Supply Chain Risk: What if the Unexpected Happens? The Logistics Institute – Asia Pacific National University of Singapore Executive Director Dr. Robert de Souza Improving Resilience of Global Supply Chains: Workshop on Promoting Disaster Risk Management and Hazard Mapping to better Understand Potential Risks to the Supply Chain” 4-6 May 2015 Hilton Lima Miraflores Lima, Peru
TLI–ASIA PACIFIC : OVERVIEW Established in November 1998 under The Global School House Program as a collaboration between Mission: “ To be the premier institute in Asia Pacific nurturing logistics excellence through world-class research, education and industry outreach ” Programs: EDUCATION RESEARCH INDUSTRY OUTREACH • GT-NUS Double MSc. in • Collaborative Urban • THINK Executive Logistics & Supply Chain Logistics Program • THINK IT Management • Humanitarian Logistics • THINK Innovation • NUS MSc. in Supply Program • THINK Logistics Chain Management • Risk Management Program • Industry Research
Supply Chain Disruption Supply chain disruptions affect firms’ top and bottom lines and are Main Challenges becoming increasingly expensive Companies take various steps to protect their supply chains, including: Steps to Overcome Gaining a deep understanding of their supply chain to identify risk Challenges Implementing business continuity plans Taking a more active role across their supply chains to ensure their suppliers have enough capacity to deliver Not relying too much on a single supplier or region within the supply chain
Low Chances – Big Impacts – Slow Recovery Hazard-related business disruptions: of major concern and that actually had been experienced during the last five years Source: UNISDR
Urbanising risk Expansion of Delhi, India from 1992 to 2011 Source: UNISDR
Who pays for disaster losses? •Often in developing economies the poorest pay the most when disasters strike. Source: UNISDR Source: Asia Pacific Disaster Report
About Supply Chain Risk • Managing supply-chain risk is difficult • Risks are often interconnected in complex ways • Actions taken by one company impacts others 6
Risk or Uncertainty I am so glad that the hole is not on our side! Theoretically, – Risk is where the odds are known – Uncertainty applies where the odds are unknown • Risk is usually the basis for decision making, but really we are dealing with uncertainty.
Causes and Consequences CAUSES Disruption CONSEQUENCES EVENTS (Impacts) Lean Relationships Sudden Loss of Supplier Finished Goods Supplier Attributes Shipments Stopped EFFECTS Revenue Locate and Ramp Up Losses Back up Supplier and Recovery Delivery, Expenses Service Level Problems Emergency Buy and Shipments Supply Chain Disruption Emergency Redesign Disasters (Weather, and Earthquake, Terrorists) Rushed FG Shipments Situational Factors OTHER Reputation IMPACTS Environmental Forgone Income Market Share Loss Adapted from Supply Chain Redesign, LLC
Supply Disruption Profile Sustaining Impact >0 Performance Initial Impact Detection Preparation Preparation and Full Impact Response Recovery Disruption Event Time
Countering the Supply Disruption Profile Detection and response Recovery - minimized Sustaining Impact = 0 Initial Impact Full Impact – Avoided! Sustaining Impact >0 Performance Initial Impact Detection Preparation Preparation and Full Impact Response Recovery Disruption Event Time
Four Stages in Risk Management 11
Robustness & Resilience Robustness: When does it break? • Resilience: How does it recover? 12
Combinations: Robustness & Resilience
Risk Identification Risk Risk Monitoring Identification Mid/Long Risk Term Assessment Mitigation 14
Risk Assessment: Risk Propagation • Risk assessment involves assessing the risk exposure of a company/supply chain and the actual impacts of certain disruption to a company/a supply chain. Risk Risk Monitoring Identification Mid/Long Risk Term Assessment Mitigation 15
Risk Impact Assessment: Risk Propagation Risk Risk Monitoring Identification Disruption profile Mid/Long Risk Term Assessment Mitigation Risk propagation Risk impact quantification Overal Disruptio Node Node Node Node Node l n Origin … 1 2 3 4 n Impac Node t Node 1 I 1.1 I 1.2 I 1.3 I 1.4 … I 1.n I 1 Node 2 I 2.1 I 2.2 I 2.3 I 2.4 … I 2.n I 2 Node 3 I 3.1 I 3.2 I 3.3 I 3.4 … I 3.n I 3 Node 4 I 4.1 I 4.2 I 4.3 I 4.4 … I 4.n I 4 … … … … … … … … Node n I n.1 I n.2 I n.3 I n.4 … I n.n I n
Disruption at the supplier side d s Supply Level Supplier t t s t s ’’ b 1 Production Level l tr Producer d p t t p t p ’ t p ’’ b 2 l p Customer Service Level d d t t d ’’ t d t d '
Risk Mitigation Risk Risk Monitoring Identification Mid/Long Risk Term Assessment Mitigation Reduce disruption duration Reduce disruption severity Improve recovered performance level Postpone the disruption effecting time
Mitigation Strategies vs. Risk Risk Risk Monitoring Identification Mid/Long Risk Term Assessment Mitigation 19
Risk Disaster Monitoring Risk Risk Monitoring Identification Mid/Long Risk Term Assessment Mitigation 20
Building Advanced Capabilities (in Singapore) Risk Risk Monitoring Identification Mid/Long Risk Term Assessment Mitigation
Visibility: Monitoring AEB Xchange Event 2014 Planned delivery Wednesday, June, 20th 2012 Expected delivery Wednesday, June 20th, 2012 Order Customs Cross-docking Production start Customs Goods in truck Goods in truck Completion Quality control Goods on vessel Pick & pack Goods in DC Goods in outlet Goods in the hub Goods issue Real world 30/5 2/6 4/6 18/6 , 6.00 p.m. 19/6 19/6 , 8.00 a.m. 20/6, 10.00 p.m. Source: AEB
Visibility: Alerting AEB Xchange Event 2014 AEB Xchange Event 2014 Planned delivery Wednesday, June 20th, 2012 Expected delivery Wednesday, June 20th, 2012 Order Customs Cross-docking Production start Customs Goods in truck Goods in truck Completion Quality control Goods on vessel ! Pick & pack Goods in DC Goods in outlet Goods in hub Goods issue Real world 30/5 2/6 4/6 18/6, 6.00 p.m. 19/6 19/6, 8.00 a.m. 20/6 , 10.00 p.m. Source: AEB
Visibility: Alerting AEB Xchange Event 2014 AEB Xchange Event 2014 Planned delivery Planned delivery Wednesday, June 20th, 2012 Wednesday, June 20th, 2012 Expected delivery Expected delivery Wednesday, June 21st, 2012 Wednesday, June 20th, 2012 Order Customs Cross-docking Production start Customs Goods in truck Goods in truck Completion Quality control Goods on vessel Seen. Pick & pack Goods in hub Goods in DC Goods in outlet Goods issue Real world 30.5. 2.6. 4.6. 18.6 / 6.00 p.m. 19.6. 19.6. / 8.00 a.m. 20.6. / 10.00 p.m. 18.6 / 10.00 p.m. 19.6. 19.6. / noon 21.6. / 2.00 a.m. Source: AEB
Disruption Reduction Levers Risk Risk Monitoring Identification Mid/Long Risk Term Assessment Mitigation 1. Postpone the 2. Reduce disruption disruption 3. Improve the effecting time duration recovered performanc e level 4. Reduce disruption severity
Advance Capabilities Building Blocks Common Platform for integration of tools and algorithms Large-scale mapping Disruptions Real-time decision Dynamic security Dynamic resources to capabilities to model propagation with fault support for risk handle scale & with Circle-of-Trust, the SCs’ connectivity intensity tracing and mitigation with what-if complexity of data privacy and data reverse diagnostic scenario planning integrity capabilities including large-scale analytics Common Platform for integration of tools and algorithms
Building Advanced Capabilities (in Singapore)
Supply Chain Risk Management: Framework Risk Identification Risk Assessment Risk Mitigation Risk Monitoring • Time-adjusted inventory • Risk propagation policy • Risk visualization • Risk measurement via • Supply chain risk Value-at-Risk • Demand uncertainty • Real-time natural category analysis disasters for warning • Risk matrix approach Risk exposure index • Mitigation policy • • Master facilitative • Time-based risk examination platform control tower propagation analysis
Risk Modelling
Building Advanced Capabilities (in Singapore)
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