how to conduct a supply chain business impact analysis · 2010-07-09 · 1 april 12-14, 2010...

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April 12-14, 2010Sheraton New Orleans

How to Conduct a Supply ChainBusiness Impact Analysis

Gary S. Lynch, CISSPManaging Director & Global LeaderSupply Chain Risk [email protected]


Today

• What is our objective?

• What is the desired output?

• Where do we begin?

• What’s the system we need to achieve the desired output?

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What is our objective?

• Create a system to balance business value against potential exposure

• Build a business case for risk investment


Example

4.5 4.5

3.6

4.5

5.2

4.6

5.3 5.4

6

6.6

8.2

7.9

6.9

6.5

7.2

6.3

7

6

5.2

6.4

1

2

3

4

5

6

7

8

9Inherent Risk

1

2

3

4

5

6

7

8

9Mgmt. Effectiveness

Mngt. Effect. 4.5 4.5 3.6 4.5 5.2 4.6 5.3 5.4 6 6.6

Inherent Risk 8.2 7.9 6.9 6.5 7.2 6.3 7 6 5.2 6.4

Pt A Pt B Pt C Pt D Pt E Pt F Pt G Pt H Pt I Pt J

Revenue Stream: The Ultimate WidgetRevenue Stream: The Ultimate Widget

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What is our desired output?(macroview)

Revenue Stream: The Ultimate WidgetRevenue Stream: The Ultimate WidgetImpact

Effort

Sun/OracleEnvironment(MRP)

Testers, EM Assembly, Engineers, Sr. Bus Dev

FacilityHigh

High

Low

Low

Quad Pick & Place

Export licenses for first time shipments

Illustra

tive

Test equipment

Helium

Voice & Data Communications

Contracts

Employee files

ATI RouterInsta-pack

Crimping hand tools, cutters, irons

Cleared Personnel


What is our desired output?(microview)

Revenue Stream: The Ultimate WidgetRevenue Stream: The Ultimate Widget

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Where do we begin?

• Assumptions

• Scope

• System

• Something of value


The Reality of RiskDefinition

• Uncertainty

• Exposure to Uncertainty

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There is an infinite universe of potential failures – all with the potential for

significant impact

Consumer

Wholesaler

DistributionCenter

Filling & Packaging

Supplier Failures (financial, production,

design, etc.)

Natural Disasters

Work StoppagesLabor Disputes

Infrastructure Outages (fire in plant, power

grid down, etc.)

Unanticipated Demand Surge

or Drop-offPolitical Upheava

l

Price, Currency, and Interest

Rate FluctuationsUnanticipated

Supply Constraints,

Allocation, or Price Increases

Spoilage

Counterfeiting

Improper Handlingor Cargo Placement

Delivery Delays

Theft

Diversion/ Gray Market

Poor Packaging

Manufacturing

Raw Materials

PandemicPandemic


Exposure to Uncertainty

STEP 6 - MEASUREMENT OF RISK

25%

50%

Mitigated BI Risk

U.S. Plant

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Assumptions

• Business impact assessment versus functional impact assessment

• Collective versus individual perspective

• Goal is to determine impact regardless of exposure exists; within or outside the organization boundaries

ResourcesFunctions

Processes

Flows

Products&

Services

Clients&

Markets


Scope

• Know no borders

• However, reality is we need to do it manageable “chunks”

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Supply chains are complex, geographically distributed & collectively managed


Manageable “Chunks”Cropping

Scope

Lo

gistics

Corporate and Shared Services Support

Active Ing. & MaterialSuppliers

ActiveMaterial

SuppliersCustomers

Logistics

Sourcing Distribution (US based)

OperationsDistribution Centers &

WholesalersPrimary Care Doctors

Specialty Doctors

Hospitals

Pharmacnies

3Ps L

og

istics

Lo

gistics

R&D Clinical Development

Manufacturing

BulkProduction

Packing &Materials

Clinical Trials

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Need a system & process to manage supply chain risk

Value Alignment

Prioritization &

Allocation

GapRecognition

Options&

Alternatives

Pricing&

Measurement

ExecutionOf

Risk StrategyOptimization

RISCProgram

Diagnostic

• Value segmentation (by product, product line, SKUs, or other value creating segmentation)

• Flow analysis• Risk paradigm

set, listening posts & market sensing, client & market alignment

• Line of sight (business process & resource mapping) & scoping

• Impact failure analysis & modeling

• Relevance & threat analysis & modeling

• Current state evaluation

• Risk tolerance index (current state & benchmark)

• Risk effect analysis (current state & benchmark

• Risk option analysis & modeling (finance, alternate finance, mitigation, acceptance)

• Integration impact analysis & modeling (cost, service, social, quality)

• Solution pricing and modeling

• Business case creation with roadmap

• Decision modeling

• Risk transfer optimization analysis & modeling

• Risk mitigation optimization analysis & modeling

• Risk portfolio optimization analysis & modeling

Overall program assessment, validation, continuous improvement

• Governance & alignment

• Policy, standards & organization

• Architecture & processes

• Awareness, education & training

• Technology, tools & procedures

• NOTE: PLAN, DO, CHECK, ACT

Risk Identification(impact assessment)

Risk Measurement& Investment

Risk Execution(Mitigation, Financing,

Monitoring & Optimization)

Source: “Single Point of Failure”, Lynch, Wiley, 2009, pg 233


Objective: match greatest value with highest impact

Value Consideration• Quantitative

Contribution• Revenue• Margin• Cash• Asset

• Qualitative Contribution

• Brand• Compliance• Strategic

• Weight at point in time

Illustrative Only - Random Org Selected - Does not reflect actual priority

Hallmark Rationalization – Business AlignmentContribution to overall value of the organization

ValueFilter

Based on the value assessment, Management establishes priorities basedupon which to allocate timemanagement attention, resources, and capital

Value Target

Greeting cards

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Map product/service flows &analyze failure points


Incorporate resource categories into scope of analysis

PeoplePeople Technology and Processing

Technology and Processing

Physical Environment

Physical Environment RelationshipsRelationships

Leaders and ManagersLeaders and Managers

Critical TalentCritical Talent

Other EmployeesOther Employees

Contingent workforceContingent workforce

FunctionsFunctions

Electronic dataElectronic data

ElectronicapplicationsElectronic

applications

Nonphysical infrastructure:Nonphysical

infrastructure:

EquipmentEquipment

FacilityFacility

Raw materialsRaw materials

InventoryInventory

Work in progressWork in progress

Vital recordsVital records

Peripherals and supplies

Peripherals and supplies

Other tangible assetsOther tangible assets

Cash and currencyCash and currency

CustomersCustomers

General publicGeneral public

External suppliersExternal suppliers

Internal suppliersInternal suppliers

InvestorsInvestors

InsurersInsurers

Public and external infrastructure

Public and external infrastructure

RegulatorsRegulators

Industry consortiumsIndustry consortiums

Auditors Auditors

Service ProvidersService Providers

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Analyze impacts and prioritize both internal and external suppliers

Logistics Portion of Supply Chain (Illustrative)

PRIORITIZED FAILURE POINTS


Quantify and Qualify Impacts

• Quantitative Impact - ~$3,305,000**• Qualitative Impact – Strategic – Shipfitter shop journeyman have over 15 years experience in the second busiest fabrication department

Journeyman – Shipfitter Shop

• Quantitative Impact - ~$4,870,000**• Qualitative Impact – Strategic – Mechanical journeyman generally have approximately 20 years of experience and are not readily available for hire

Journeyman – Mechanical

• Consider expanding recruiting base to similarly skilled professions outside of marine

• Accelerate knowledge transfer through new methods of knowledge management (e.g., IT-based education, external mentoring programs)

• Establish contract or partnership with sub-contractor or competitor to provide replacement help immediately following an incident.

• Analyze the feasibility of establishing further agreements with Norfolk for skilled labor.

• Quantitative Impact - ~$5,044,000**• Qualitative Impact – Strategic – Loftsman hold critical skill sets that are very difficult to replace in a marketplace with an aging workforce

Loftsman

Recommendations*Annual ImpactCritical Skill Sets*

People (Skills)

ProductionSupport

ProductionSupportFabrication

FabricationMaterial Management

Material ManagementExecution

Planning

Execution PlanningProgram

Management

Program Management

Business Development & Contracts


Technology

Physical

Relationships

People (Skills)

ProductionSupport

ProductionSupportFabrication

FabricationMaterial Management

Material ManagementExecution

Planning

Execution PlanningProgram

Management

Program Management



Technology

Physical

Relationships

Example

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Couple of footnotes

• Not perfection on the numbers, rather a stratification

• Trajectory counts

• Behavioral issues trump all else, will have to factor in (slide)

• Impact based (versus threat)

• Don’t lose focus on overall goal


Wrap Up

• Objective

• Output

• Starting point

• System

• Law of the Laws– Behavioral

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how to conduct a supply chain business impact analysis · 2010-07-09 · 1 april 12-14, 2010...

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