supply chain risk management and continuity planning...

33
10/22/2012 1 Supply Chain Risk Management and Continuity Planning E i Wi k Eric Wieczorek Caroline Kolman Bio Caroline Kolman Licensed Professional Engineer (Industrial) Improving supply chains for over 20 years, focused on healthcare industry for last 10 Strategic sourcing: Identifying and implementing efficiencies in the procure to pay cycle Technology solutions: SAP , Demand management Value analysis: Creating sustainable cost savings for healthcare providers

Upload: phungdang

Post on 16-Mar-2018

216 views

Category:

Documents


1 download

TRANSCRIPT

10/22/2012

1

Supply Chain Risk Management and Continuity Planning

E i Wi kEric WieczorekCaroline Kolman

Bio ‐ Caroline Kolman

• Licensed Professional Engineer (Industrial)• Improving supply chains for over 20 years, focused on healthcare industry for last 10– Strategic sourcing: Identifying and implementing efficiencies in the procure to pay cycle

– Technology solutions:  SAP, Demand managementgy , g– Value analysis:  Creating sustainable cost savings for healthcare providers

10/22/2012

2

Bio – Eric Wieczorek

• 10 years pharmaceutical manufacturing at B i t l M S ibbBristol Myers‐Squibb– Chemicals sourcing and procurement, RFP management, global contract negotiations, lean manufacturing

– Third party manufacturing management, sourcing quality management, make versus buy analysis

• Supply chain risks consulting

Agenda• The efficient supply chain – The risky supply chain • Anatomy of a supply chain disruption – Thailand floods

• Supply chain risk quantification and business continuity planning

– Manufacturing example– Healthcare example

i i i l i– Business continuity planning

• Best practices in supply chain risks management• Questions and answers (10 min)

10/22/2012

3

Agenda• The efficient supply chain – The risky supply chain • Anatomy of a supply chain disruption – Thailand floods

• Supply chain risk quantification and business continuity planning

– Manufacturing example– Healthcare example

i i i l i– Business continuity planning

• Best practices in supply chain risks management• Questions and answers (10 min)

The efficient supply chain• Supply Chain management has its roots in 

manufacturing and the quality evolution– In the early 1900’s, Henry Ford developed the 

assembly line system to focus on standardization and elimination of waste in the car manufacturing process

– In response to US manufacturers losing market share to Japan in the late 1970’s, Total Quality Management (TQM) was adopted to improve manufacturing performance

– In the 1990’s, General Electric (led by Jack Welch, CEO) adopted Six Sigma to improve quality and eliminate variance that caused defects

– Industries such as financial services, government, and , g ,healthcare begin to adopt these principles and techniques

• The successes achieved through the application of these techniques continues to fuel the demand for more efficiencies and cost savings 

10/22/2012

4

Efficiencies and associated risks• By its very nature, the drive for a lean and efficient supply 

chain creates risk, or the opportunity for disruption:

Supply Chain Component

Past Strategy New "Lean" Strategy Risk

Strategic Sourcing Utilize many sources/vendors to obtain raw materials and inputs

Reduce the number of vendors to reduce variability and increase volume for low cost

Dependence on one or few suppliers

Globalization Maintain a vertical  Utilize low‐wage third  Disruptions due to supply chain ‐ own or have significant influence on raw materials and inputs

world countries to reduce costs

violence/political unrest, natural disasters, etc.

Efficiencies and associated risksSupply Chain Component

Past Strategy New "Lean" Strategy Risk

Transportation Government regulated Carriers can charge Movement andTransportation Deregulation & Warehousing

Government regulated shipping and transportation inflated costs, limiting capabilities and offerings

Carriers can charge competitive rates to their customers; combining warehousing with transportation companies leads to 3rd party logistics (3PL) and greater 

Movement and storage creates opportunities for delays, damage

goutsourcing for moving goods

10/22/2012

5

Efficiencies and associated risks

Supply Chain Component

Past Strategy New "Lean" Strategy Riskp

Information Technology Automation and electronic records/communication did not exist ‐ manual processes

Technology automates order filling and processing (procurement) through fulfillment, delivery and invoicing (payment)

System errors ("garbage in, garbage out"), downtime (power disruptions, system crashes, upgrades and patch applications)

The impact of supply chain disruptions• Defects• Delays / shut downs• Additional costs• Reduced perceived value• Reduced real value (suppliers, customers)• Fatalities (in extreme cases)

10/22/2012

6

Agenda• The efficient supply chain – The risky supply chain • Anatomy of a supply chain disruption – Thailand ato y o a supp y c a d s upt o a a dfloods

• Supply chain risk quantification and business continuity planning

– Manufacturing example– Healthcare example– Business continuity planning

• Best practices in supply chain risks management• Questions and answers (10 min)

Anatomy of a supply chain disruption• What is a supply chain disruption?• What are the key contributors in a supply chain disruption?

• Impact from supply disruptions?

10/22/2012

7

What are supply chain risks? (examples ‐ short list)Highly visible/ Less controllable

Terrorism

Less visible/ More controllable

Legal/ contract relatedTerrorismNatural catastrophesWidespread labor stoppagePort closuresDiseases/ pandemicsForeign governments/ trade disruption

Legal/ contract relatedRegulatory/ compliancePlanning/ forecastingSourcing/ procurement / qualitySupplier interruption/ qualification / qualityCustomer service & satisfaction

Country/ political riskDomestic & international lawsOthers…

Inventory & obsolescenceTechnology/ systemsOthers…

Potentially insurable risk (given certain conditions)

Last 10 years of supply chain disruptions –related to natural events – selected few• 2011 Japan earthquake ($300BB economic losses, $25BB 

insured)insured)• 2011 Thailand floods ($45BB economic losses, $10BB insured)• 2011 New Zealand earthquake ($13BB in losses)• 2010 Iceland volcano ash cloud ($200MM/ day, uninsured)• 2005 Hurricane Katrina ($62BB insured losses)• 2008 Hurricane Ike ($18.5BB insured losses)

10/22/2012

8

Recent or notorious isolated event supply disruption examples• Evonik plant Germany. Nylon 12 & Resins shortages impacts auto, sporting 

and medical industries• A 10‐minute fire changes the industry for Nokia and Ericsson in March 

2000‐ Ericsson is becomes SonyEricsson in October 2001• Airbus A380 disruption of 2005• Kellogg’s disruption in carton manufacturing plant (Labor issue)• Mattel 2009 and 2010, SARS/ avian flu outbreak affects third party 

manufacturers• Dell supply chain glitches of 2007 (manufacturing quality)Dell supply chain glitches of 2007 (manufacturing quality)• Genzyme March 2011, 2 unrelated supply disruptions at separate 

manufacturing plants create drug shortages for Fabrazyne and Thyrogen

The four stages of a supply chain disaster

Denial

“It’s not that 

few days!”

“It’s not that bad! We”llbe back in 

business in a few days!” Well, it’s  How did that 

happen? And the

Severity Blame

Resolution

Event

Denial

we thought!

actually worse than we thought!

happen? And the inevitable… Who is 

responsible?

During that time a solution is being  worked 

on.Is a lesson learned?

10/22/2012

9

The Thailand floods supply disruption example in the flash memory industry – summary of press conferences and business leader quotes after the event

• Event takes place…• Reactions from flash memory manufacturer business leaders a few days after

– “there will be minor disruptions because of logistics issues. Aside from that business as usual thanks to inventory in the supply chain” (DENIAL….)

• A month later: Things get sorted out and the severity comes to light…– “The industry will see supply shortages caused by the destruction of the Work In 

progress inventory (WIP) at the time of the event” (SEVERITY…)

• Short‐Term: More bad news…– “ The industry will face further shortages due to reduced production capacity as a result 

of production assets destroyed, factories unable to restart due to power supplyof production assets destroyed, factories unable to restart due to power supply limitations, or lack of raw materials from their own suppliers” (SEVERITY & BLAME…)

• Long‐Term (6 months later): Hope is coming back but it is not done yet….– “ We will see further supply chain constraint while destroyed assets and factories get 

repaired or replaced and new capacity comes online” (RESOLUTION…)

The Thailand floods supply disruption example in the flash memory industry – Continued

• During that time… what was going on?• Firms directly hit by supply disruption are frantically canceling orders and trying to• Firms directly hit by supply disruption are frantically canceling orders and trying to 

book orders from alternate suppliers…• Problem: manufacturing capacity was already pretty scarce before the event.• Problem: qualifying and testing parts from new supplier is time and resource 

consuming for most industry.• Problem: the alternate supplier identified are in the same region of Thailand; 

impacted like any other supplier!• Problem: manufacturing yield and quality with new supplier is not the same as 

with the incumbent supplier.• Problem: prices are also higher!

• What impact would a similar event have if it took place in Hong‐Kong?

10/22/2012

10

The Thailand floods supply disruption example – What happened there?

• Flash memory is a very competitive market• Low global manufacturing capacity available• High concentration of global supply base in one geographical area

• Extended/ complex supply chain• Low global inventory

The Thailand floods supply disruption example – How did we get there?

• Low cost country sourcing• Global sourcing… Yes but one supplier for each component

• Lean/ Just‐In‐Time• Wall Street – inventory hinders company performance yet inventory is one way toperformance, yet inventory is one way to mitigate risk that also hinders company performance

10/22/2012

11

The Thailand floods supply disruption example – What could have been done about it?

• Recognize and monitor manufacturing capacity shortages• Recognize end‐to‐end supply chain lead‐times and plan inventory g pp y p y

accordingly• Recognize that the world supply is geographically concentrated• Negotiate supply contracts for emergency manufacturing capacity 

allocation• Maintain supplier relationships with multiple supply sources• Qualify & test supplier components before an event happens• Transform LEAN manufacturing to “risk adjusted LEAN” supply chain• Transform LEAN manufacturing to “risk‐adjusted LEAN” supply chain 

management

That’s Business 

Planning! (BCP)

That’s Business Continuity 

Planning! (BCP)

Supply chain disruption response scenarios

Event Start

Detection

Mitigation Strategy

Early Delayed

Planin

place

No responseplanned

Planin

place

No responseplanned

Organizational PerformanceRecovery

FastEfficientLow cost

FastInefficientHigher cost

SlowEfficient

Higher cost

SlowInefficientHigh cost

10/22/2012

12

The disruption recovery curve – The benefits of continuity planning

ce

Event start

Had no event happened!

gani

zatio

nal p

erfo

rman

reco

very

Delayed response/ No mitigation strategy

Lucky!

Org

Time elapsed

Worst Case Scenario!

Detection Response Mitigation strategy

For illustration purposes only – not to scale

The disruption recovery curve – The benefits of continuity planning

nce

Event start

Had no event happened!

gani

zatio

nal p

erfo

rman

reco

very

Delayed response/ No mitigation strategy

Delayed response/ mitigation strategy

Late Detection

Org

Time elapsed

For illustration purposes only – not to scale

10/22/2012

13

The disruption recovery curve – The benefits of continuity planning

nce

Event start

Had no event happened!

Early Detection

gani

zatio

nal p

erfo

rman

reco

very

Delayed response/ No mitigation strategy

Rapid response/ mitigation strategy

Early Detection

Org

Time elapsed

Worst Case Scenario!

For illustration purposes only – not to scale

The disruption recovery curve – The benefits of continuity planning

e

Event start

Had no event happened!

aniz

atio

nal p

erfo

rman

cere

cove

ry

Delayed response/ No mitigation strategy

Value of detecting & planning for disruption.

BCP!

Org

a

Time elapsed

Worst Case Scenario!

For illustration purposes only – not to scale

10/22/2012

14

Buying the umbrella before it rains

Business continuity planning (BCP) aims to help:• Ensure the survival of the organization• Ensure the survival of the organization.• Protect corporate assets and control financial loss.• Minimize the loss of customers.• Facilitate the resumption of operations.• Improve the ability to salvage damaged equipment and 

operations.• Provide for the safety of personnel and the public before, 

during, and after a disaster.

Myths and realityMyth Reality

Our people know the business and will know what to do in the event of a disaster.

When a disaster occurs, it is no longer business as usual. People have to think in t f h t i i t t t k i thterms of what is important to keeping the business running.

We have insurance to cover our losses. Insurance is a part of your protection, but may not fully compensate you for things like loss of customers, loss of market share, set backs indevelopment or release of a new product in the market.

We don’t have time to develop a Business  Time spent developing and maintaining a Continuity Plan. Business Continuity Plan is an investment in 

the company.

10/22/2012

15

Limitations of insurance• 3 types of supply chain disruption insurance

– Property business interruption insurance (also called Time Element) may include Contingent Business Interruption (CBI)include Contingent Business Interruption (CBI)

Direct Damage is a pre‐requisite (owned or supplier location); narrow coverageUsually limited to 12 monthsOnly named suppliers or owned locations or limited coverageExpensive if located in natural catastrophe areas (i.e. earthquake, flood, storm); high deductible

– Trade disruption insurance/ Supplier risk insuranceBroader risk coverage, indirect risks (although some risks are not covered) but typically low limits ($100MM)typically low limits ($100MM)Sold per supplier, expensive

– Political risk insuranceConfiscation of assets, lost income, currency inconvertibility

What is the insurance industry saying?• After the Japan earthquake and suffering close t $40BB i t t l i d l ito $40BB in total insured losses insurance companies are reacting:– Munich Re/ Swiss Re: […] customers that they have 18 months from 

January 1, 2012 to deliver far greater transparency on supply chains [...]and suppliers […]or else coverage will be limited or even excluded. (Commercial Risk Europe‐ January 2012)

– Lloyds – reviewing its contingent business y g ginterruption exposure

– Reduction in CBI coverage. CBI used to be a “throw‐in”, now it will cost policyholders.

10/22/2012

16

Why plan?• Can be the difference between survival or death of the organization (more 

than 50% of organizations do not resume business after a major disaster‐International Risk Management Institute (IRMI) 2006

• To remain competitive• To satisfy the company’s mission, its shareholders and customers• Insurance is not THE answer!• Minimize the severity of a disruption (financial losses, regulatory fines, 

long term loss of customers, etc.)• Minimize legal liability as a result of an accidentMinimize legal liability as a result of an accident• Maintain the reputation of the organization

“Dollarization” is key to BCP

• Can you demonstrate ($) the cost of not l i f ti it ?planning for continuity?

• What would be the cost of a plan versus the cost of a loss?

• Are there risks the organization must plan for and others it can “deal with”?and others it can  deal with ?

• Which risk should we address first?

10/22/2012

17

Can you demonstrate ($) the cost of not planning for continuity?• A large Pharma client uncovers and “dollarizes” the value of a key third party manufacturer (TPM) to itsvalue of a key third party manufacturer (TPM) to its #1 selling product

• A catastrophic loss at its TPM means the potential to be out of business for at least 3 years

• Dollarization ($)= 3 years sales + continuing expenses interdependent plant inefficiencies andexpenses, interdependent plant inefficiencies, and payroll to retain key employees, etc…

What would be the cost of a plan versus the cost of a loss?• A large California Tech client hired us to 

th i b i i t ti l i iprepare their business interruption claim in Thailand

• 30 days out of business = over $15MM loss• $500K per day!• Cost of a plan? A fraction of $500K• Cost of a plan?  A fraction of $500K• If the plan reduces a loss by at least one day the ROI is over 100%

10/22/2012

18

Are there risks the organization must plan for and others it can “deal with”?

• A large Pharma client identifies a bottleneck in its manufacturing process at a location in earthquake prone g p q parea.

• A laser manufactured (24 months normal lead time, 18 expedited) in Germany is key to its entire franchise. Several $ billions at risk. Cost of an additional laser is $2million.

• Contract packaging TPMs are also identified as

Plan

Contract packaging TPMs are also identified as bottlenecks in the chain.

• Packaging can be moved (30 days) to another suppliers easily by filing a CB30 with FDA.

Deal with

Which risk should we address first?• “Dollarized” risk is a function of ($) severity and likelihood of 

occurrence.occurrence.• Distinguish between assessment & quantification

High Spend/ Low Risk

High Spend/ High Risk

Low Spend suppliers

generally not captured by

i k

Spend

Page 36

Risk

Low Spend/ Low Risk

Low Spend/ High Risk

Supplier Risk Heat Map (example)

risk assessments

10/22/2012

19

Agenda• The efficient supply chain – The risky supply chain • Anatomy of a supply chain disruption – Thailand a o y o a supp y c a d s up o a a dfloods

• Supply chain risk quantification and business continuity planning

– Manufacturing example– Healthcare example– Business continuity planning

• Best practices in supply chain risks management• Questions and answers (10 min)

Drug manufacturer supply chain example

Dosage DistributionPackagingBulk Drug

TPM Spain

Pen

Syringe

Puerto Rico

U.S. market

TPM, Germany Location 1

TPM, Germany Location 2

Boston, MA DC, USA

TPM Germany

Other marketsBack Up plant, Ireland

TPM UK DC, France

Owned location

Supplier location

Legend:

10/22/2012

20

Drug manufacturer supply chain example

Dosage DistributionPackagingBulk Drug

TPM Spain

Pen

Syringe

Puerto Rico

U.S. market

TPM, Germany Location 1

TPM, Germany Location 2

Boston, MA DC, USA

TPM Germany

Other marketsBack Up plant, Ireland

TPM UK DC, France

Owned location

Supplier location

Legend:

Drug manufacturer supply chain example

Dosage DistributionPackagingBulk Drug

• Spain TPM ramps up production 20%, 60‐day lead time

• Ireland can provide 50%

TPM Spain

Pen

Syringe

Puerto Rico

U.S. market

TPM, Germany Location 1

TPM, Germany Location 2

Boston, MA DC, USA

TPM Germany

• Ireland can provide 50% of total world demand, 6 months lead time

• Tax impact from manufacturing out of Puerto Rico versus Ireland/ Spain ($200MM)

Other marketsBack Up plant, Ireland

TPM UK DC, France

Owned location

Supplier location

Legend:

10/22/2012

21

Drug manufacturer supply chain example

Dosage DistributionPackagingBulk Drug

• Contract penalties at TPMs

• $10MM

TPM Spain

Pen

Syringe

Puerto Rico

U.S. market

TPM, Germany Location 1

TPM, Germany Location 2

Boston, MA DC, USA

TPM Germany• Manufacturing slow down

Other marketsBack Up plant, Ireland

TPM UK DC, France

Owned location

Supplier location

Legend:

down.• 60 % volumes from 

Puerto Rico• Interdependency total 

$60MM

Drug manufacturer supply chain example

Dosage DistributionPackagingBulk Drug

TPM Spain

Pen

Syringe

Puerto Rico

U.S. market

TPM, Germany Location 1

TPM, Germany Location 2

Boston, MA DC, USA

TPM Germany

• 3 Months Finished Inventory

12 Months to restart Puerto Rico

Other marketsBack Up plant, Ireland

TPM UK DC, France

Owned location

Supplier location

Legend:

10/22/2012

22

Dollarization – Puerto Rico plant loss

$2BB

MM

$1.4BB

$600

M

$500

MM

$900MM

$910MM

$970MM

$200

MM

$1.17BB

$500

MM

$670MM

$675MM $675MM

Value at risk(VaR)

MitigationStrategy

Cost($5MM)

Spain TPMRamp up 20%

Production(60 Days)

Contract Penalties($10MM)

MitigatedVaR

Ireland50% capacity6 months to come online

ExpensesContinuing

Boston & DC($60MM)

Taximpact

($200MM)

Inventory($500MM)

Dollarization – Puerto Rico Plant loss

$2BB

MM

$1.4BB

$600

M

$500

MM

$900MM

$910MM

$970MM

$200

MM

$1.17BB

$500

MM

$670MM

$675MM $675MM

Value at risk(VaR)

MitigationStrategy

Cost($5MM)

Spain TPMRamp up 20%

Production(60 Days)

Contract Penalties($10MM)

MitigatedVaR

Ireland50% capacity6 months to come online

ExpensesContinuing

Boston & DC($60MM)

Taximpact

($200MM)

Inventory($500MM)

Actions taken by the business continuity plan….

10/22/2012

23

Scenario planning dashboard–Puerto Rico location exampleScenario Exposure

($MM)Time to Recovery

Probability VaR($MM)

comments

Windstorm $675 12 months

20% $135 Total Plantshutdown!

Fire $250 12 Months

10% $25 Partial plant shut down

Earthquake $675 12 Months

1% $6.75 unlikelyMonths

Manufacturing Quality

$2BB 6 Months 5% $50 Transfermanufacturing

Agenda• The efficient supply chain – The risky supply chain • Anatomy of a supply chain disruption – Thailand a o y o a supp y c a d s up o a a dfloods

• Supply chain risk quantification and business continuity planning

– Manufacturing example– Healthcare example– Business continuity planning

• Best practices in supply chain risks management• Questions and answers (10 min)

10/22/2012

24

Health Care ProviderSupply Chain Example

Health care provider exampleThe healthcare supply chain

Medical Supplies

Hospital Patient

Non ClinicalSupplies

Pharmaceuticals

Cli i l S i

ManufacturersandDistributors

Clinical Services

Non Clinical Services

ServiceProviders

10/22/2012

25

• ProductsClinical supplies (surgical medical surgical laboratory)

Health care provider example Critical components of the healthcare supply chain

– Clinical supplies (surgical, medical‐surgical, laboratory)– Pharmaceuticals– Non clinical supplies (facilities, environmental, food/nutrition)

• Services– Repairs & maintenance (clinical, non clinical)Repairs & maintenance (clinical, non clinical)– Environmental/housekeeping– Food service

Health care provider exampleWhat are the risks for healthcare providers?

Natural catastrophes & Medical malpractice abuse care

External Operational

Natural catastrophes & accidental destruction of assetsDiseases/ pandemicsTerrorism/violenceOthers…

Medical malpractice, abuse, care accountabilityRegulatory/ compliance/ medical records protectionSourcing/ procurement / qualitySupplier interruption/ qualityDrug shortages/ recallsCustomer service & satisfactionTechnology/ systems/ patient privacy/ medical records protection (HIPAA violations)Others…

10/22/2012

26

Health care provider exampleDrug shortages• Although the FDA takes great efforts, within its legal authority, to address 

and prevent drug shortages, they still occur for many reasons:– manufacturing and quality problems, – delays– discontinuations

• FDA actions:– Communicate the issue and to help restore availability– Work with other firms who manufacture the same drug, asking them 

to increase production if possibleto increase production, if possible– Many companies voluntarily provide shortage information that FDA 

posts on its website

Health care provider exampleDrug shortages – Planning and preparedness

Hospitals and health care providers have few options in drug shortage situations:• Ensure the hospital/system has a team or specific person assigned to 

monitor, advise, and/or recommend actions associated with the current drug shortage issue.

• Utilize drug shortage monitoring tools and daily updates for existing shortages and ones to anticipate (Some of the shortages have lead time, while others happen literally overnight)

• Utilize P&T Committee to regularly review drug protocols and usage; investigate alternatives and review/approve as appropriate

10/22/2012

27

Health care provider exampleOther disruption examples

• Product recalls • Procedure for product removal and

• Disaster recovery planning

removal and documentation

• Backup supplies in close proximity

• Alternative sources/suppliers

• Teaming with neighboring hospitals for demand surges

Agenda• The efficient supply chain – The risky supply chain • Anatomy of a supply chain disruption – Thailand a o y o a supp y c a d s up o a a dfloods

• Supply chain risk quantification and business continuity planning

– Manufacturing example– Healthcare example– Business continuity planning

• Best practices in supply chain risks management• Questions and answers (10 min)

10/22/2012

28

Business ContinuityPlanning

Managing the risks:  What is business continuity planning?The process of:• Preparing for• Mitigating• Responding to and• Recovering from a crisis.

10/22/2012

29

What is business continuity?For the business continuity manager:• The plans:

– Crisis • Scope:

– Management• Threats:

– Natural hazardsmanagement

– Disaster recovery– Contingency plan

– Production/ sales/ supply chain

– Finance/ accounting

– Human resource– Customer service

R&D

– Man‐made– Accidental– Technological– Utilities failures– Regulatory

– R&D– IT– Marketing– Legal

Source: IRMI practical risk management – Topic D-18

The business continuity plans…

• Crisis management plan (emergency): actions taken immediately before during and after a catastrophicimmediately before during and after a catastrophic event that preserves lives, safeguard property and reduce loss of resources

• Disaster recovery: actions take to recover from a disaster and to resume business functions

• Contingency plans: actions taken to address the loss• Contingency plans: actions taken to address the loss of a specific key process , asset or resource

10/22/2012

30

What is business continuity?For the supply chain manager:• The plans:

– Crisis management• Scope:

– Management• Threats:

Natural hazardsDisaster recoveryContingency plan

Production/ sales/ supply chain

– Finance/ accounting

– Human resource– Customer service

R&D

Man‐madeAccidentalTechnologicalUtilities failuresRegulatory

– R&D– IT– Marketing– Legal

Source: IRMI practical risk management – Topic D-18

The supply chain BCP processThreat analysis

• Identify risks throughout the supply chain function•Identify mitigation strategies, processes, equipment, locations, suppliers, customers

ValueAt

risk analysis

•Quantify threat financial impacts•Assess likelihood of threats•Prioritize results

Continuation strategies

•Develop a risk register/ catalog•Establish a response plans, checklists•Evaluate cost/benefits

Emergency•Establish protocol for plan activation•Develop communication plans(suppliers, customers,Emergency 

responseDevelop communication plans(suppliers, customers, internal)

•Establish response teams based on threat

Testing & education

•Team members role•Test plans with suppliers, customers, plant  staff•Review periodically

10/22/2012

31

Additional strategies for improved supply chain disruption recovery• Early detection & reaction

» Knowing where the threat is and which suppliers/ customers might be affectedK i t k f i l th t d l t d k i h» Keeping track of regional weather event development and knowing where your suppliers are located

• Visibility & predictability» Gaining knowledge about procured components and their raw materials sources 

impact to your product or services» Collaborating with suppliers and customers before and after an event» Building supply contract in order to understand what parameters will govern a 

relationship in case of a crisis

• Resiliency and sustainability» Multi‐sourcing, alternate suppliers, alternate processes, equipment, alternate 

logistics routes, carriers» Build flexibility in product design,» Know your supplier / customers BCP, participate in  collaborative emergency 

response  trainings

Free resources for BCP

• www.contingencyplanning.com• Department of Homeland Security: www.ready.gov

• Disaster Recovery Journal: www.drj.com

10/22/2012

32

Agenda• The efficient supply chain – the risky supply chain • Anatomy of a supply chain disruption – Thailand a o y o a supp y c a d s up o a a dfloods

• Supply chain risk quantification and business continuity planning

– Manufacturing example– Healthcare example– Business continuity planning

• Best practices in supply chain risks management• Questions and answers (10 min)

Elements of organizational supply chain risk management maturity

VISIBILITY PREDICTABILITY SUSTAINABILITYRESILIENCY

TOOLS

TECHNIQUES

•Assessment HEAT MAP •Supply Chain Network Map•VaR, Value-at-Risk Metric

•BCP Planning•Disruption/Insurance•SCRM Mitigation Tactics•SCRM Case Studies

•ISO SCRM Standards

•Predictive Analytics Engines•Scenario Planning•Probabilistic Modeling•War Room Exercise

•ERM, Enterprise-Wide Risk Management Framework•Financial Risk Quantification•Supplier Risk Analysis

•Standards InstitutionalizedS

•Real-time Global Risk Alert Dashboards•Web-based ERM Program Management Maturity•Scenario Risk Response Plans

•Formal BCP Process•Scenario/Risk Response Planning•Global Risk Register•Supplier collaboration Program

•Active/Effective SCRM-A /Miti t /M

•Predictive Analytic Engines•Global Risk/Threat Service•Real-time Risk Dashboards•ERM Web-based Tool•SRM Tool

•Real Time Risk Monitoring•New SCRM Metrics •Scenario/Risk Response Plans embedded in S&OP

•Ongoing SCRM Organization

Supply Chain Risk Management Maturity Model

COMPLIANCEGOVERNANCE

•SCRM Workshops•Knowledge Transfer

•Supplier Collaboration/Compliance•Embedded ERM in S&OP

Assess/Mitigate/Manage•Standards of Compliance in S&OP•Embedded ERM/SRM/Metrics

•Collaborative risk management and compliance•Formal SRM Program•Bi-Annual Risk Assessments

Avg. Companies

10/22/2012

33

Conclusion

• SCRM and BCP is a journey not a race…• Eisenhower once said “Plans are nothing, Planning is everything”… you will come up with the plans but you must start the planning process.

• OrOr…

Caroline Kolman Eric WieczorekCaroline KolmanManaging Director, Healthcare Supply Chain

Tel: 412-378-8701

Email: [email protected]

Eric WieczorekAssociate Director, Supply Chain Risk Analysis

Tel: 609-620-7855

Email: [email protected]