Supply Chain Risk: What if the Unexpected Happens? The Logistics - - PowerPoint PPT Presentation

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

 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

• GT-NUS Double MSc. in

Logistics & Supply Chain Management

• NUS MSc. in Supply

Chain Management RESEARCH

• Collaborative Urban

Logistics Program

• Humanitarian Logistics

Program

• Risk Management

Program

• Industry Research

INDUSTRY OUTREACH

• THINK Executive
• THINK IT
• THINK Innovation
• THINK Logistics

TLI–ASIA PACIFIC : OVERVIEW

Supply Chain Disruption

Main Challenges

• Supply chain disruptions affect firms’ top and bottom lines and are

becoming increasingly expensive Steps to Overcome Challenges Companies take various steps to protect their supply chains, including:

• Gaining a deep understanding of their supply chain to identify risk
• 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

Hazard-related business disruptions:

• f major concern and that actually

had been experienced during the last five years Source: UNISDR

Low Chances – Big Impacts – Slow Recovery

Expansion of Delhi, India from 1992 to 2011 Source: UNISDR

Urbanising risk

• Often in developing economies the poorest pay the most

when disasters strike.

Source: Asia Pacific Disaster Report

Source: UNISDR

Who pays for disaster losses?

6

• Managing supply-chain risk is difficult
• Risks are often interconnected in

complex ways

• Actions taken by one company impacts
• thers

About Supply Chain Risk

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.

I am so glad that the hole is not on

• ur side!

Risk or Uncertainty

CAUSES Disruption EVENTS CONSEQUENCES (Impacts) Supply Chain Disruption Environmental Lean Relationships Delivery, Service Level Problems Disasters (Weather, Earthquake, Terrorists) Finished Goods Shipments Stopped Locate and Ramp Up Back up Supplier Emergency Buy and Shipments Reputation Market Share Loss EFFECTS Revenue Losses and Recovery Expenses OTHER IMPACTS Forgone Income Emergency Redesign and Rushed FG Shipments Sudden Loss of Supplier Adapted from Supply Chain Redesign, LLC Supplier Attributes Situational Factors

Causes and Consequences

Performance Time

Preparation Initial Impact Recovery Sustaining Impact >0 Disruption Event Full Impact Preparation Detection and Response

Supply Disruption Profile

Performance Time

Preparation Initial Impact Recovery Sustaining Impact >0 Disruption Event Full Impact Preparation Initial Impact Detection and Response Recovery - minimized Sustaining Impact = 0 Full Impact – Avoided! Detection and response

Countering the Supply Disruption Profile

11

Four Stages in Risk Management

12

Robustness: When does it break?

• Resilience: How does it recover?

Robustness & Resilience

Combinations: Robustness & Resilience

14

Risk Identification Risk Assessment Mid/Long Term Mitigation Risk Monitoring

Risk Identification

15

• 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 Identification Risk Assessment Mid/Long Term Mitigation Risk Monitoring

Risk Assessment: Risk Propagation

Disruptio n Origin Node Node 1 Node 2 Node 3 Node 4 … Node n Overal l Impac t Node 1 I1.1 I1.2 I1.3 I1.4 … I1.n I1 Node 2 I2.1 I2.2 I2.3 I2.4 … I2.n I2 Node 3 I3.1 I3.2 I3.3 I3.4 … I3.n I3 Node 4 I4.1 I4.2 I4.3 I4.4 … I4.n I4 … … … … … … … … Node n In.1 In.2 In.3 In.4 … In.n In

Disruption profile Risk propagation Risk impact quantification

Risk Identification Risk Assessment Mid/Long Term Mitigation Risk Monitoring

Risk Impact Assessment: Risk Propagation

t Production Level t ts Supply Level ds t Service Level tp’ td' ts’’

Disruption at the supplier side

tp td ltr lp b1 b2 tp’’ td’’ dp dd

Supplier Producer Customer

Reduce disruption severity Reduce disruption duration Improve recovered performance level Postpone the disruption effecting time

Risk Identification Risk Assessment Mid/Long Term Mitigation Risk Monitoring

Risk Mitigation

19

Risk Identification Risk Assessment Mid/Long Term Mitigation Risk Monitoring

Mitigation Strategies vs. Risk

20

Risk Identification Risk Assessment Mid/Long Term Mitigation Risk Monitoring

Risk Disaster Monitoring

Risk Identification Risk Assessment Mid/Long Term Mitigation Risk Monitoring

Building Advanced Capabilities (in Singapore)

AEB Xchange Event 2014

Real world Production start Quality control Pick & pack Goods issue Customs Goods on vessel Goods in the hub Goods in truck Goods in DC Goods in outlet Customs Cross-docking Completion Goods in truck Order

    

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.

         

Planned delivery Wednesday, June, 20th 2012

Expected delivery Wednesday, June 20th, 2012

Source: AEB

Visibility: Monitoring

AEB Xchange Event 2014

Real world Production start Quality control Pick & pack Goods issue Customs Goods on vessel Goods in hub Goods in truck Goods in DC Goods in outlet Customs Cross-docking Completion Goods in truck Order

    

30/5 2/6 4/6 19/6 19/6, 8.00 a.m. 20/6 , 10.00 p.m.

   

Planned delivery Wednesday, June 20th, 2012

Expected delivery Wednesday, June 20th, 2012

18/6, 6.00 p.m.

!

Source: AEB

AEB Xchange Event 2014

Visibility: Alerting

AEB Xchange Event 2014

Real world Production start Quality control Pick & pack Goods issue Customs Goods on vessel Goods in hub Goods in truck Goods in DC Goods in outlet Customs Cross-docking Completion Goods in truck Order

    

30.5. 2.6. 4.6. 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. 18.6 / 6.00 p.m.

Seen.

Planned delivery Wednesday, June 20th, 2012

Expected delivery Wednesday, June 20th, 2012

Planned delivery Wednesday, June 20th, 2012

Expected delivery Wednesday, June 21st, 2012

Source: AEB

AEB Xchange Event 2014

Visibility: Alerting

• 4. Reduce

disruption severity

• 1. Postpone the

disruption effecting time

• 2. Reduce

disruption duration

• 3. Improve the

recovered performanc e level

Risk Identification Risk Assessment Mid/Long Term Mitigation Risk Monitoring

Disruption Reduction Levers

Large-scale mapping capabilities to model the SCs’ connectivity Dynamic resources to handle scale & complexity of data including large-scale analytics Real-time decision support for risk mitigation with what-if scenario planning Dynamic security with Circle-of-Trust, privacy and data integrity capabilities Disruptions propagation with fault intensity tracing and reverse diagnostic Common Platform for integration of tools and algorithms Common Platform for integration of tools and algorithms

Advance Capabilities Building Blocks

Building Advanced Capabilities (in Singapore)

Supply Chain Risk Management: Framework

Risk Identification Risk Assessment Risk Mitigation Risk Monitoring

• Supply chain risk

category

• Risk exposure index
• Risk propagation
• Risk measurement via

Value-at-Risk

• Risk matrix approach
• Time-based risk

propagation analysis

• Time-adjusted inventory

policy

• Demand uncertainty

analysis

• Mitigation policy

examination platform

• Risk visualization
• Real-time natural

disasters for warning

• Master facilitative

control tower

Risk Modelling

Building Advanced Capabilities (in Singapore)

Retail Precinct Management

Visualization and analytics for freight flow Real-time delivery with multi-

• bjective
• ptimization

Multi-party loading dock coordination In-mall delivery Consolidation

Retail Shops Suppliers Carriers/3PL Shopping Malls In-mall carriers

Order

1

Order Fulfillment with collection schedule, delivery schedule and delivery volume

2 3

Resource availability & bidding for loading docks

4

Collection and delivery schedule and route & auction winner Order tracking Delivery tracking Loading dock availability and pricing Auction winner

5

Resource availability Delivery schedule and route

Bay 1 2 bids Bay 2 3 bids Bay 3 Bay 4, 5 bids Bay 5 3 bids Bay 6

Remaining Time: 0 h 25 min Heavy Traffic Optimized Route: ~ 12km

Level #5 Entrance Exit Bay #1 Bay #3

Consolidation Point

Worker is making delivery Level #4 Level #3

32

Building Advanced Capabilities (in Singapore)

Decision Support Tools for Strategic Planning (SDSS): Facility Location

Logistics Challenge in Asia Pacific: “High Cost/Low Utilization” CC

Airport

cus1

Port

cus2 cus3

• The common solution to enhance
• verall performances of logistics
• perations is the use of CC
• CC can be represented by a

distribution center, a service center, a regional warehouse

Building Advanced Capabilities (in Singapore)

Spatial (geographical) analysis Assessment of traffic flow

Methodology Methodology

E van Herwijnen, " Spatial Decision Support for Environmental Management", Vrije Universiteit, Amsterdam, 1991.

Cost optimization model

Methodology Output (min cost) Output “ Analytical platform that allows user to visualize spatial information along with the evaluation modules to pinpoint the proposed location ” VC ratio Output Land use Road access map VC ratio Output (candidate set)

The least cost

Decision Support Tools for Strategic Planning (SDSS): Facility Location

Building Advanced Capabilities (in Singapore)

35

Master Facilitative Control Tower (MFCT)

W White Swan Black Swan

Source: Future Stake

Black or White

White Swan Black Swan Grey Swan Red Swan Black Turkey Dirty White Swan

Source: Future Stake

Shades of Grey

RESEARCH

Supply Chain Risk Management at www.tliap.nus.edu.sg

Research Consortium Leads a

Thank You rdesouza@nus.edu.sg

Workshop: Risk Index

Collaboration: Partners

• Find less risky alternative

suppliers

• Estimate the sustainability

index of supply chain

• Estimate the impact of risk

event and generate “what- if” scenarios.

Collaboration: General Objective

Firm to Firm relationship: Risk analysis view

Input decision activities Internal process Output deliverables Input decision activities Internal process Output deliverables

Firm A: Supplier Firm B: Manufacturer

Disruption Risk source (AND/OR) Firm C Firm D

• Trace the effect of performance

disruption by analysing the risk sources (internal process and/or output deliverables).

• Risk analysis AFTER disruption

Firm to Firm relationship: Risk analysis view

• The risk (at Firm B) would be typically analyzed by investigating the

effects of risk sources (at Firm A).

• The risk sources may belong to the internal process and/or the
• utput deliverables of Firm A.
• Conventional risk analysis approaches adopt this view.
• The relevant studies concentrate on find the risk relationship

between the sources (Firm A) and the performance disruption (Firm B) so that the Firm B considers the alternative supplier(s) avoiding the conditions that Firm A has.

Firm to Firm relationship: Risk estimation view

Input decision activities Internal process Output deliverables Input decision activities Internal process Output deliverables

Firm A: Supplier Firm B: Manufacturer

Prospect disruption Input decisions influencing on outputs = risk explanatory elements

• Estimate the effect of performance

disruption by identifying the risk sources (input decisions).

• Risk estimation BEFORE disruption

Firm C Firm D

Firm to Firm relationship: Risk estimation view

• The prospect risk (at Firm B) would be estimated by identifying the

input decision activities influencing on the output deliverables (at Firm A).

• This view moves the risk explanatory elements backward to the

input decision activities.

• The prospect risk (at Firm B) would be estimated by investigating

the input decision activities (at Firm A) to that the Firm B consider the alternative supplier(s) satisfying the certain input decisions.

• This also provides a guideline to the current supplier how to update

the current operation setting.

Risk exposure index: Problem statement

• Problem description: It is important for a firm to understand its risk exposure in

the supply chain network before any risk actually occurs. The loss can be caused by itself and its partners. The risks caused by supply chain partners would lead to the performance disruption. Thus it is required to identify risk elements of a member influence on the firm’s performance disruption, and quantify the risk effects.

• Solution approach: we develop a methodology to describe the risk exposure of a

firm by estimating indices for the connectedness of a supplier.

• Novelty: This approach possibly recognizes the degree of supply chain risk for a

company in an intuitive manner. In addition, the approach can diagnose a supply chain so that eventually identify the bottleneck of the supply chain.

• Challenges: It should be appropriate to companies who have little information

available and are premature to control the production and supply chain activities.

• Results: with the assessment of risk exposure of its supply chain, a firm can

determine the operation settings of a supplier or substitute the supplier with another so that the potential risk exposure would be controlled in advance. Furthermore, the proposed method would help to diagnose the supply chain of the firm.

Risk exposure index: Definition

• Risk exposure index = the degree of prospect risk of the target firm

due to the relation with a supplier.

• Simply put, risk index = f(x1, x2, … = risk explanatory elements)

0.2 0.5 0.8 0.6 High index = High prospect risk Supplier substitute 0.2 0.5 0.5 0.6 MNC Firms (Supply side)

Risk exposure index: Usage storyline

• Risk explanatory elements (Input

decision activities@ Firm A)

– Assuming that we can discretize the input decisions of interest – Production capacity – (s, S) Inventory policy (reorder level, replenishment level)

• Performance measure (Output

deliverables@ Firm B)

– Shipment delay level (e.g. 0,1,2,3,..)

Input decision activities Internal process Output deliverables

Firm A: Supplier

Input decision activities Internal process Output deliverables

Firm B: Manufacturer

Risk exposure index: Usage storyline

• The estimation of the risk exposure index = 0.7 (scale 0 ~ 1)

– Under the current operation setting of Firm A – Production capacity = 65% – Reorder level = 10% (of storage capacity) – replenishment level = 50%

• Operation scenarios (operation settings)

– 0.6 (Risk index) = 70% Production capacity & 20% reorder level & 60% replenishment level – 0.5 = 70% & 20% & 70% – 0.45 = 80% & 10% & 60% – :

• Option 1: Supplier substitute

– Finding another supplier making the preferable input decisions

• Option 2: Updating operation setting

– Advising the current supplier to update the operation setting to reduce the prospect risk

• Option 3: Bottleneck management

– Update the bottleneck by applying the options 1 or 2 and manage the supply chain

Risk exposure index: Business insight

• Quantifying the risk level of a supplier

– A supplier would be evaluate from the perspective of the manufacturer’s performance. – Select the preferable supplier among candidates (Who is a better supplier? = Who has a better input decision?)

• Bottleneck identification among the current suppliers

– Compare the risk level of current suppliers – Find out the bottleneck supplier in the supply chain

• Guiding a better input decision

– The possible scenarios can be generated by variously making input decisions of a supplier toward the manufacturer. – Different scenarios have different index values. – Guide a better decision