1) The document discusses how to control risks in a supply chain. It defines supply chain risk and explains why controlling risks is important to minimize disruptions. 2) It describes how risks flow through a supply chain and provides an example using the food industry. Both operational and risk information must flow between all entities. 3) The document outlines how to develop a risk control and monitoring framework including using risk technologies, implementing risk-focused processes, and developing skills in risk analysis, monitoring, and communication. It provides examples of how each component contributes to managing supply chain risks.

1. HOW TO CONTROL SUPPLY CHAIN RISKS
March 13, 2013
Larry Smith & Neil Smith
from

2. RISK-REWARD FRAMEWORKS
6
RISK-REWARD
DECISIONS
RISK-REWARD
COMMUNICATIONS
RISK
CONTROL
RISK
ANALYSIS
RISK
MONITORING
VALUE
CREATION
Strengthen your business capabilities.
Quick Background
About
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3. • Production planners
• Production control managers
• Purchasing managers
• Customer service managers
• Inventory managers
When something goes wrong in your supply chain, people connected to the
supply chain experience the burden.
The issue results in a domino effect of problems for dependent
stakeholders. You experience these risks through:
How can you gain control over the risks that exist, hide and emerge in your
supply chain?
•A lack of control over your day-to-day process
•More stress in your work life
•Internal debates
•Lack of clarity for decision-making
•And other experiences
Internal & external risks affect your job, your company and other stakeholders.
HOW TO CONTROL SUPPLY CHAIN RISKS
• Supply chain managers
• Financial managers
• CEO, CFO, COO, CRO
• Your customers
• AND YOU
• Warehousing managers
• Distribution managers
• Business partners
• Product development
• Product management
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4. How to Control Supply Chain Risks
1. What is the definition of supply chain risk?
2. Why supply chain risk controls are important to minimize current & future disruptions
3. What is the difference between Supply Chain:
a. Risk identification & assessment
b. Risk control & monitoring
1. How to develop a risk control & monitoring framework for your supply chain
Topics for Today’s Discussion

5. What is the definition of supply chain risk?
Something in your supply chain that may:
1.go out of control and
•impact your business
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6. Implications
Depressed stock price
Market losses to competition
Company sold
Chapter 7
Criminal law suits
Damaged reputation
Revenue losses
Damaged reputation
Business Impacted
Genzyme Corporation
Peanut Corporation of America
Toyota
Tyson Foods
iRobot
Issue
Virus
Salmonella
Brake recall
Beef recall
Defense spending Loss of customer base
Examples
Industry
Drug
Food
Automotive
Food
Robotics
44 Deaths
Company closure
Litigation
NECC Compounding Center Meningitis poisoningDrug
People Died
Litigation
Big Dig Tunnel Ceiling Collapse Loose Ceiling PlateConstruction
What is the definition of supply chain risk?
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7. Why supply chain risk controls are important
to minimize current & future disruptions

8. Manufacturers Distributors Resellers
Logistics
Providers
Customer
Logistics
Provider
Logistics
Provider
Logistics
Provider
Raw material
suppliers
Farmer
Grower
Importer
Food
Warehouser
Wholesaler
Supermarket
Restaurant
Hotel
Food
Producer Consumer
LP
2 4
31
2
3
1 3
2
LP LP
1 11
2
3
2
© Equity Metrics - All Rights Reserved
Why supply chain risk controls are important
to minimize current & future disruptions
flow of operational information
© Equity Metrics - All Rights Reserved
Example: Food Industry

9. Manufacturers Distributors Resellers
Logistics
Providers
Customer
Logistics
Provider
Logistics
Provider
Logistics
Provider
Raw material
suppliers
Farmer
Grower
Importer
Food
Warehouser
Wholesaler
Supermarket
Restaurant
Hotel
Food
Producer Consumer
LP
2 4
31
2
3
1 3
2
LP LP
1 11
2
3
2
© Equity Metrics - All Rights Reserved
flow of risk information
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Why supply chain risk controls are important
to minimize current & future disruptions
Example: Food Industry

10. Manufacturers Distributors Resellers
Logistics
Providers
Customer
Logistics
Provider
Logistics
Provider
Logistics
Provider
Raw material
suppliers
Farmer
Grower
Importer
Food
Warehouser
Wholesaler
Supermarket
Restaurant
Hotel
Food
Producer Consumer
LP
2 4
31
2
3
1 3
2
LP LP
1 11
2
3
2
© Equity Metrics - All Rights Reserved
Why supply chain risk controls are important
to minimize current & future disruptions
flow of operational information
© Equity Metrics - All Rights Reserved
Example: Food Industry
flow of risk information

11. Manufacturers Distributors Resellers
Logistics
Providers
Customer
Logistics
Provider
Logistics
Provider
Logistics
Provider
Raw material
suppliers
Farmer
Grower
Importer
Food
Warehouser
Wholesaler
Supermarket
Restaurant
Hotel
Food
Producer Consumer
LP
2 4
31
2
3
1 3
2
LP LP
1 11
2
3
2
© Equity Metrics - All Rights Reserved
flow of risk
information
Why supply chain risk controls are important
to minimize current & future disruptions
1 1
1 3
2
LP LP
1
2
3
2
Example: Food Industry

12. Flow of risk Information
EXTERNAL RISKS
market risks
regulatory risks
economic risks
environmental risks
legal risks
financial risks
operational risks
Manufacturer
INTERNAL RISKS
1 Business Risks
flow of risk
information
Why supply chain risk controls are important
to minimize current & future disruptions
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13. Manufacturer
Risk Information
EXTERNAL RISKSINTERNAL RISKS
1 Business Risks
Why supply chain risk controls are important
to minimize current & future disruptions
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financial risks
operational risks
market risks
regulatory risks
environmental risks
legal risks
economic risks
Credit rating
Margin generation
Unplanned costs
Financing availability

14. Manufacturer
Risk Information
EXTERNAL RISKSINTERNAL RISKS
1 Business Risks
Why supply chain risk controls are important
to minimize current & future disruptions
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Engineering changes
Product contamination
Change in raw material
Transportation merger
Capacity constraints
Financial credit
Supplier quality
Security breach
Smart grid outage
Product delays
supplier risks
operational risks
EXTERNAL RISKS
market risks
regulatory risks
environmental risks
legal risks
economic risks
financial risks

15. Manufacturer
Risk Information
EXTERNAL RISKSINTERNAL RISKS
1 Business Risks
Why supply chain risk controls are important
to minimize current & future disruptions
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Manufacturer
market risks
regulatory risks
environmental risks
legal risks
economic risks
operational risks
Stock prices
Oil prices
Interest rates
Foreign exchange prices
Defense spending
Commodity prices
Labor shortage
Market consolidation
Union strikes
financial risks
1

16. Manufacturer
Risk Information
EXTERNAL RISKSINTERNAL RISKS
1 Business Risks
Why supply chain risk controls are important
to minimize current & future disruptions
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economic risks
market risks
environmental risks
legal risks
regulatory risks
Policy reform
Border security
Government sequester
Changing government regulations
operational risks
financial risks

17. Manufacturer
Risk Information
EXTERNAL RISKSINTERNAL RISKS
1 Business Risks
Why supply chain risk controls are important
to minimize current & future disruptions
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environmental risks
market risks
economic risks
regulatory risks
legal risksoperational risks
financial risks
Floods
Fires
Hurricanes
Earthquakes
Tsunamis

18. Manufacturer
Risk Information
EXTERNAL RISKSINTERNAL RISKS
1 Business Risks
Why supply chain risk controls are important
to minimize current & future disruptions
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regulatory risks
market risks
environmental risks
legal risks
economic risks
operational risks
financial risks
Tax reform
Minimum wage changes
Logistical restrictions
Trade barriers

19. Regulator Modify
regulatory
policies
Regulator Perspective
Information Shapes Decisions that Impact Dependent Stakeholders
Foresee
economic risks
Notify
corporations

20. Information Shapes Decisions and
Impact Interconnected Stakeholders in the Supply Chain
Manufacturer’s Perspective
Manage financial condition
Manage operational state
risk
information
BUSINESS PERFORMANCE
MANAGEMENT
Manufacturer 1
Perception:
Regulation will
impact our margins
We can then
maintain our margins
receive change in
regulatory policy
Reaction:
find a lower price supplier

21. Risk control status of your supply chain
...capture risk information across your supply chain
that can impact your business?
...store the risks in a central risk register?
...implement risk control measures at the process level?
...monitor risk thresholds?
...evaluate the cause and effect of the risks?
NO
out of control
YES
YES
YES
YES
YES
YES
YES
In Control
Does your company...

22. Risk Control
& Monitoring
Risk Identification
& Assessment
Risk control status of your supply chain
Does your company...
...capture risk information across your supply chain
that can impact your business?
...store the risks in a central risk register?
...implement risk control measures at the process level?
...monitor risk thresholds?
...evaluate the cause and effect of the risks?
...communicate risk violations to impacted stakeholders?
...shape decisions based on current and future risk states?

23. Risk Information
BUSINESS PROCESS MANAGEMENT
RISK-REWARD DECISIONS
STAKEHOLDER COMMUNICATIONS
RISK-REWARD PROCESSES
YOU
Why supply chain risk controls are important
to minimize current & future disruptions
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24. Risk Information
Risk perspective
BUSINESS PROCESS MANAGEMENT
RISK-REWARD DECISIONS
STAKEHOLDER COMMUNICATIONS
RISK-REWARD PROCESSES
Why supply chain risk controls are important
to minimize current & future disruptions
RISK-REWARD PROCESSES
YOU

25. Who has experienced supply chain risks
in their business?
Audience question
Why supply chain risk controls are important
to minimize current & future disruptions

26. What types of supply chain risks
have you experienced?
Audience question
Why supply chain risk controls are important
to minimize current & future disruptions

27. What are some challenges you’ve experienced
to control those risks?
Audience question
Why supply chain risk controls are important
to minimize current & future disruptions

28. How could your supply chain risks
affect your business?
Audience question
Why supply chain risk controls are important
to minimize current & future disruptions

29. How to develop a Risk Control & Monitoring Framework
For your supply chain

30. How to Develop a Risk Control & Monitoring Framework
For Your Supply Chain
attain
adaptability
REALIZE
efficiency
ACHIEVE
effectiveness
RISK CONTROL
EXCELLENCE
Analytics
Process Execution
Frameworks
Risk
technology
capabilities
Risk-centric
processes
Risk-focused
people skills

31. How to Develop a Risk Control & Monitoring Framework
For Your Supply Chain
Risk
technology
capabilities Analytics
Process Execution
Frameworks
Risk-centric
processes
Risk-focused
people skills
attain
adaptability
REALIZE
efficiency
ACHIEVE
effectiveness
RISK CONTROL
EXCELLENCE

32. How to Develop a Risk Control & Monitoring Framework
For Your Supply Chain
risk
analysts
decision
makers
risk
monitors
business
stakeholders
business
stakeholder
communicators
Risk-focused
people skills
risk
communicators
Supply Chain
Risk Control Skills
2
3
risk
aggregators1
5
7
6
4

33. How to Develop a Risk Control & Monitoring Framework
For Your Supply Chain
Analytics
Risk-focused
people skills
Risk-centric
processes
Process Execution
Frameworks
Risk
technology
capabilities
attain
adaptability
REALIZE
efficiency
ACHIEVE
effectiveness
RISK CONTROL
EXCELLENCE

34. How to Develop a Risk Control & Monitoring Framework
For Your Supply Chain
risk
aggregation
risk
analysis
risk-based
decision-making
risk
monitoring
stakeholder
communication
Supply Chain
Risk Control
Processes
Risk-centric
processes
risk
communication
2
3
1
4
6
5

35. How to Develop a Risk Control & Monitoring Framework
For Your Supply Chain
Risk
technology
capabilities Analytics
Risk-focused
people skills
Risk-centric
processes
Process Execution
Frameworks
attain
adaptability
REALIZE
efficiency
ACHIEVE
effectiveness
RISK CONTROL
EXCELLENCE

36. How to Develop a Risk Control & Monitoring Framework
For Your Supply Chain
Profile supply chain
participants
Capture
risk measures
Pre-experience
decision
implications
Monitor
changing
risks
Illustrate
stakeholder
viewpoints
Supply Chain
Risk Technology
Manage risk
scenarios
Visualize
changing
risk conditions
Risk
technology
capabilities
2
3
1
5
7
6
4

37. Larry Smith & Neil Smith
from
Thank you for your time.