Supply Chain Risk Mitigation using Collaborative approach

1. Supply chain risks mitigation: a collaborative approach
Ahmed A.L (MCIPS)

2. Presentation Outline
• Introduction
• Risk management
• Collaboration as a tool for supply
chain risks mitigation
• Conclusion

3. Objective of the presentation
• To explain why supply chain vulnerability is a
critical concern to business
• To also suggest how collaboration can be
used to mitigate supply risk from the
perspective of the resource based view Theory
(RBV)

4. Challenges in supply Chain today
• Faster (Growth, Innovation)
• Stronger (Competition)
• Cheaper (Lean, Efficient)
• Shorter (Effective, lead times)
• Wider (Globalisation)
• Changing ( Customer
requirements, CPFR, Technology)

5. Survey suggests that

6. Fact is
The inter-connectivity of a supply
chain makes it possible to achieve
competitive advantage.
(Christopher 2002 ;Harland,
Brenchley and Walker 2002)
The dynamic and interconnected nature of
industries and firms that form the supply chain
has also made them vulnerable to disruptions -
Lee (2004)

7. We have seen so many examples
• Ericsson (2000)
o Fire halted Operations
o Over $400 million lost revenue
• Samsung (2007)
o Power outage disrupted operations
o 15% NAND production shortage
o Fall in stock price
• Matsushita battery (2007)
o Fire halted operation
o $85 million lost sales
o Affected supply of batteries to many electronic
device OEMs

8. • Material,
• Information
• Cash Flows
Supply Chain risks can seriously disrupt or delay:
Any of which can damage sales, increase costs — or both.

9. The costs due to supply chain disruptions are Huge
Business Continuity Institute (Survey report 2013)
Survey shows that of 519 respondents
• 75% of respondents experienced at least one disruption
incidence in the past 12 months
• 15% suffered a cost of more than a $1.35 million US
• 9% experience a single-event disruption that cost in
excess of $1.35 million US
• 24% said they suffered brand and reputation damage
• 26% saw increased stakeholder concern
• 3% witness a drop in their share price

10. Risk management Realities in O&G
For the Oil & Gas industry today projects are risky.
• We are pushing the technology envelope, and executing projects in
increasing deep water and frontier areas.
• Owner/Operators want to receive a completed project that meets the
desired function, in a defined timeframe, and within an acceptable cost

12. Lets look at the issue from theoretical stand point
The Resource Based View of the firm (RBV)
The Theory asserts that
• The essence of decision making is to determine
how firm and supply chain resources can be
configured to achieve inimitable advantage and
superior performance
• Resources and capabilities can be configured for
strategic flexibility as well as to control risks and
disruption
• Achieving this requires collaboration among diverse
members of a supply chain- (Alfred et al 2011).

13. Collaboration
Has many definitions , but the can all be summed into the following
Collaboration is founded through the sharing of information among
supply chain partners on the basis Mutuality of benefits, rewards
and risks-
(Stank et al. 1999; Barratt and Oliveira 2001)

14. Why we need to collaborate
• Closer working relationships with suppliers is a key supply network risk
management strategy. - Zsidisin and Ellram (2003) and Zsidisin et al.
(2000)
• building resilience to supply chain risks requires a high degree of
collaboration- (Christopher and Peck 2004)
• Krause (1999) finds that communication and early involvement of
suppliers in strategic decision-making is an important element of SCRM.
Several authors have suggested that:
Supply network risks must be mitigated through collaboration among
supply network partners (Christopher 2002, Tang 2006)

15. Thus, a key element in any successful supply network risk
management strategy is effective relationship management and a
collaborative climate between supply network partners- (Kessler et al.
2012).
In a 2010 survey, CGN found that the top three risks
companies battled in the past year included
• Cost
• General availability of product from their supply base
• lack of supplier alignment with their goals
All three risks scream for an increase in collaboration
between corporations and their supply base.

16. Successful Collaboration Relies on
• Development of mutual interest between
members of a collaborative team
• The willingness to share information that
can benefit all members of the team
Treat all suppliers,
outsourcing
partners, customers
and service providers
as an extension of
the organisation
Enhance mutual
trust through
putting in place
• Set of service level
agreements
• Associated performance
Measurement tools

17. Who can get involved in collaborative efforts?
The answer is every company that wants to
mitigate risk must make a sort of
collaborative effort
It can be
• Internal - involving different department of a
company
• External – with other participating groups with
a company’s supply chain
Even competitors can collaborate
(Horizontal collaboration)

18. Risks of collaboration
• Collaboration can be a risk on its self when combined
with Competitive behaviours among supply chain
partners (Srivastava, and Gnyawali 2014).
• Dependence on strategic suppliers is a key
vulnerability factor (Pettit, Fiksel, and Croxton 2010).
Developing a close, collaborative relationship converts this
dependency into interdependency, with shared goals and shared
rewards

19. Benefits of collaboration
• It allows companies to establish strategic partnerships with its
suppliers and trading partners in setting mutually beneficial goals.
• It encourages sharing of business processes and information which
helps mitigate risks
• It assists in driving market share, sales and product adoption while
maximising return on assets and investment

20. The collaboration game is ever increasing in relevance
“currently , almost every industry is experimenting with supply
chain collaboration. Creatively adopting the concept to fit its
specific needs”
SAP publication (2007)
For example
• Retail and consumer products industry - Lean and JIT using
information systems for responsive replenishments
• Pharmaceutical industry – working together to prevent
counterfeit products from entering into their supply chain

21. Collaboration is a common practice within the oil and Gas
Technip/Hereema joint venture can
be seen as result of complexities
associated with deep water
exploration (Risk Hedging)
Success from that collaboration won
the their biggest Subsea contract
(Koambo project in Angola)

22. Conclusion

23. … and always remember
Never put too much
expectation or demand on the
process and know your
limitations

25. Thank you for listening

26. References
ALLRED, C.R. et al., 2011. A Dynamic Collaboration Capability as a Source
of Competitive Advantage. Decision Sciences, 42(1), pp. 129-161 BARRATT,
M. and OLIVEIRA, A., 2001. Exploring the experiences of collaborative
planning initiatives. International Journal of Physical Distribution &
Logistics Management, 31(4), pp. 266-289
ZSIDISIN, G.A., ELIRAM, L.M. and OGDEN, J.A., 2003. The Relationship
between Purchasing and Supply Management's Perceived Value and
Participation in Strategic Supplier Cost Management Activities. Journal of
Business Logistics, 24(2), pp. 129-154