Supply Risk Assessment Process

The Supply Risk Model

CAUSES
(Categories of Predictive Measures) Relationship

DISRUPTION EVENTS
Misalignment of Interests

CONSEQUENCES
(Impacts)

Sudden Loss of Supplier

Finished Goods Shipments Stopped

Performance Supplier Attributes

Quality, Delivery, Service Problems

Supplier Union Strike, Ownership Change, Workforce Disruption

Recall for Quality Issues Locate and Ramp Up Back up Supplier Emergency Buy and Shipments Emergency Rework and Rushed FG Shipments

Human Resources

EFFECTS Revenue Losses and Recovery Expenses

Supply Chain Disruption

Supplier Locked Tier II Stoppage Supplier Bankruptcy (or financial distress) Disasters (Weather, Earthquake, Terrorists)

Situational Factors

Financial Health

Reputation
Market Share Loss

Environmental

OTHER IMPACTS Foregone Income

Copyright 2007 DRK Research and Consulting LLC

Supply Risk Assessment - Units of Analysis

Supply Chain Network/Commodity Category
Interactions and Relationship
Performance Relationship

s s s
Supplier Environment
Environmental

The customers reputation with suppliers is also a critical factor.

s s s
Supplier Attributes
Human Resources

Geographic, market, transportation, etc.

SC Network Organizer

Supply Chain Disruption Financial Health

Copyright 2007 Supply Chain Redesign, LLC

Supply Chain Risk Assessment Process

Week 0
1.0 Kick off
2.0 Preparation

Week 1-2

Week 3-4

Week 5-6

Week 7

Week 7

Week 8
Note: Cycle Time 6-8 weeks 1 Category = 30 suppliers - Manual Process

Follow up

Assessment Team

Supplier Information Set Up Internal Information Set Up

3.0 Data Collection

Set up Survey Internal Data

- IT Enabled Process - Combination

Survey Data Collection 4.0 Analyze 5.0 Report Validate

Report

Review Team

6.0 Mitigate

Provide Set up information

Category Manager and Suppliers

Survey Review & Event Probability

Subject Matter Experts and Suppliers

Review/ Validate Preliminary Data

Category Manager and Risk Manager

ID and Begin Mitigation

Category Manager and Risk Manager

Kick Off

Preparation

Data Collection

Analyze

Report

Mitigate

Risk Wheel

Diagnostic

Analytical

Supplier Risk Wheel: Supplier Example

Union Strike Risk 1 Highly unionized production facilities Disaster Risk 1 Transportation mode and route may cause disruption

Service Risk 1 Low number of engineers assigned to company parts

Delivery Risks 1 Planned capacity decrease 2 Relatively low number of production employees assigned to company parts 3 Inventory status information is not shared with company 4 Medium to low ability to satisfy demand fluctuations with 5 week notice

Quality Risk 1 Relatively low number of production employees in the process for company 2 Six month supplier rating is medium 3 Medium likelihood of quality problems affecting company

Exercise Teams

Commodity Teams Risk Management Supplier Improvement Strategic Sourcing

Supplier Teams Supplier 1 Supplier 2 Supplier 3 Supplier 4 Supplier 5 Supplier 6 Supplier 7 www.neurasurvey.com User: supplier 1 Password: freightliner

www.neuratool.com User: freightliner Password: freightliner

Finished Product

Portfolio View

FTL Revenue Impact by Supplier Spend Analysis Supplier Revenue Impacted (000's) Percent of Total 2005 Spend Percent of Total AD Plastics $2,879,762 2.0% $710,626 0.5% Supplier 1 $2,800,000 $100,000 Supplier 2 $7,000,000 $3,000,000 Supplier 3 $3,000,000 $5,000,000 Supplier 4 $6,000,000 $2,000,000 C Products $4,766,938 3.3% $605,000 0.0% DK Company $6,241,090 4.3% $2,832,093 2.0% Supplier 5 $1,316,054 0.9% $9,004,424 6.2% Supplier 6 $625,258 0.4% $20,658 0.0% Con Co $8,209,295 5.7% $54,933,867 38.1% Doug Co. $8,738,330 6.1% $1,121,308 0.9% End Co. $6,612,661 4.6% $440,086 0.3% Guard Co. $2,879,762 2.0% $924,432 0.6% Supplier 7 $8,000,000 $1,000,000 Supplier 8 $1,316,054 0.9% $101,804 0.1% Kas Co $7,652,221 5.3% $1,674,475 1.2% Suplier 9 Kurz Co. $1,149,406 0.8% $5,579 0.0% Lac Co. $4,992,914 3.5% $10,338,144 7.2% Lomg Co. Ma Co. $7,686,293 5.3% $7,531,394 5.2% Mer Co $6,314,461 4.4% $2,025,549 1.4% Norm Co. $625,258 0.4% $22,854 0.0% Ny Co. $1,596,634 1.1% $232 0.0% Ol Co. $4,815,657 3.3% $1,652 0.0% On Co. $8,095,335 5.6% $2,141,434 1.5% Pa Co. $32,926 0.0% $4,739 0.0% Plas Co. $2,086,710 1.4% $1,824,515 1.3% Pol Co. $5,296,607 3.7% $3,214,140 2.2% Pur Co. $32,926 2.2% $116,661 7.7% Rev Co $625,258 0.4% $21,777 0.0% So Co $523,002 34.5% $40,840 2.7% South Co. $625,258 0.4% $66,671 0.0% SP Co $1,515,599 1.1% $159,597 0.1% Su Co. $1,563,708 1.1% $249,647 0.2% Sur Co. $1,563,708 92.3% $109,621 6.5% Tru Co $1,693,629 1.2% $179,242 0.1% Vis Co $1,563,708 1.1% $7,080,074 4.9% Wi Co $2,831,653 2.0% $176,284 0.1% Plas Eng Co. Wil Co $8,848,539 6.1% $11,000,000 7.6% Wil Therm Co $523,002 0.4% $31,303 0.0% Wil IMP Co. $1,563,708 1.1% $34,916 0.0%

$144,203,324

209%

$129,845,639

99%

Agenda
Time 1:45 2:15 2:15 2:30 2:30 3:30 Topic Asses the supply network How - each team will complete their part of the supply network risk assessment. - each team will build their reports and analyze the data using the SCRD model - breakout exercise diagnosing the results of the assessment and building mitigation action plans. each team presents their results. Q and A Outcomes Completed assessment of the supply network

Break Develop Reports and analyze the data

2:30 3:30

Diagnose the network and identify mitigation actions.

3:30 4:00

Report out and wrap up

Participants are able to explain how they used the SCRD model components to describe a measure supply chain risk. Participants are able to explain how they used the SCRD model components to diagnose a supply chain network Participants are able to explain how they used the SCRD model components to diagnose a supply chain network obtain feedback

4:00

Adjourn