Managing Todays Supply Chain Trends, Leading Practices, and Risks

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Managing Todays Supply Chain Trends, Leading
Practices, and Risks
Council of Supply Chain Management
Professionals Grand Rapids, Michigan
RoundtableApril 18, 2007

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• AGENDA
• What is a companys Supply Chain?
• Leading practices for managing evolving supply
  chains
• What has changed or is changing in Supply Chain
  today?
• Risks/Considerations
• This session is a FACILITATED session.Not a
  Lecture!

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What is a companys Supply Chain?
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Definitions

• Logistics Management is that part of Supply Chain
  Management that plans, implements, and controls
  the efficient, effective forward and reverse flow
  and storage of goods, services, and related
  information between the point of origin and the
  point of consumption in order to meet customers'
  requirements.
• Supply Chain Management encompasses the planning
  and management of all activities involved in
  sourcing and procurement, conversion, and all
  Logistics Management activities. Importantly, it
  also includes coordination and collaboration with
  channel partners, which can be suppliers,
  intermediaries, third party service providers,
  and customers. In essence, Supply Chain
  Management integrates supply and demand
  management within and across companies.
• Council of Supply Chain Management Professionals
  (www.cscmp.org)

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Its Everything
Supply Chain Management is the processes and
activities that are involved in the
identification, procurement, logistics, and
management of Goods and Services within an
organization, its suppliers, and its customers
Typical
Purchase
Pay
SuppliersSupplier
CustomersCustomer
Company
Suppliers
Suppliers
Customer
Advanced View
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What has changed, or is changing, in Supply
Chain?
Key Trends to Pay Attention To
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The Drivers of Change
The following changes have resulted in where we
are today

• Changing supply and customer markets
• Globalization of supply chains
• Unplanned or catastrophic events
• Company consolidation and ownership changes
• Increased emphasis on controls
• Increase demands on time to market
• Continued search for savings or revenue
  enhancement
• Shortened financial market outlook and demand for
  rapid response
• Employees are changing
• New technologies

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Whats Happening Today?

• The SUPPLY MARKET has changed
• Therefore, SOURCING STRATEGIES are changing
• The LOGISTICS function (warehousing
  transportation) is getting much more
  sophisticated
• Increased use of TECHNOLOGY and suppliers
  capabilities to try and obtain full visibility to
  the supply chain
• Re-focus on PROCESS capabilities
• Organizations are changing

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Whats Coming?

• Changes in Transportation
• Increasing fuel costs
• Increasing security requirements
• Decreased capacity
• GREEN
• How much fossil fuel does your SC burn?
• What is your carbon footprint?
• Network Optimization
• The supplier and customer markets have changed
• The economics have changed/will change

The off shoring trend of the last 10 years will
reverse itself Supply chains will become more
regional
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Leading Practices for Managing the Evolving
Supply Chain
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Service/Cash Flow

• So what is Supply Chain?
• It is your customer experience
• It is your cash flow
• Meyers Rule for Supply Chain Design
• Time Service
  Inventory Cost
• Profit

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Best in Class
If you focus on moving cash faster, it will drive
total cost down
3 2 1
I want you to think about the MONEY first
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Leading Practices

• Develop and document a Supply Chain Strategy in
  alignment with the organization or lead the
  organization through Supply Chain Strategy
• Focus on the ability to connect people,
  processes, technology shift thinking from
  linear to network
• Simplify processes, controls, and metrics
  customer satisfaction
• Instill Total Cost of Ownership and Total System
  Cost mindset and metrics
• Establish key Supplier and Customer Alliances
  source and sell strategically
• Focus on visibility, speed, and accuracy invest
  in technology
• Correctly organize the supply chain function and
  recruit professionals with correct skill sets
• Focus on the cash flow

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Risks in today's Supply Chain
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Supply Chain Risk in the Headlines

• What was the impact of these events on your
  Supply Chain?
• Hurricane Katrina
• Massive disruption of selected transportation
  routes, including Port of New Orleans
• Shortages and price spikes for various
  commodities
• West Coast Port Strikes
• 1997 Harbor Pilots
• 2002 Dock Workers
• California Power Crisis
• Commodity shortages Steel, Energy, Raw
  Materials

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The Physical Supply Chain
Potential Risk Factors
- Outbound Transport - Managing to Demand

• - Availability
• Voice of the Customer
• Market Perception
• Cash Payments
• Cash Collections

- Innovation - Market Concentration

• - Cost
• Supplier Relations
• Availability
• Inbound Transport

- Regulatory Requirements - Time-to-Market

• Data Integrity
• Product Pricing

- Facilities - Labor Relations - Geography -
Political Factors
Research Development
Market Feasibility
Beta Testing
Resource Acquisition
Production
Distribution
Point of Sale
Customer Service Transactions
Risk Analysis 1
Risk Assessment 2
Mitigation Process

• Risk Management 3
• Information Sharing
• Transferring Exposure
• Reduction Program Implementation
• Avoidance

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Risk Management for the Supply Chain
Risk Analysis

• Provides an objective assessment of the Supply
  Chain and process weaknesses
• Provides an actionable list of improvements to be
  implemented
• Provides the foundation for a successful and
  sustainable security program

Risk Assessment

• Diagnostics of physical assets
• Mapping of Supply Chain flows
• Gap analyses
• Quantitative models and assessments
• Regulatory reviews
• Sustainable business continuity plans
• Documentation of exposures to Sarbanes-Oxley
  compliance

Risk Management

• Integrated and holistic Supply Chain strategies
• Broaden cooperation and collaboration between
  Supply Chain links
• Consider the tradeoffs between costs to implement
  the program versus potential losses
• Pay equal attention to non-quantifiable risk

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Prime Supply Chain Risk Elements

• Fraud and/or Theft
• Product Delivery Interruptions
• Cost Control and Predictability
• Pricing Control and Predictability
• Supplier Relationship Sensitivity
• Customer Relationship Sensitivity
• Political Legislative Effects
• Legal Effects
• Quality Control Issues
• Lack of Safeguarding Company Assets
• Speed to Market Issues
• Inadequate Market Intelligence
• Sarbanes-Oxley Non-compliance

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Risk Control Categories

• Risk in relation to a business entity falls into
  two categories of control
• Risks that are within the Companys control
• Risks that are outside of the Companys control
• Understand the controllable risks within your
  Supply Chain and manage them accordingly
• Design contingency plans to minimize the
  potential adverse effects of risks that are
  outside of your control

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Risks Within the Companys Control

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Risks Within the Companys Control

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Risks Within the Companys Control

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Risks Within the Companys Control

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Risks Outside of the Companys Control

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Additional Risk Considerations

• Sensitivity of operational continuity during ERP
  implementations
• Poor implementations may adversely impact the
  integrity and accuracy of information flow
• Off-shoring and outsourcing exposure
• Security of supply
• What to do in a Sellers Market?
• Mitigating risk through Contract Management
• Consistent indemnification policy with written
  clauses adhering to corporate guidelines
  established by Risk Management department
• Proper insurance coverage
• Performance Metrics ensuring agreements are in
  compliance and meet expectations
• Internal contract and agreement compliance
  programs minimize risks associated with dilution
  of spend leverage due to stakeholder
  non-compliance
• Missed volume discounts
• Deterioration of negotiating leverage

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THANK YOU!!!

• Michelle Meyer
• michelle.meyer_at_resources-us.com
• 720-904-8562
• Brian Cunningham
• brian.cunningham_at_resources-us.com
• 248-351-5904