Brief presentation managing supply chain risks

Programa de Atualização Profissional

Supply Chain Risk Management

SCRM

summary

by Gláucio Bastos, M.B.A., Ch.E.


abstract

SCRM target: given a supply chain (SC) from the point of view of the participants, which may be the manufacturer, the purchaser, transporter, logistics provider, etc.. from historical operational data, are initially located the points where failures, delays, interruptions, defects and material losses should occur, then for correction are defined effective strategic measures considering their cost of implementation and the benefits brought, to eventually the result of SC operation monitoring with the improvements are replenished in a continuous process


SCRM need

even before the recent global economic recession SCs have been through increasing complexity

executives faced more extensive and intricate processes of SC in challenging environments, being forced to reach new territories in search of opportunities for cost savings and greater agility

globalization and increasing interdependence of SC increased further the level of volatility and vulnerability, with no apparent chance of standardization and exposing the company’s SCs to risks of amplified failures rarely seen until now, with wider and larger potential impact than those of recent past

uncertainty has become usual this new environment requires a more intelligent and resilient SC

(able to recover)


method from the historical data of the SC, the framework

automatically sets the risk model, generating a network (BN) with interdependencies between risk variables both qualitative (relationships between variables) and quantitative (probability of occurrence of the variables and calculating the value chain for each situation), which can be enhanced by the experts experience

historical data show to each SC process (e.g. each delivery of a particular product) which was the condition (state) of each occurrence (variable) – e.g. who was the carrier, there was and what was the kind of change in the order requested by the customer, what product configuration was requested, which requested destination, what kind of client, etc.


resumo


risk components

SC risks are contingencies that affect logistics operations

risk merges 02 factors:

the probability that an adverse event or a threat is realized

the impact, that is the effect or negative consequence of the adverse event


SCRM steps

identification of SC potential risks assessment of risk occurrence likelihood and

consequences severity planned mitigation of risks i.e. application of

countermeasures to prevent or reduce (if possible) the probability of the risk and reduce the damage / disruptions in SC

monitoring and control for continuous assessment of improvement in the SC operation after the implementation of the strategies


BN elements horizontal dimension of BN – SC business processes vertical dimension - 03 types of risk variables: factors risk: underlying causes affecting the processes

risk events: factors consequences – e.g. delays, interruptions, defects

risk symptoms: actual occurrences of events defined for example, by measuring the time of manufacture or collection

performance measures complete the vertical dimension, quantifying the value of SC in each situation depending on the presence or absence of each symptom


issue description


issue description

consider a SC as a process of delivering a product to the customer comprising the steps: order processing product collecting product shipping product delivery


risk factors by business processChange_in_order (small, normal, large): order changing by clientTied_order (tied, untied): order consolidationOrder_type (yes, no): abnormality caused by order typeShipment_size (yes, no): abnormality by shipment sizeCust_type (yes, no): abnormality by customer typeProduct_family (yes, no): abnormality by product familyProduct_importance (yes, no): abnormality by product importanceCust_config (yes, no): abnormality by adapting the configuration required by the customerDemand_level (yes, no): abnormality by demand level

Mfg_related_errors (yes, no): errors relatves to manufacturingManuf_location (China, Mexico, unknown,USA): factory placeCust_location (yes, no): abnormality by client place


risk factors by business processMisroute (yes, no): lost load

Carrier (yes, no): abnormality by transport characteristicsDelivery_mode (yes, no): abnormality by delivery modeHolidays (yes, no): abnormality by holidaysInsufficient_carrier_capacity (yes, no): abnormality by low transport

capacityOther_logl_causes (yes, no): abnormality by other logistics causesSevere_weather (yes, no): abnormality by bad weather

Custom_causes (yes, no): abnormality by customs causesCust_causes (yes, no): abnormality by client reasonsCustomer_fulfillment (yes, no): abnormality by customer fulfillment level


problem approach

risk factors probability:

from historical data of SC operation, the risk factors are scored according to their probability of occurrence


issue approach

Produ

ct_im

porta

nce

Chang

e_in_

orde

r

Cust_

conf

ig

Deman

d_lev

el

Shipm

ent_

size

Cust_

caus

es

Holida

ys

Order

_typ

e

Other

_logl_

caus

es

MFG_r

elate

d_er

rors

Tied_o

rder

Man

uf_lo

catio

n

Custo

m_c

ause

s

Custo

mer

_full

filmen

t

Carrie

r

Cust_

locat

ion

Cust_

type

Produ

ct_f

amily

Sever

e_wea

ther

Delive

ry_m

ode

Insu

fficie

nt_c

arrie

r_ca

pacit

y

Misr

oute

0%

20%

40%

60%

80%

100%

120%

Likelihood of Abnormal Risk States


issue approach

risk factors impact on performance measures: is defined by simulating the occurrence of each of the

possible states of the risk factors ('evidence') and calculating the total value of the SC in each of these situations

the difference between the totals of the SC for each state of a risk factor is the value of your impact on SC


issue description

Shippin

g_de

lay

Delive

ry_d

elay

Logis

tics_

delay

Cust_

conf

ig

S2D_M

et

O2D_M

et

O2S_M

et

Pick_d

elay

Carrie

r

Custo

m_c

ause

s

MFG_r

elate

d_er

rors

MFG_d

elay

Chang

e_in_

orde

r

Man

uf_lo

catio

n

Other

_logl_

caus

es

Cust_

caus

es

Tied_o

rder

Produ

ct_im

porta

nce

Deman

d_lev

el

Shipm

ent_

size

Holida

ys

Order

_typ

e

Custo

mer

_full

filmen

t

Cust_

locat

ion

Cust_

type

Produ

ct_f

amily

Sever

e_wea

ther

Delive

ry_m

ode

Insu

fficie

nt_c

arrie

r_ca

pacit

y

Misr

oute

0

100

200

300

400

500

600

700

800

Mini

Max

Impact on Total_process_valueImpact on Total_process_value

Base


assessment tool

by merging probability and impact of each risk factor, one can trace the SC map of vulnerabilities which use depends on the degree of risk aversion of the manager:


issue approach

Shipping_delayDelivery_delayLogistics_delayCust_configS2D_MetO2D_MetO2S_MetPick_delayCarrierCustom_causesMFG_related_errorsMFG_delayChange_in_orderManuf_locationOther_logl_causesCust_causesTied_orderDemand_levelShipment_sizeHolidaysOder_typeCustomer_fullfilmentCust_location

Imp

act

Likelihood


issue treatment beyond the vulnerability map, other methods of sensitivity

analysis of SC risk factors are applied to define the major or relevant risk factors to be mitigated

as a result of this analysis, the following risk factors were considered relevant: ‘change in order’ ‘customer configuration’, and ‘manufacturing location’

the event more relevant risk was found 'manufacturing delay‘

then to evaluate the states behavior of relevant factors was considered an evidence on the event 'manufacturing delay'


issue treatment

as a result, for each of these factors the greatest variations of probabilities with and without 'manufacturing delay', were: ‘change in order’ – ‘small changes’ state – from 65% to

75% ‘customer configuration’ – ‘abnormal’ state – from 43%

to 50% ‘manufacturing localition’ – ‘Mexico’ state – from 44% to

53% in short, occurring ‘manufacturing delay' these are the

states of each factor most likely to have caused the risk event


issue treatment


issue treatment

mitigation strategy effects:

found the relevant risk factors the mitigation strategies to be applied are set, which are included in the BN applied to the nodes of those selected risk factors

then in the same way that the impact was defined for each risk factor also by calculating the difference between the total value of SC for each mitigation measure in the active state (on) and inactive (off) including its implementation cost, your benefit to SC is determined


issue treatment

Allow_flexible_configurations Improve_contract Improve _route_scheduling560

580

600

620

640

660

680

700

720

740

760

Mit. off

Mit. on

Impact of mitigation strategy on Total_process_value

Base


issue treatment

mitigation strategy results

therefore the strategy ‘flexible configurations' was designed and implemented recasting as a whole the production process and the order processing with particular emphasis on the Mexico unity, where by the strategy a production downsizing is implemented there to reduce the manufacturing cycle since it was found in ‘manufacturing delay’ evidence that there is significant increasing in probability when a delay occurs, that the product has coming from this plant among the others


issue treatment

mitigation strategy results

by simulating a wide range of SC total values it is clear for the scenario with application of proposed mitigation measures that the probability of SC highest total value achievement increases 20% compared to the same probability for the scenario with no application of mitigation measures.


issue treatment

0 100 200 300 400 500 600 700 800 900 10000%

10%

20%

30%

40%

50%

60%

Impact of Allow_flexible_configurations mitigation strategy onTotal_process_value

Mitigation 'off'

Mitigation 'on'

Date post:	24-Jan-2015
Category:	Technology
Upload:	glaucio-bastos
View:	75 times
Download:	2 times

Brief presentation managing supply chain risks

Technology