Supply Chain Resilience & supply chain strategy

Notes:

1

“Supply Chain Resilience &

supply chain strategy”

Professor Richard Wilding

Cranfield School of Management

www.cranfield.ac.uk/som www.richardwilding.info Prof. Dr. Richard Wilding

Centre for Logistics & Supply Chain Management

Cranfield School of Management, Cranfield, Bedford, England, MK43 0AL.

Tel: +44 (0)1234 754170 Fax: +44 (0)1234 751712 Email: Richard.Wilding@cranfield.ac.uk

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Cranfield School of Management is…

Cranfield University ….. •Established 1946 - TO £136m • 2,000 employees • 3,000 postgraduate students: - 73% on taught degrees - 27% research

• Two 3*/4* hotels on campus • Over 10,000 alumni in 110

countries

• 4th busiest airport in the UK!

Notes:

3

Themes & Agenda



The sources of Supply Chain Risk.



Linking Supply Chain Risk Management to the strategic

process



Risk mitigation strategies within the supply chain.



Competitive Supply Chain Resilience



Relating Supply Chain Risks to wider business

consequences – classifying your competitive processes.



Instigating action to involve all stakeholders in improving

Supply Chain Resilience and Competitiveness.

2007 by Dr Richard Wilding

4

Innovation & Risk Reduction

“Innovation is all about

creating value

,

economic value, social value and/or

environmental value through

the

application of ideas that are new to

YOU.”

Notes:

Better Together! My Linkedin Network.

5

We live in a networked world!

The Nespresso Coffee Supply Chain Network

Source: Alvarez, Pilbeam and Wilding 2009

Nespresso Expocafé/ Cafexport Volcafé Neumann Ecom CRica Ecom Mex Ecom Guat RFA CRica SAN Guat SAN Mex Funda natura Fed Nac Café Colb Neumann Colb? Ecom Orosi Volcafé CRica Ecom LGiorgia Neumann Huila? Volcafé S Dgo FNC Nariño FNC Cauca EC Jardín? EC Caldas Ecom Proj IFC Ecom Proj Global National Local Nespresso CA Nesp Colombia RFA

Processors and or exporter NGO

International development agency

Ecom Cooxupé EFICO Cooxupé Imaflora Other?

Notes:

7

How are the following related?

The Seven Valley Steam Railway

Leather Luxury Car Seat

Gilbert Presentation Rugby Ball

How are the following related?

Notes:

What can destroy your supply chain?

9

10

Notes:

11

What events destroy your Supply Chain?

12

Notes:

13

What can destroy your Supply Chain?

Are you happy with the iphone supply chain?

Source: http://images.apple.com/supplierresponsibility/pdf/Apple_SR_2011_Progress_Report.pdf

“Audit reveals child labour, poisoned workers at

Apple Suppliers”

137 workers at the Suzhou

facility of Wintek had suffered

n-hexane poisoning.

91 cases of underage workers

were found in ten factories. In one

plant, 42 children were discovered.

Notes:

What resources are you currently

experiencing shortages of?

15

Oil

Land

People

Metals

Food

Money

Energy

Not long now until Coffee!

Notes:

17

Water is the new CO2!?

0.1 for the water itself

2.5 to make the plastic lid

5.5 to make the paper cup and sleeve

7.5 to grow the sugar for one teaspoon.

49.5 to feed the cows that make the milk

143 to grow the coffee

208.1 Litres

WWF 2009

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Peak Oil – Changing the Risk Profile of the

Supply Chain

Notes:

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Peak Oil

Source: Professor Martin Christopher, Cranfield School of Management 2008.

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“ ….. As peaking is approached, liquid fuel prices and

price volatility will increase dramatically, and without

timely mitigation, the economic, social and political

costs will be unprecedented.”

US Department of Energy, 2005

Notes:

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Options for reducing the risk of peak oil on your

supply chain.

 More local for local manufacturing based on ‘small footprint manufacturing’ practices

 Greater levels of collaborative workingand asset sharing to improve transport utilisation

 Leverage economies of scale through bigger vehicles and vessels (e.g. Emma Maersk)

 Utilise postponement techniques to enable low cost country sourcing of ‘vanilla’ products to be moved in bulk for local finishing

 Re-work network optimisation calculations based on a $200 barrel of oil cost and realistic carbon cost

Source: Professor Martin Christopher, Cranfield School of Management 2008.

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Sources of Supply Chain Risk

EXTERNAL INTERNAL Vulnerability = RISK + EXPOSURE _Control Communication, Contracts, IPR, Organisation, Compliance, KPIs Supply Lead times, unreliability, visibility, IPR leakage, ethics Environmental, Government Regulations, Security, Customs,

Tariffs & Quotas Ethics Demand

Uncertainty within the lead time,

margin and markdown management Mitigation / Contingency Planning, Back up, Safety cover, disposal channel Process Forecasting, Flow control, Documentation, IT integration, Costing

Notes:

Uncertainty Generation in Supply Chains.

Amplification Parallel Interactions Deterministic chaos Supply chain Uncertainty

The Supply Chain Complexity Triangle

Amplification

Notes:

Car Build Target Orders to Supplier A

Production Target A Orders by A on B Production

Target B

EFFECT OF A ONCE OFF STEP INCREASE OF 10% IN DEMAND ORDER OSCILLATIONS DOWN THE SUPPLY CHAIN

Hoarding Mentality due to Japan

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''Clearly, chipmakers are attempting to

hoard inventory given increased risk of

supply side dislocations up and down the

entire chain, impacting end product

availability.''

Notes:

Deterministic Chaos



Well defined, rational behaviour can generate chaos!



23% of managers generate chaos!



Costs 500% greater than optimal!

Aggressive Stock Management generates

chaos.



Low target inventory.



Little consideration of pipeline.



Rapid correction of discrepancies between actual

Notes:

Parallel Interactions

Metro Brake Servo Assembly

Shell and cover

Tandem Master Cylinder Body Fluid Reservoir Body Diaphragm AP Brakes Division W.H.Smiths (Tools) Ltd. Qualcast (Foundaries) Ltd. AP Rubber Division AP Pressings Division Rover Group

“Parallel interaction” describe interactions that occur between different channels in a supply network.

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Suppliers’

suppliers Supplier Inbound Manufacturer

Intermediate Distribution / Finishing

Distribution Retail

Notes:

31

Supply Chain Risk Management

“The identification and management of risks within

the supply chain and risks external to it through a

coordinated approach amongst supply chain

members to reduce supply chain vulnerability as

a whole –

this is not a single company concept.”

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Supply Chain events destroy Share Value!

Source: Singhal and Hendricks – December 2000 - Georgia Tech & Univ of Western Ontario

-25 -20 -15 -10 -5 0 -61 -49 -37 -25 -13 -1 11 23 35 47 59

Trading day relative to announcement date

A v e ra g e sh ar eh o ld e r r e tu rn s (% ) -8.6% -17.5%

Notes:

33

The destruction of Competitive Advantage

Ericsson

Specific Supply Network Corporate

Individual symptoms or events that cause disruption to the supply chain

Those networks that represent high exposure to the organisation.

Implications of corporate culture and policy setting on supply chain vulnerability.

Types of Vulnerability Nokia

single supplier common platform event tracking multiple suppliers various platforms event tracking Fire at Philips

found out via a technician didn’t have a

plan ‘B’

bad news travelled slowly left the mobile handset market

$400m lost in missed sales

found out via an executive reviewed daily from weekly product re-design Bad news travelled fast executive hit squad

used power to get outcome

met demand

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Factors contributing to Supply Chain Risk &

Organisational Stability.



The adoption of Lean “anorexic” practices.



The globalisation of Supply Chains



Focussed Factories and Centralised Distribution



The trend to outsourcing



Reduction in the supplier base



Volatility of demand

Notes:

Building the Resilient Supply Chain.

THE

RESILIENT SUPPLY CHAIN

CONTINUOUS MONITORING AND INTELLIGENCE SUPPLY CHAIN TRANSPARENCY

SUPPL Y CHAIN COLLABORA TI ON AGILIT Y SUPPL Y CHAIN RISK MANAGEMENT CUL TURE

PRODUCT DESIGN FOR THE SUPPLY CHAIN THE FOUNDATION OF EFFECTIVE SUPPLY CHAIN STRATEGY

SUPPL

Y

CHAIN

DESIGN &

ENGINEERING

Copyright Professor Richard Wilding 2011

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Cranfield School of Management -The Demand

Chain Management Community

Demand Creation

Logistics & Supply Chain Management Marketing

Demand Creation Demand Fulfilment

Demand Chain Management

Demand Fulfilment

The alignment of demand creation and fulfilment processes across functional and organisational boundaries

Notes:

Design Supply Chain Infrastructure Design Supply Chain Information System Design Supply Chain Organisation Design

Supply Chain Strategy – Process, Infrastructure,

Information Systems and Organisation

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Linking customer value to supply chain

strategy

What do our customers value?

How do we translate these requirements into an offer?

What does it take to succeed In this market?

How do we deliver against this proposition? Identify value segments Develop the supply chain strategy Identify the market winners Define the value proposition

What do our customers value?

How do we translate these requirements into an offer?

What does it take to succeed In this market?

How do we deliver against this proposition? Identify value segments Develop the supply chain strategy Identify the market winners Define the value proposition

What do our customers value?

How do we translate these requirements into an offer?

What does it take to succeed In this market?

How do we deliver against this proposition?

Notes:

39

Competitive Supply Chain Resilience

A unique way to increase resilience in your supply chain

LOCA TE SUPPL Y CHA IN RI SKS SELECT SOLUTI ONS OPTIONS The CSCR M e thod is …  Focused on improving competitiveness  Successful in delivering value

 Modular and flexible in design & use

 Built on cross industry experience and world class tools

 Takes an end-to-end and integrated view of the supply chain.

 Recognises that supply chain must change to meet future visions COMPETITIVE SUPPLY CHAIN RESILIENCE Understanding Action 40

Defining the Success factors for the

segment/market. – Task 1

1. Brief description of customer segment/market 2. Critical Success Factors for

this segment/market Importance

………

………

………

………

………

………

100%

Notes:

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Task 2 - Identifying Supply Chain Processes that

Support the Success Factors

Key Success Factor 1. 2. 3. 4. 5. Supply Chain Processes that enable “Key Success Factors” * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * 2005 by Dr Richard Wilding

2008 by Prof. Richard Wilding

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Task 3 - Classify the Supply Chain processes that

support the key success factors for each

segment/market.

•Classify the processes using the triangle.

Notes:

43

Task 4 - Sources of Supply Chain Risk

Brain Storm the sources of Vulnerability to

your Supply Chain.

EXTERNAL INTERNAL Vulnerability = RISK + EXPOSURE Control Supply Environmental, Demand Mitigation / Contingency Process

2008 by Prof. Richard Wilding

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Task 5

Prioritise Key Supply Chain

Vulnerabilities

Vulnerabilities Key Process Vulnerability Ratings Process Group Vulnerability Ratings Vulnerability Priority Ratings Underpinning Processes Competitive Processes Transformation Processes Qualifying Processes

Notes:

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Task 6 - Vulnerability Action Plan Exercise

(Top 3 Vulnerabilities from Task 5)

Vulnerability 1. 2. 3. What Capability is required to address this vulnerability? Perfect world! What capability do we have now? How do we bridge the Gap?

What is the impact of this capability on the Key Success Factors (Task 1)?

2008 by Prof. Richard Wilding

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Competitive Supply Chain Resilience

1. Understand what are the success factors for a market or segment. 2. Identify the Supply Chain Processes that support these success

factors

3. Classify the Processes using the “Process Triangle”. 4. Identify the risks/vulnerabilities in the Supply Chain

5. Understand how these risks/vulnerabilities impact on the Supply Chain Processes.

6. Understand our current capability to deal with the risk and what capability is required to remove this.

7. By investing in the capability to deal with the risk/vulnerability how this will impact on the success factors for the market or segment?

“Demonstrating the link between Supply Chain Risk Management and the success factors in a market and therefore improving our competitive position”

Notes:

47

A key message on Risk within Supply

Chains.

Accept uncertainty is inherent in supply chains…….

“If a man presumes certainty,

he shall end with doubts,

but if he will be content with

doubts, he will end with

certainties”.

Francis Bacon 1561-1626

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Cranfield School of Management

www.cranfield.ac.uk/som

Download the free podcasts and iTunesU course easy

link via

www.richardwilding.info

or visit

iTunes.com

View free Videos on

www.yourtechtv.com

and

www.youtube.com/supplychainpodcast

Links & Further Information

Professor Richard Wilding

www.RichardWilding.info

www.linkedin.com/in/richardwilding

www.facebook.com/supplychainprofessor

Notes:

A world-class business school

Financial Times Executive Education Rankings 2010

 Ranked by clients as the top UK business school for customised executive development and amongst the world’s top 10.

 In the top 3 business schools globally for international delivery

 Ranked 1st in the UK for programme preparation; flexibility in programme design, contemporary and relevant teaching materials; the quality of faculty and level of programme follow-up.

Economist Ranking of MBA Programmes

 1st in the UK, 4th in Europe

Europe's largest faculty specialising in the management of Logistics & Supply Chains

 Globally recognised Centre of Excellence

 Internationally recognised MSc in Logistics and Supply Chain Management. Accreditations

 One of an elite group of business schools worldwide to be triple AMBA, EQUIS and AACSB accredited

www.cranfield.ac.uk/som

50

Professor Richard Wilding Cranfield School of Management Cranfield, Bedford, England, MK43 0AL. Tel: +44 (0)1234 754170

Fax: +44 (0)1234 752158

Email: Richard.Wilding@cranfield.ac.uk Web: www.cranfield.ac.uk/som/lscm

www.richardwilding.info

Please keep in touch!

2003 by Dr Richard Wilding

If you would like further information on the

techniques described in this presentation, for example,

supporting journal articles, or would like to discuss

the content further, please don’t hesitate to contact

the author at the following address:

with European and International companies on logistics and supply chain projects in all sectors including pharmaceutical, retail, automotive, high technology, food drink and professional services to name a few. He is a highly acclaimed presenter and regularly speaks at Industrial Conferences and has undertaken lecture tours of Europe and Asia at the invitation of local Universities & Confederations of Industry. He has published widely in the area of supply chain management and is Editorial Advisor to a number of top journals in the area.

Professor Wilding was winner of the “Individual Contribution Award” at the “European Supply Chain Excellence Awards 2010” this is presented to the individual who has made an outstanding contribution to supply chain excellence. In 2009 his biography was entered into the 162nd edition of “Who’s Who” described as "Britain's most famous reference book" for those who have "reached the pinnacle of excellence in their field". At the European Supply Chain Distinction Awards 2008, received the `Distinguished Service Award for Thought Leadership and Service to Supply Chain Management`.

Richard was appointed in 2005 as the first ever Full Professor and Chair of "Supply Chain Risk Management" in the World. This was in recognition of his significant contribution to this subject area. Supply chain risk is still a key focus of his research within the context of an organisations overall Supply Chain Strategy, thus enabling companies to create sustainable and resilient competitive advantage.

His Doctoral research, undertaken while employed at the University of Warwick, applied chaos and complexity science to logistics and supply chain management and resulted in the development of new management guidelines for supply chain re-engineering to mitigate risk. This innovative research received international media coverage including features on the BBC World Service and articles in the Times, Financial Times and New Scientist. More recently his research into inventory policies of organisations in times of risk & uncertainty resulted in international media coverage including live interviews on BBC1 television news, BBC News 24, BBC Television’s “The Money Programme”, BBC 5 live and Independent Radio News. The research was also covered by the print media including the Financial Times, Sunday Times, The Guardian, and The Independent newspapers.

Richard is both a European and Chartered Engineer, he is a chartered fellow of both the Institute of Engineering and Technology (Manufacturing Division) and the Chartered Institute of Logistics & Transport (CILT). Professor Wilding was elected by the 20,000 members of the CILT U.K. to the Board, and is a Director and Trustee of the institute. He is a founder & steering Committee Member of the CILT "Logistics Research Network", a global network of academics and practitioners involved in state-of-the-art logistics and supply chain research. He is also Co-Chairman of the CILT "Leaders in Supply Chain" Forum, a group limited to the top 120 Logistics and Supply Chain Directors from Europe. Richard is also a Member of The Higher Education Academy in recognition of his innovative approaches to teaching and course design.

Richard’s special areas of interest include the creation of collaborative business environments, reducing supply chain vulnerability & risk, time compression and techniques for aligning supply chains to maximise customer value and reduce cost.

Web: www.richardwilding.info and www.cranfield.ac.uk/scm