Supply Chain Risks,

Mitigation, & Prevention

Tara Barnes Kevin Haselwander Kaylee Pfennig Trever Shaishrikoff

June 5th, 2006

Agenda•Types of Risks

– Internal and External• Risk Mitigation

–Why is this important? •Prevention

– How companies can reduce risks?

Types of Risk• Internal

~Strategy – Having the wrong strategy

~ Demand – Buying to much or too little

~ Market – miss expectations

~ Implementation – new supplier downtime

~ Performance – post implementation expectation

Types of Risks•External

–Natural Disasters• Earthquakes -Japan (1995) • Hurricane Katrina (2005)

– Human/Technology• Nike ( 2001) • Cisco Systems (2001)

– Terrorism• Closing of shipping docks

Global Supply Chain Risks

The impact of global supply chain disruptions is increased when any of the following increases:• Location of Supplier• Number of Brokers• Long Lead Times• Concentration of Suppliers• Workforce Issues• Demand for Product

Product/Process Risks

The impact of supply chain disruptions is increased when any of the following increases:• Product Complexity• Proprietary Technology• Value of Product• Quality Requirements• Uniqueness of Parts

How do we Reduce these Risks?

• With Risk Mitigation– Continuous monitoring and analyzing risk associated with the system – Evaluate alternate safeguards associated with each threat/asset pair – Suggesting the most effective safeguard, which would mitigate the threat consequences and occurrences.

Risk Mitigation• Company wide managers must think

– Strategically– Broaden Cooperation– Consider the tradeoffs – Don’t ignore a risk just because you can’t quantify it

Supply Chain Disruptions

•Set up Supply Chain Risk Management Systems :

1. Discover a disruption2. Effectively recovery 3. Supply chain design for resilience

Nokia• March 2000- Nokia’s semiconductor plant in NM caught on fire.

– Disruption Discovery• 4 million headsets, 5% of production

– Disruption Recovery• Alternate part sources, work with Philips

–Supply Chain Redesign• Visible tracking system, Risk management assessment for suppliers, Business continuity plans, and Insurance programs

Preventing Disruption

Research through Data and Analysis• Review entire supply chain to see where problems might arise • Improve forecasting and planning• Align company with other suppliers that adhere to same safety standards and policies

–Example- Supplier Certification

• Identify, track, and quickly respond to problems

Preventing Disruption

Lesson’s Learned• Major lesson to be learned from Supply Chain Disruptions is:

– Speed of Company’s response is critical– Establish Contingency plans– Visibility Solutions – Buffer Stock– Mitigate Impact of Disruptions

Sources1. Bosman, Ruud. "Risk Management in a Global Economy." FMGlobal. Apr.

2006. 30 May 2006 <http://www.fmglobal.com/pdfs/ChainSupply.pdf>.

2. Clouse, Mark, and Jason Busch. "How to Identify and Manage Supply Chain Risk Part 1." Harvard Business School. Oct. 2003. Harvard University. 22 May 2006 <http://www.supplychainplanet.com/e_article000188823.cfm>.

3. Clouse, Mark, and Jason Busch. "How to Identify and Manage Supply Chain Risk Part 2." Supply Chain Planet. Nov. 2003. 30 May 2006 <supplychainplanet.com/e_article000203546.cfm>.

4. Handfield, Robert B. "A Managerial Framework for Reducing the Impact of Disruptions to the Supply Chain." Supply Chain Resource Consrtium. North Carolina State University. 31 June 2006)<http://scm.ncsu.edu/public/risk/risk3.html>. (Also all photo credits from this cite)

5. Stauffer, David. "Supply Chain Risk: Deal with It." Harvard Business School. 28 Apr. 2003. Harvard University. 30 May 2006 <hbswk.hbs.edu/pubitem.jhtml?id=3442&t=operations>.