8.5% 7.6% 1.0% 0.0% 0.0% 0.0% 0.0% 22.7% <€50K €50K-€250K €251K-€1M €1.1M-€10M €11M-€50M €51M-€100M €101M-€250M €251M-€500M >€500M Don't know Single event 12 Month cumulative BCI Supply Chain Resilience Survey 2014
  • 11.
    The world isstill not flat, but … @scguydan #SAPICS2016 38th Annual Conference & Exhibition
  • 12.
    @scguydan The road toglobalisation – and greater risk … “One of the very trends that has increased supply chain risk – globalisation – also provides opportunities to manage risk.” 2014 DHL Global Connectedness Index; R Bosman - The New Supply Chain Challenge: Risk Management in a Global Economy, FM Global 2006
  • 13.
    @scguydan … increasing complexity Adaptedfrom G. Linden, K.L. Kraemer, and J. Dedrick (2009), “Who Captures Value in a Global Innovation Network? The Case of Apple’s iPod”, Communications of the ACM, March 2009, Vol. 52, No. 3, pp. 140-144; World Economic Forum Global Risks 2015. $80 $75 $85 $19 $27 $7 $5 $1 $40 Apple (Margin) Distribution and Retail Major Components Other Inputs Japan (Margin) USA (Margin) Taiwan (Margin) Korea (Margin)$80 $75 $85 $19 $27 $7 $5 $1 $40
  • 14.
    @scguydan Evolving supply chainsto minimise cost … of companies had re- structured their distribution network in the last year. of the cases the distribution re-structuring had involved relocating distribution centres to a lower cost country. More Fewer National DCs 49.5% 50.5% Regional DCs 58.5% 41.5% Global DCs 52.8% 47.2% of respondents cited the main reasons for the distribution re-structuring were predominantly related to cost. indicated that they were establishing more regional (multi-country) distribution hubs. 75% 20% 50% 58% How has the structure of your distribution network changed? European supply chains are evolving to become more product- and/or channel- specific enabling them to adapt to different customer and product service level requirements. Transport Intelligence - Global Distribution Strategies Survey, 2008
  • 15.
    @scguydan … causing complexityand fragility PwC and the MIT Forum for Supply Chain Innovation - Making the right risk decisions to strengthen operations performance, 2013 38% 74% 80% 87% 94% 95% The relationships between supply chain entities have become less transparent The number of entities in the supply chain has increased Products and services have become less standard New product introductions have been more frequent Changes in the extended supply chain network occur more frequently Dependencies between supply chain entities* have increased Chart Title Evolution of supply chain complexity over the past three years *suppliers, partners, customers Strongly Agree / Agree
  • 16.
    @scguydan …with the costefficiency chasers losing Difference in performance resilience measured by percentage of companies that suffered a 3% or higher impact on their performance indicators as a result of supply chain disruptions in the past twelve months -6%-5%-6% -21% -8% -14% -26% -24% -32%-33% PwC and the MIT Forum for Supply Chain Innovation - Making the right risk decisions to strengthen operations performance, 2013 46% 47% 36% 53% 71% 64% 67% 73% 80% 73% 13% 41% 31% 47% 50% 56% 53% 47% 56% 41% Market value Sales revenueMarket-share Total supply chain cost Supply chain asset utilisation Inventory turns Customer service level Total supply chain lead time Total supply chain lead time variability Order fulfilment lead time Mature (Level III—Level IV) cost efficient companies Mature (Level III—Level IV) flexible response companies
  • 17.
    @scguydan Risk visibility insub-tiers is lacking 17% 36% 79% 90% 78% 31% 31% Indirect suppliers Indirect suppliers Direct suppliers Internal plants & operations Direct customers Indirect customers Indirect customers Tier-3 + supplier Retailer End customer Whole- saler Whole- saler Retailer Retailer End customer End customer End customer Tier-2 supplier Tier-1 supplier Tier-3 + supplier Tier-3 + supplier Tier-3 + supplier Tier-2 supplier Tier-2 supplier Tier-1 supplier OEM SCMWorld - Innovative Approaches to Supply Chain Risk, 2014 Risk visibility across the value chain
  • 18.
    @scguydan …making it thebiggest challenge in moving goods Transport Intelligence - Supply Chain Risk & Visibility in the Movement of Goods, 2014 3.5% 3.9% 7.7% 8.2% 8.7% 11.0% 13.2% 13.9% 14.4% 15.5% Meeting the demands of Omni- channel Environmental programmes / CO2 reductions Complexity of handling multimodal transportation Schedule compliance Speed Competition Delivering to schedule Rising costs Transport reliability Supply chain visibility Chart Title The key challenges faced in moving goods, % of respondents
  • 19.
    Anatomy of asupply chain disruption @scguydan #SAPICS2016 38th Annual Conference & Exhibition
  • 20.
    @scguydan What happens witha supply chain disruption BusinessPerformanceIndicator Time Stable situation/ Business-as-usual Y Sheffi - The Resilient Enterprise - Overcoming Vulnerability for Competitive Advantage, 2005; B Asbjørnslett - Assessing the vulnerability of supply chains, 2008; David Simchi-Levi - A New Approach to Manage Supply Chain Risk, HBR, 2015 Disruptive event Time of full impact First response Preparation for recovery Recovery Initial impact New stable situation / Business-as-usual Time to Recovery (TTR) Performance Impact (PI)
  • 21.
    @scguydan … with theactual residual effect BusinessPerformanceIndicator Time Stable situation/ Business-as-usual Y Sheffi - The Resilient Enterprise - Overcoming Vulnerability for Competitive Advantage, 2005; B Asbjørnslett - Assessing the vulnerability of supply chains, 2008; David Simchi-Levi - A New Approach to Manage Supply Chain Risk, HBR, 2015 Disruptive event Time of full impact First response Preparation for recovery Recovery Initial impact New stable situation / Business-as-usual Long-term impact Time to Recovery (TTR) Performance Impact (PI)
  • 22.
    @scguydan Having a significantimpact on business and financial performance 68% 72% 65% 64% 67% 66% 69% 40% 54% 35% Order fulfilment lead time Total supply chain lead time variability Total supply chain lead time Customer service level Inventory turns Supply chain asset utilisation Total supply chain cost Market-share Sales revenue Market value Chart Title Percentage of companies that suffered a 3% or higher negative impact on their performance indicators as a result of supply chain disruptions in the past twelve months PwC and the MIT Forum for Supply Chain Innovation - Making the right risk decisions to strengthen operations performance, 2013
  • 23.
    @scguydan Disruptions can happenanywhere in the supply chain network “A collapse in one part of the network can have a magnifying effect on every part of the network. These interrelationships are either not well understood or are ignored by most companies.” - David Simchi-Levi, professor MIT Tier 2+ Tier 1 CustomersDistribution Assembly LTL FTL
  • 24.
    @scguydan With sources ofsupply chain risks far beyond the company Macro environment risks Have potential effects across the entire supply chain Exist among enabling functions that support supply chain processes Functional risks Human resources Information technology LegalFinance Economic Environmental/ Social responsibility Infrastructure/ Resources Geopolitical Hazards SecurityRegulatory Supply Demand Tier N Tier 1 End usersDistributors3rd party services Operational risks DeliverDevelop Plan Source Make Return Relate to internal process risks Extended value chain risks Originate in upstream and downstream supply chain partners The risks to supply chains today are numerous and constantly evolving, and emanate both from within and outside of the company. Deloitte - Supply Chain Resilience: A Risk Intelligent approach to managing global supply chains, 2012
  • 25.
    From the riskobservatory @scguydan #SAPICS2016 38th Annual Conference & Exhibition
  • 26.
    @scguydan Categorising sources ofdisruption to define strategies Business continuity • Natural disasters • Man-made disruptions • Supplier redundancy & contingency Security • Cargo disruption • Cargo theft • Hijacking exposure • Unmanifested cargo • Information/cyber attacks • Sea piracy • Supply chain terrorism • Anti-western terrorism Brand protection • Facility traceability (forced & child labour) • Compliance to social & human rights • Compliance to environmental, health & safety • Counterfeiting • Intellectual property violations Geopolitical • Political stability • Economic & financial stability • Corruption • Crime & government effectiveness • Employee screening practices
  • 27.
    @scguydan Major causes ofsupply chain disruption 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Energy scarcity Lack of credit (cost, availability) Currency exchange rate volatility New laws or regulations Loss of talent/skills Environmental incident Intellectual Property violation Product quality incident Health & Safety incident Act of terrorism Fire Business ethics incident Data breach Cyber attack Transport network disruption Unplanned IT/telecoms outage Animal disease Earthquake/tsunami Insolvency (in the supply chain) Human illness Civil unrest/conflict Industrial dispute Outsourcer service failure Adverse weather High Impact Some Impact Low Impact Security risks Business continuity risks Brand protection risks Geopolitical risks
  • 28.
  • 29.
    @scguydan Natural disasters havebecome more pervasive … EM-DAT: The CRED/OFDA International Disaster Database, 2016 0 100 200 300 400 500 600 1900 1907 1914 1921 1928 1935 1942 1949 1956 1963 1970 1977 1984 1991 1998 2005 2012 TitleNatural disasters reported 1900-2015
  • 30.
    @scguydan …at a veryhigh price Munich Re, NatCatSERVICE, 2016 760 8 000 18 500 16 000 15 300 29 500 300 3 000 60 500 40 000 28 000 30 000 38 000 43 000 44 000 68 500 85 000 100 000 125 000 210 000 Japan - Earthquake (2004) Chile - Earthquake, tsunami (2010) Caribbean / USA - Hurricane Ike (2008) Thailand - Floods, landslides (2011) United States - Earthquake (1994) Caribbean / N.A. - Hurricane Sandy (2012) China - Earthquake (2008) Japan - Earthquake (1995) United States - Hurricane Katrina (2005) Japan - Earthquake, tsunami (2011) Losses in US$ million original values Overall value Insured value 0 0 0 0 0 0 0 0 0 0 46 520 170 813 61 210 84 000 6 430 1 720 15 880 Fatalities Fatalities Dummy
  • 31.
    @scguydan Old reliable havecome under man- made disruptions Heavy manufacturing (steel, machinery, etc.) 25% Electronics 17% Garment and Textiles 17% Consumer Goods and Retail 11% Food 7% Footwear 6% Automotive 5% Pharmaceutical 2% Other 10% Chart TitleStrikes by Industry in China, 2015 Labour unrest in China grows with factory strikes increasing by 58.3 percent in 2015, as factory owners struggled to pay workers due to a slumping economy, leading to protests and walk-offs. BSI - Business Continuity Risk Index, 2016
  • 32.
    @scguydan And even increasinglypopular destinations are succumbing 34 121 147 108 118 2011 2012 2013 2014 2015 StrikesGarment Sector Strikes in Cambodia, 2011-2015 Historically wages have been a major cause of strikes in Cambodia, but workers in recent strikes have also cited more specific grievances such as the cost of living, labour contracts, and working conditions. BSI - Business Continuity Risk Index, 2016; Photo: Luc Forsyth
  • 33.
  • 34.
    @scguydan Supply chain partnerfailure is the major supply chain network problem 3% 5% 13% 10% 13% 13% 24% 19% 8% 12% 9% 13% 14% 14% 13% 19% Downstream logistics partners Indirect customers Upstream logistics partners Company-owned support functions Direct customers Tier 2 suppliers Tier 1 (direct) suppliers or third parties Company-owned supply chain operations Chart Title Ranked #1 Ranked #2 Locations in the supply chain of the most costly outcomes of risk events over last three years 38% 37% 27% 22% 17% 27% 23% 11% Deloitte - The Ripple Effect - How manufacturing and retail executives view the growing challenge of supply chain risk, 2013 The most costly disruptions are caused by own supply chain, then failure at Tier 1 and Tier 2 suppliers. According to BCI respondents, 11.5% of disruptions are caused by suppliers at Tier 3 and lower. 3PLs are the third highest reason for failure.
  • 35.
    Supply chain securitydisruptors @scguydan #SAPICS2016 38th Annual Conference & Exhibition
  • 36.
    @scguydan 34% 35% 41% 44% 53% 68% 90% Conveyances not inspected Failureto screen business partners Containers, trailers, pallets, etc. not secured/properly inspected prior to loading Lack of seal procedures Inadequate transportation monitoring Security procedures not followed (lack of checks, balances, accountability) Involved “trucks” as the mode of transportation for breached cargo Major factors contributing to cargo breaches C-TPAT Program Study June 2009
  • 37.
    @scguydan Global cargo theftrisk levels FreightWatch International Risk level of cargo theft Highest level Lowest level
  • 38.
    @scguydan Cargo theft inSouth Africa Crime Stats SA - Crime Stats Simplified Robbery: non-residential Number of incidents 2014 2015 18 476 19 170 3.8%
  • 39.
    @scguydan Hijacking exposure inSouth Africa Truckjacking Number of incidents 2014 2015 989 1 279 29.3% Crime Stats SA - Crime Stats Simplified
  • 40.
    @scguydan Omni-channel retailing hasgiven the consumer newfound power … Forrester report: Welcome To The Era Of Agile Commerce, 2014
  • 41.
    @scguydan Home Chore automation and security $200B−350B …andthe Internet of Things (IoT) brings huge opportunity … Human Health and fitness $170B−1.6T Offices Security and energy $70B−150B Factories Operations and equipment optimization $1.2T−3.7T Vehicles Autonomous vehicles and condition-based maintenance $210B−740B Outside Logistics and navigation $560B−850B Cities Public health and transportation $930B−1.7T Worksites Operations optimization/ health and safety $160B−930B Retail environments Automated checkout $410B−1.2T Enable new business models For example, remote monitoring enables anything- as-a-service Transform business processes Predictive maintenance, better asset utilization, higher productivity Types of opportunities 9 settings gave us a cross-sector view of a total potential impact of $3.9 trillion–11.1 trillion per year in 2025 McKinsey Global Institute (MGI): The internet of things: mapping the value beyond the hype, 2015
  • 42.
    @scguydan 0.1% 0.7% 0.8% 3.9% 4.1% 15.3% 20.6% 25.1% 29.4% Payment card skimmers Pointof sale intrusions Cyber espionage Denial of service attacks Web app attacks Physical theft and loss Insider and privilege… Crime ware Miscellaneous errors … but it also creates great peril Almost all cyber attacks can be classified by 9 patterns Verizon 2015 Data Breach Investigations Report
  • 43.
    @scguydan Typical cyber attackincidents for transport & logistics 24% 16% 16%Transportation Cyber-espionage Insider and privilege misuse Web app attacks WEB APP ATTACKS When attackers use stolen credentials or exploit vulnerabilities in web applications — such as content management systems (CMS) or e-commerce platforms. INSIDER AND PRIVILEGE MISUSE This is mainly by insider’s misuse, but outsiders (due to collusion) and partners (because they are granted privileges) show up as well. Potential culprits come from every level of the business, from the frontline to the boardroom. CYBER-ESPIONAGE When state-affiliated actors breach an organization, often via targeted phishing attacks, and after intellectual property. Verizon 2015 Data Breach Investigations Report 72% ON AVERAGE of the incidents in an industry can be described by just three of the nine patterns.
  • 44.
    @scguydan Cyber attacks arephysical Verizon 2014 & 2015 Data Breach Investigations Report of insider and privilege misuse attacks used the corporate LAN. of theft / loss happened at work. of miscellaneous errors involved printed documents. 49% 85% 55% A significant amount of cyber attacks are actually through physical means and can be mitigated through physical security systems.
  • 45.
    @scguydan Look inside yourcompany for cyber attack origins 31% 29% 16% 13% 12% 22% 12% 13% 23% 7% 5% 24% 35% 30% 18% 15% 13% 24% 15% 16% 24% 7% 6% 18% Unknown Domestic intelligence service Foreign nation-states Competitors Activists / activist organisations / hacktivist Organised crime Hackers Suppliers / business partners Former service providers / consultants / contractors Current service providers / consultants / contractors Former employees Current employees Likely sources of incidents All industries in all regions Transportation & Logistics PWC Global State of Information Security Survey 2015
  • 46.
    @scguydan …making screening andvetting business critical PWC Global State of Information Security Survey 2015 47% 48% 55% 54% 52% 57% 58% 69% 51% 54% 55% 56% 56% 59% 60% 73% Accurate inventory of where personal data for employees and customers are collected, transmitted and stored Employee Chief Information Security Officer in charge of security Information security strategy that is aligned to the specific needs of the business Employee security awareness training programme Secure access-control measures Priviledged user access Conduct personnel background checks Require 3rd parties to comply with our privacy policies Security safeguards in place All industries in all regions Transportation & Logistics
  • 47.
    @scguydan Sea piracy isstill rife Based on info from IMO, IMB, ReCAAP
  • 48.
    @scguydan …you survive piratesand then this Newsflare
  • 49.
    @scguydan Countries effected byterrorism disruptions Institute for Economics and Peace , 2015 The impact of terrorism Highest impact of terrorism Lowest impact of terrorism
  • 50.
  • 51.
    @scguydan 7% 10% 17% 19% 15% 32% 10% 11% 15% 17% 25% 22% Social responsibility failure Regulatorynon-compliance and/or worker-safety failure Product quality failure Physical product flow disruption Sudden demand change Margin erosion Chart Title Ranked#1 Ranked#2 Brand reputation is the most costly outcome of disruption …. 34% 19% 15% 32% 36% 17% 25% 22% Brand reputation damage Physical product flow disruption Sudden demand change Margin erosion Chart Title Ranked#1 Ranked#2 Most costly outcomes of risk events in the supply chain Most costly outcomes of risk events in the supply chain 54% 40% 32% 17% 36% 21% 54% 40% 70% 36%
  • 52.
    @scguydan Wearing human rightsis cheap 0.18 0.27 1.15 1.2 2.19 3.4 3.61 4.63 12.37 29 Sellingprice Paytogarmentworker Overheadcost ProfitfactoryBangladesh Intermediary Transportcost Materialcost Brandprofit Valueaddedtax Retail* Share in Euro: Share in %: 42.616.00.6100 0.9 4.0 4.1 7.6 11.7 12.5 Share of value – T-shirt from Bangladesh sold in Germany *Includes all costs at a retail level including staff, rent, store profit, etc. WEF: Beyond Supply Chains, Empowering Responsible Value Chains, 2015
  • 53.
    @scguydan Bitter aftertaste ofchild labour in the cocoa supply chain • Small, family farms (>750 000) • Independent operation • Few cooperatives (<2% of crop) • Privately-funded operators • Pisteurs, Traitants • Fewer quality linkages • Various participants, including international companies • Includes semi-finished goods • Beans, small family farm products into global market • Further manufacturing of products • Retail outlets, restaurants, small businesses • Final customer Global Market Manufacturers Farmers Collectors Transporters Processors Exporters Customers Consumers Other Beans Cocoa Supply Chain - Côte d'Ivoire Center for Reflection, Education and Action (CREA)
  • 54.
    @scguydan Counterfeiting - aglobal $600 billion epidemic Czech Republic Turkey Nigeria Nigeria loses N200 billion annually to sales and circulation of adulterated lubricants Saudi Arabia 50% of deaths in automobile accidents caused by counterfeit parts Philippines Korea France Georgia USA Brazil Paraguay Counterfeiting costs US businesses between $200 and $250 billion dollars annually One of the main sources of counterfeit agro-chemicals Alcoholic drink counterfeiting widely reported in Paraguay Sub-standard wines found in premium brand bottles 30 people died in 2012 from consuming counterfeit Rum containing methanol Pakistan Authorities fighting counterfeit motor-oil supply High volume producer of counterfeit bags and other fashion items China High volume producer of counterfeit branded clothing and leather goods One of the main sources globally of counterfeit cosmetics • 400 billion counterfeit cigarettes produced every year • Counterfeit baby food found in original packaging India One of the main contributors to global counterfeit medicines epidemic Increasing problems with counterfeit soft drink production HH Global - Brand Protection & Anti-Counterfeiting
  • 55.
  • 56.
    @scguydan Countries effected bydisruptions due to political instability World Bank, 2015 Level of political stability Politically most stable Politically least stable
  • 57.
    @scguydan Disruptions in countrieseffected by corruption 2014 Transparency International Level of corruption Highly corrupt Very clean
  • 58.
    @scguydan Customs “integrity” ofSA’s biggest trade partners Honest Joe’sHonest Crooks AngelsDark Horses DS&C Analysis, WEF ETI (2014) Zimbabwe Angola Zambia BotswanaMozambique Nigeria NamibiaMadagascar GhanaLebanon India Thailand Mauritius Saudi Arabia South AfricaChinaItaly United States Germany United Kingdom Japan Netherlands 0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7 Efficiencyandtransparencyofborder administration(1=inefficient,7=efficient) Irregular Payments (1 = common, 7 = never occurs)
  • 59.
    @scguydan Government (in)effectiveness that cancause disruptions Level of government effectiveness Most effective Least effective World Bank, 2015
  • 60.
    @scguydan The war fortalent continues … 15% 19% 14% 22% 37% 43% 2011 2013 2014 Chart Title Easier More difficult 0% 5% 10% 15% 20% 25% 30% 2011 2012 2013 2014 Chart Title Career progression Retaining Developing Finding Hiring Measuring Knowledge worker challenges % of respondents saying ‘extremely challenging’ Knowledge worker challenges % of respondents saying ‘extremely challenging’ SCMWorld - The Chief Supply Chain Officer Report, 2014
  • 61.
    @scguydan #SAPICS2016 38th Annual Conference& Exhibition Being able to bounce back
  • 62.
    @scguydan A systematic approachto supply chain risk is required Identify Quantify MitigateRespond What types of risk are we exposed to and where are they in our supply chain? What financial impact could these risks have on our sales and profitability? How quickly can we recover from a disruptive event and return to normal operations? What strategies/tactics do we have in place to minimise the disruption to our business? Supply Chain Risk Effective supply chain risk management is not a static exercise or a linear process. It requires constant monitoring, ongoing assessment and the periodic re-evaluation of contingency plans, whether or not they have actually been implemented. SCMWorld - Innovative Approaches to Supply Chain Risk, 2014
  • 63.
    @scguydan Identifying and assessingrisk 19% 25% 38% 40% 42% 47% 48% 54% 58% 61% 72% Social media monitoring Business impact surveys Real-time data monitoring/analytics Segmentation of suppliers / customer value propositions Intuition or management insight Third-party research/intelligence Scenario planning/business simulations Risk mapping Regular/open dialogue with customers Analysis of historical data Regular/open dialogue with suppliers Chart Title SCMWorld - Innovative Approaches to Supply Chain Risk, 2014 Methods used to identify risk exposure % of respondents
  • 64.
    @scguydan Data driven …a stark contrast to the normal intuition-based approach The power of predictive analytics Visual mapping and social media Innovators in supply chain risk use these tools and techniques within an enterprise- wide “culture of data driven decision making” that informs and shapes their risk mitigation strategies. When you are dealing with complex networks that have evolved over time, intuition can be misleading and take you in completely the wrong direction.” - David Simchi-Levi professor MIT SCMWorld - Innovative Approaches to Supply Chain Risk, 2014
  • 65.
    @scguydan Tools of therisk trade … 29% 32% 35% 36% 42% 42% 44% 45% Business simulation Worst-case scenario modelling Risk sensing data Predictive modelling Risk intelligence data Supply chain mapping/visualization Supply chain operational modelling Financial risk modelling Chart Title Types of data/visualization/analytical tools used to manage risk within the supply chain Deloitte - The Ripple Effect - How manufacturing and retail executives view the growing challenge of supply chain risk, 2013
  • 66.
    @scguydan Identifying and assessingrisk - illustration Gartner - Case Study: Cisco Addresses Supply Chain Risk Management, 2010 How Cisco mapped the 2011 disaster in Japan No impact-low risk profile Significant impact reported-mitigate with higher priority Some impact reported-monitor and/or mitigate Capacity disabled or assumed highest risk-mitigate with highest priority
  • 67.
    @scguydan Available supply chainrisk solutions and services ChainLink Research - Supply Chain Risk Solutions: A Market Overview, 2013 Supply chain & business continuity consultants Supplier audit and monitoring services Supplier quality management Contract, SLA management Supplier performance management Hedging tools and instruments Trading partner / IT security/ identity management Supplier data subscription services Cargo security Sustainability/ CSR platforms, product analytics Supply chain insurance Event monitoring & alerting services Anti- counterfeiting solutions Cold chain Business continuity management Design collaboration/ IP protection Inventory optimisation, demand management Governance, risk management & compliance Supplier risk and compliance Logistics, visibility, TMS Traceability, chain of custody Supply chain mapping and monitoring
  • 68.
    @scguydan Natural disasters Geopolitical risks Epidemics Terroristattacks Environmental risks Volatile fuel prices Rising labour costs Currency fluctuations Counterfeit parts and products Port delays Market changes Suppliers’ performance Forecasting accuracy Execution problems Quantifying and prioritising risk This may work reasonably well in the case of recurring operational risks – the “controllable” or “known-unknown” risks where historical data is available, but not for the “uncontrollable” or “unknown-unknown” risks. Unknown- Unknown Uncontrollable Known- Unknown Controllable Likelihoodofoccurrence Business impact ModerateMinor Major Critical Possible Likely Highly likely Unlikely A typical risk evaluation matrix Sources of supply chain risk SCMWorld - Innovative Approaches to Supply Chain Risk, 2014; David Simchi-Levi, et al. - Identifying Risks and Mitigating Disruptions in the Automotive Supply Chain (Ford case study)
  • 69.
    @scguydan The Risk ExposureIndex as an alternative BusinessPerformanceIndicator Time Stable situation/ Business-as-usual Y Sheffi - The Resilient Enterprise - Overcoming Vulnerability for Competitive Advantage, 2005; B Asbjørnslett - Assessing the vulnerability of supply chains, 2008; David Simchi-Levi - A New Approach to Manage Supply Chain Risk, HBR, 2015 Disruptive event Time of full impact First response Preparation for recovery Recovery Initial impact New stable situation / Business-as-usual Time to Recovery (TTR) Performance Impact (PI) The Risk Exposure Index allows companies to understand the dependencies within their supply chains, estimate hard-dollar impacts and prioritise their risk mitigation efforts.
  • 70.
    @scguydan The Risk ExposureIndex illustrated Time-To-Recover (TTR): The time it takes to recover to full functionality after a disruption Performance Impact (PI): Impact of a disruption for the duration of TTR on a given performance measure Risk Exposure Index (REI): Normalizes the PI by the maximum PI over all disruption scenarios Tier 2+ Tier 1 CustomersDistribution Assembly TTR =2 Weeks PI = $400m 2 Weeks $300m 2 Weeks $100m 2 Weeks $400m 2 Weeks $2.5bn 1 Week $100m 2 Weeks $1.5bn LTL FTL Adapted from David Simchi-Levi, et al. - Identifying Risks and Mitigating Disruptions in the Automotive Supply Chain (Ford case study)
  • 71.
    @scguydan The Risk ExposureIndex illustrated Time-To-Recover (TTR): The time it takes to recover to full functionality after a disruption Performance Impact (PI): Impact of a disruption for the duration of TTR on a given performance measure Risk Exposure Index (REI): Normalizes the PI by the maximum PI over all disruption scenarios Tier 2+ Tier 1 CustomersDistribution Assembly TTR =2 Weeks PI = $400m 2 Weeks $300m 2 Weeks $100m 2 Weeks $400m 2 Weeks $2.5bn 1 Week $100m 2 Weeks $1.5bn LTL FTL Adapted from David Simchi-Levi, et al. - Identifying Risks and Mitigating Disruptions in the Automotive Supply Chain (Ford case study)
  • 72.
    @scguydan The Risk ExposureIndex illustrated Time-To-Recover (TTR): The time it takes to recover to full functionality after a disruption Performance Impact (PI): Impact of a disruption for the duration of TTR on a given performance measure Risk Exposure Index (REI): Normalizes the PI by the maximum PI over all disruption scenarios Tier 2+ Tier 1 CustomersDistribution Assembly TTR =2 Weeks PI = $400m 2 Weeks $300m 2 Weeks $100m 2 Weeks $400m 2 Weeks $2.5bn 1 Week $100m 2 Weeks $1.5bn LTL FTL Adapted from David Simchi-Levi, et al. - Identifying Risks and Mitigating Disruptions in the Automotive Supply Chain (Ford case study)
  • 73.
    @scguydan The Risk ExposureIndex illustrated Time-To-Recover (TTR): The time it takes to recover to full functionality after a disruption Performance Impact (PI): Impact of a disruption for the duration of TTR on a given performance measure Risk Exposure Index (REI): Normalizes the PI by the maximum PI over all disruption scenarios Tier 2+ Tier 1 CustomersDistribution Assembly TTR =2 Weeks REI = 0.16 2 Weeks 0.12 2 Weeks 0.04 2 Weeks 0.16 2 Weeks 1.0 1 Week 0.04 2 Weeks 0.6 LTL FTL Adapted from David Simchi-Levi, et al. - Identifying Risks and Mitigating Disruptions in the Automotive Supply Chain (Ford case study)
  • 74.
    @scguydan 41% 59% Companies that do not segment theirrisk strategy Companies that segment their risk strategy Mitigating risk and speeding recovery 55% 70% 70% 64% 73% 88% 90% 80% 82% 80% 11% 32% 17% 46% 52% 50% 46% 50% 59% 46% Mature companies that do not segment their risk management strategy Mature companies that segment their risk management Mature companies that invest in risk segmentation are more resilient to disruptions than mature companies that don’t. -18%-53%-38% -21% -38% -44% -30% -23% -34%-44% Difference in performance resilience measured by percentage of companies that suffered a 3% or higher impact on their performance indicators as a result of supply chain disruptions in the past twelve months PwC and the MIT Forum for Supply Chain Innovation - Making the right risk decisions to strengthen operations performance, 2013
  • 75.
    @scguydan Mitigating risk andspeeding recovery – segmentation illustration • Partnerships • Risk-sharing contracts • Track performance • Share experience • Business continuity plans • Inventory • Long-term contracts • Inventory • Dual sourcing/sites • Flexibility • Standard components • Track performance Financial impact Totalspend High HighLow 20% of suppliers 80% of spend Using supplier segmentation to drive mitigation actions Mature companies that invest in risk segmentation are more resilient to disruptions than mature companies that don’t. David Simchi-Levi
  • 76.
    @scguydan #SAPICS2016 38th Annual Conference& Exhibition Bouncing back without missing
  • 77.
    @scguydan 43% 55% 56% 60% 70% Concentrating the CSCO’spriorities Cost Containment Supply Chain Visibility Globalization Customer Intimacy Risk Management IBM - The Smarter Supply Chain of the Future - Insights from the Global Chief Supply Chain Officer Study 2010
  • 78.
    @scguydan 27% 33% 41% 48% 54% 59% 59% 60% 72% 72% 78% 79% 82% Other actions Use postponementor delayed differentiation strategy Use regional strategy only Use component substitution strategy Pursue near-shoring manufacturing strategy Establish distribution centres in multiple regions Increase inventory levels and safety stock Apply forward buying/hedging strategy Pursue demand collaboration with customers Pursue (1st and 2nd tier) supplier collaboration Use both regional and global strategy Implement dual sourcing strategy Create and implement a business continuity plan Chart Title Risk mitigation strategies Actions companies take to mitigate supply chain risk PwC and the MIT Forum for Supply Chain Innovation - Making the right risk decisions to strengthen operations performance, 2013
  • 79.
    @scguydan Risk mitigation strategies 9% 10% 12% 15% 15% 15% 18% 19% 19% 21% 23% 24% Purchasingbusiness interruption insurance Increasing hedging against currency or commodity volatility Participating in lobbying efforts to influence legislation Developing the capability to more rapidly deploy pipeline… Increasing the ability to protect the brand reputation and… Creating a more flexible workforce Enhancing the ability to intelligently collect and react to… Enhancing the ability to dynamically change product flow Building the ability to rapidly adapt the supply network Building the ability to rapidly adapt the production or… Developing business continuity and risk contingency plans Building stronger extended value chain relationships Chart Title Most effective strategies for preventing and recovering from negative outcomes of supply chain risk events Deloitte - The Ripple Effect - How manufacturing and retail executives view the growing challenge of supply chain risk, 2013
  • 80.
    @scguydan The main themes •Proper developed supply chain strategy considering various trade-offs • Proactive vertical collaboration in the extended value chain • Network visibility and flexibility • Business continuity planning
  • 81.
    @scguydan What happens whenbusiness continuity planning is in place BusinessPerformanceIndicator Time Stable situation/ Business-as-usual Y Sheffi - The Resilient Enterprise - Overcoming Vulnerability for Competitive Advantage, 2005; B Asbjørnslett - Assessing the vulnerability of supply chains, 2008; Wipro Consulting Services - Supply Chain Vulnerability in Times of Disaster, 2012; David Simchi-Levi - A New Approach to Manage Supply Chain Risk, HBR, 2015 Disruptive event New stable situation / Business-as-usual Time to Recovery (TTR)1 Effect of visibility systems Time to Recovery (TTR)2 Effect of swift action as per BCP Preparation for recovery2 Recovery1 Recovery2 Initial impact First response Preparation for recovery1
  • 82.
    @scguydan Add some bestpractices • Supply chain security efforts such as TAPA, C-TPAT, AEO and Maritime ISPS • Business continuity management standards such as ISO 22301:2012, ISO/IEC 27001 information security management and ISO 28000 2007 supply chain security management standard • Supply chain security intelligence resources, including trade and compliance intelligence, global supply chain security risk data and analysis • Real-time trade interruption updates and reports on major disruption incidents • Country-specific reports on supply chain terrorism, cargo disruption, business and political climate, population and culture, economy and trade, transportation infrastructure, general governance, export control governance, employer security practices, and customs-trade supply chain security programs • Thorough vetting of your supply chain and participating firms’ supplier base
  • 83.
  • 84.
    @scguydan The CSCO Agenda •Never say never – it can happen to you • Know your network – 3 to 4 tiers deep • Flexibility trumps cost towards resilience • It’s not a guessing game – its data driven based on intelligence of specific risks • Supply chain visibility and supply chain risk walk hand in hand • Learn from best practice and others
  • 85.
    @scguydan What are thethree things you hope to achieve? “Demosthenes, the greatest of Athenian orators, was asked what the three tests of a great speech were. “Action, action and action‟ was his reply.” James C. Humes
  • 86.
    @scguydan Danie Schoeman +27 82940 6028 danie@danieschoeman.com www.danieschoeman.com There’s more to talk about, so let’s have coffee …
  • 87.
  • 88.
    @scguydan Disclaimer This document hasbeen prepared by Danie Schoeman and Company to provide background information on the subjects mentioned herein, the forecasts, opinions and expectations are entirely those of Danie Schoeman and Company. This presentation was prepared with the utmost due care and consideration for accuracy and factual information; the forecasts, opinions and expectations are deemed to be fair and reasonable. However there can be no assurance that future results or events will be consistent with any such forecasts, opinions and expectations. Therefore the authors will not incur any liability for any loss arising from any use of this presentation or its contents or otherwise arising in connection herewith. Neither will the sources of information or any other related parties be held responsible for any form of action that is taken as a result of the proliferation of this document.