Transcript Risk assessment in the supply chain

Risk assessment
in the supply chain
Supply Chain Risk Leadership Council
Developments in Insurance
January 30 2008
Confidential – Do Not Forward Outside SCRLC
Confidential
1
Supplier Business Continuity Plan
Internal Material Contingency Plan
Industry Analysis
Sustainability/Regulatory
Capacity Analysis (C:D tgt setting)
Inventory Target Setting
Strategic Material Planning/RCCP/
Materials at Risk
Mat'l Change Mgt Process
Initiative Mgt Process
Lane Risk Assessment
Supply network visibility (alerts, GPS)
Supplier Capability Assessment
Internal Capability Assessment
Supplier Business Interruption Risk Insurance
Supplier Relationship/Partnership
Crisis Management/Response
Risk analysis (data, modeling, measurement, etc)
Survey (What capability we shall focus on)
 Top 3 risks (supply chain complexity, supplier capability, recovery capability)
have high-linkage to 7 key capabilities, but no one has full capability score on
“Supplier Business Interruption Risk Insurance”
Why might that be?
(*) Key Capability
3
2
0
1
0
0
1
0
0
0
2
0
0
2
0
0
2
TSMC
Boeing
Cisco
P&G
Jabil
Average
3
4
3
3
2
4
3
5
5
3
2
3
4
2
3
5
2
2
3
5
5
4
4
5
5
5
2
2
5
4
1
4
4
2
5
2
3
3
4
3
4
2
4
4
5
4
3
5
5
4
5
4
4
3
4
3
3
5
2
2
4
4
1
5
2
1
3
4
4
2
4
3
3
5
5
3
3
5
4
3
4
3
3
3.4
3.6
3.8
3.4
3.4
3.6
3.6
4.0
4.8
2.8
2.8
4.2
3.8
1.4
3.2
3.8
2.6
Confidential
2
Outline ~ 30 minutes
 Objectives of session
 Review traditional versus new perspective
 New challenges – illustration from Katrina
 Risk assessment process
 Loss database
 Cross-matching opportunities
Confidential
3
Objectives of session
 To share current thinking on SCR assessment in context of
developing a new risk transfer tool (SCBI)
 To consider lessons from the SCRLC Supplier Reliability
track
GP ICOW
Loss of Profits
Cost of Temporary
Solution
Time
Confidential
4
From the traditional to a new world
 Historical focus on protecting physical assets
 BI becomes more important – Katrina ratio of BI:PD
claims (70:30)
 The journey from
- traditional Business Interruption (BI) insurance to
Contingent BI to
Supply Chain BI
 Global risks and the ‘Over-Optimised Supply Chain’
(WEF 2008)
Confidential
5
The concept of supply chain networks*
E.G
LEVEL 0
People
Employees
LEVEL 1
Process
Value
creation
(production)
LEVEL 2
Infrastructure
Physical flow
(logistics)
Strategic
(partnerships
)
LEVEL 3
Organisation
networks
Regulatory,
Exchange rates,
Country, region
issues
LEVEL 4
External
environment
* Derived from Cranfield University – Supply Chain Risk study
Confidential
6
SCBI Risk Assessment Process
1
Basic data
input Form
(Exposures)
Risk factor assessment Workshop 1 (Controls).
6
2
Pricing Tool
+ input from
- benchmarking
- BI Surveys
- BCM assessments
EML and Profit
Impact Analysis
Workshop 2.
Data/Info
to define
supply &
customer
risk
3 Accumulation db
4
EMLs
and
limits
5
Risk
modifiers
that either
increase or
decrease
rate
% rate to be
applied to limits
Capacity
Agreed Loss Calculation
7
Confidential
SCBI Insurance
premium pricing
7
Supply chain risk factors
Exposures
Controls
1. Commodity Shortages / Price Fluctuations
2. Supplier Reliability
3. General Availability, Cost, Quality Of Labour
4. Internal Supply
5. Accidents / Errors
6. Malicious Intervention
7. Supply Chain Infrastructure
8. Customer Demand
9. Obsolescence Of Product / Inventory / Technology
10. Product Quality
11. Incidents / Natural Disasters
12. Regulatory Concerns
13. War, Terrorism, Other Geopolitical
14. Other External Influences
(Cross-match with SCRLC Supplier Reliability
factors)
Confidential
8
Supply chain risk framework
Commodity Shortages / Price Fluctuations
Exposures
Controls?
Supplier Reliability
General Availability, Cost,
Quality Of Labour
Internal Supply
Accidents / Errors
Malicious Intervention
Supply Chain Infrastructure
Customer Demand
Obsolescence Of Product /
Inventory /
Technology
Product Quality
Incidents / Natural
Disasters
Regulatory Concerns
War, Terrorism, Other
Geopolitical
Other External Influences
Risk Assessment
Control Activities
Cross-match with SCRLC Supplier Reliability factors
Confidential
9
Supplier reliability - Controls
Supplier business continuity plan
Internal material contingency plan
Industry analysis
Sustainability / Regulatory
Capacity analysis
Inventory target setting
Strategic material planning / RCCP / Materials at Risk
Material change management process
Initiative management process
Lane risk assessment
Supply network visibility
Suppler capability assessments
Internal capability assessments
Supplier BI risk insurance
Supplier relationship / partnership
Crisis management / response
Risk analysis (data modelling, measurement, etc)
Confidential
10
Visualising revenue dependencies
SITE A - Grain
distillery
REGION 1
REGION 2
Pulp:
0mt
Co-pulp
SITE B
Pulp:
Release paper for
sale : mt
Co-pulp
Paper
Pulp:
mt
Pulp:
Region 2’s cartonned
Blending
Receives broke
from 3 sites
Pulp:
mt
Pulp:
mt
mt
Paper
Pulp:
mt
mt
Pulp in
t
Reels:
mt
Reels:
Barrel/Cask
Warehousing
Broke
(limited)
Paper out:
t
SITE C
Barrel/Cask
Warehousing
Reels:
Paper out:
t
3 Ultracast suppliers
$
Region 1 & 2 branded
sheets and reels for sale
pulp
5% of sales:
m
Pulp in:
t
Storage capacity:
paper
pulp)
Branded sheets and
reels for sale
mt
Uncoated products for
sale:
Raw material:
SITE D
Packaging
& Bottling
SITE E
Packaging &
Bottling
SITE F
Packaging
& Bottling
REGION 3
Finished product:
Unbleached pulp:
?? Limited to raw materials and semi-processed
materials. Buffer storages at participating mills.
Key
sit es
Confidential
11
Paper
out
Risk grading
Confidential
12
Opportunities
 Building a rich source of data
 Benchmarking
 Best practice
 Loss evaluations and risk quantification
Confidential
13
Questions?
Confidential
14