Executive Overview Today’s supply chains are a risky proposition. The factors are numerous and rising. They include: outsourcing, complexity, global operations, demand volatility and supplier fragility. In our view, supply chains are not up to the challenge. They are fragile. Supply chain risk management is a factor in business continuity planning. Over 80% of companies see risk management as an important piece of their company’s strategy, but in over 50% of companies, the effort is buried in other processes. It is not top of mind. In another 20% of companies, leaders are just getting started on a risk management program. The reason? Many of the concepts are new. The processes are evolving, and companies are unsure. However, the risks are growing and the potential consequences for companies are large.it is growing in importance. Consider the facts: • Pervasive. In 2013, 80% of companies had a material disruption. It was not one. On average, it was three. Companies are not prepared for the challenges they face. • False Sense of Security? Today, 68% of companies feel that they are better prepared than five years ago, but their focus has been a narrow and traditional focus on supply. Few companies are attacking risk management holistically. • Foundational Gaps. Visibility in the extended supply chain--both demand and supply--is a growing risk. Demand volatility is the largest gap to companies today; and only 18% of companies have visibility to second and third-tier suppliers. Yet, the funding for companies is tied up in multi-year ERP programs that do not address the problem. In this report, we share the results from the study along with case studies from our client engagements to make the point that supply chains today are not able to withstand the risk. We believe that there needs to be a call to action.

1. Supply Chain Insights LLC Copyright © 2014, p. 1
Supply Chain
Risk Management Study
Summary Charts
April 2014

2. Supply Chain Insights LLC Copyright © 2014, p. 2
Agenda
 Study Overview
 Risk Overview
 Risk Drivers and Disruptions
 Risk Management Performance

3. Supply Chain Insights LLC Copyright © 2014, p. 3
Study Overview

4. Supply Chain Insights LLC Copyright © 2014, p. 4
Respondents Primarily Work for Manufacturers and
Average Revenue is $5 Billion

5. Supply Chain Insights LLC Copyright © 2014, p. 5
Two-Thirds of Manufacturers Are in a Process Industry,
Especially Consumer Packaged Goods

6. Supply Chain Insights LLC Copyright © 2014, p. 6
Respondents Primarily Work in a Supply Chain Role
and One-Quarter Are Vice Presidents or Higher

7. Supply Chain Insights LLC Copyright © 2014, p. 7
Most Report That the Supply Chain Leader Reports
to a C-Level Executive or the President

8. Supply Chain Insights LLC Copyright © 2014, p. 8
Agenda
 Study Overview
 Risk Overview
 Risk Drivers and Disruptions
 Risk Management Performance

9. Supply Chain Insights LLC Copyright © 2014, p. 9
Definition Given to Respondents

10. Supply Chain Insights LLC Copyright © 2014, p. 10
Risk Management Is a Relatively Low Source of
Business Pain for Respondents

11. Supply Chain Insights LLC Copyright © 2014, p. 11
Over Half Report Risk Management Is Embedded in
Other Processes

12. Supply Chain Insights LLC Copyright © 2014, p. 12
Most Consider Risk Management an Important
Part of Company’s Supply Chain Strategy

13. Supply Chain Insights LLC Copyright © 2014, p. 13
Over Half Driven to Risk Management Because
of Major Supply Chain Disruption

14. Supply Chain Insights LLC Copyright © 2014, p. 14
Two in Five Report the Head of the Supply Chain Is
Responsible for Supply Chain Risk Management

15. Supply Chain Insights LLC Copyright © 2014, p. 15
Top Supply Chain Descriptive Challenges Today:
Global, Many, Controlled, & Room for Improvement

16. Supply Chain Insights LLC Copyright © 2014, p. 16
Top Supply Chain Descriptive Challenges NEXT Year:
Proactive, Strategic, Aligned, Controlled & Global

17. Supply Chain Insights LLC Copyright © 2014, p. 17
Greatest Improvements in Positive Descriptors:
Proactive and Aligned

18. Supply Chain Insights LLC Copyright © 2014, p. 18
Agenda
 Study Overview
 Risk Overview
 Risk Drivers and Disruptions
 Risk Management Performance

19. Supply Chain Insights LLC Copyright © 2014, p. 19
Supply Side and External Risks Are Most Common
Issues Addressed by Risk Management

20. Supply Chain Insights LLC Copyright © 2014, p. 20
Top Three Drivers of Supply Chain Risk TODAY:
Demand Volatility, Supply Chain Visibility,
and Operations Complexity

21. Supply Chain Insights LLC Copyright © 2014, p. 21
Top Categories for Most Common Risk Drivers:
Partners and Internal Drivers

22. Supply Chain Insights LLC Copyright © 2014, p. 22
Partner-Related Drivers Expected to Decline Over Time;
Internal and Consumer Drivers Expected to Increase

23. Supply Chain Insights LLC Copyright © 2014, p. 23
Partner-Related Drivers Expected to Decline Over Time;
Internal and Consumer Drivers Expected to Increase

24. Supply Chain Insights LLC Copyright © 2014, p. 24
Drivers Most Expected to Increase:
Regulatory Compliance, Operations Complexity,
and Consumer Power

25. Supply Chain Insights LLC Copyright © 2014, p. 25
Areas of Increasing Supply Chain Risk:
Operations Complexity, Regulatory Compliance and
Consumer Power

26. Supply Chain Insights LLC Copyright © 2014, p. 26
Demand Volatility Is Only Top 3 Driver in
Past, Present and Future

27. Supply Chain Insights LLC Copyright © 2014, p. 27
Top Areas of Increased Risk vs. 5 Years Ago:
Regulatory Compliance and Operations Complexity

28. Supply Chain Insights LLC Copyright © 2014, p. 28
Top Areas of Expected Increase Risk in 5 Years:
Regulatory Compliance and Operations Complexity

29. Supply Chain Insights LLC Copyright © 2014, p. 29
Top Areas of Increased Risk in 5 Years vs. 5 Years Ago:
Operations Complexity and Consumer Power

30. Supply Chain Insights LLC Copyright © 2014, p. 30
Top Two Supply Chain Disruptions in 5 Years:
2011’s Tsunami in Japan and 2012’s Hurricane Sandy

31. Supply Chain Insights LLC Copyright © 2014, p. 31
80% Had Any Disruptions in 2013,
but Only 30% Included Them in Financial Reporting

32. Supply Chain Insights LLC Copyright © 2014, p. 32
Agenda
 Study Overview
 Risk Overview
 Risk Drivers and Disruptions
 Risk Management Performance

33. Supply Chain Insights LLC Copyright © 2014, p. 33
About Half Report Their Company Is Performing
Well on Supply Chain Risk Management

34. Supply Chain Insights LLC Copyright © 2014, p. 34
While 80% Report Risk Management Is Important,
Only Half Report Good Performance

35. Supply Chain Insights LLC Copyright © 2014, p. 35
Over Two-Thirds Claim Company’s Risk Management
Is Better Than 5 Years Ago

36. Supply Chain Insights LLC Copyright © 2014, p. 36
Why Changes in Risk Management Vs. Five Years Ago
(Open-Ended)

37. Supply Chain Insights LLC Copyright © 2014, p. 37
Demand Volatility Is Top Driver of Risk Today, but
Companies Are Most Prepared for Product Quality Issues

38. Supply Chain Insights LLC Copyright © 2014, p. 38
Drivers Less Prepared for Compared to Risk:
Computer Security and Product Quality

39. Supply Chain Insights LLC Copyright © 2014, p. 39
Less Than One in Five Has Visibility of Their Extended
Network During Supply Chain Disruptions

40. Supply Chain Insights LLC Copyright © 2014, p. 40
82% Monitor the Financial Status of 1st Tier Suppliers
vs. 44% for Extended Tier Suppliers

41. Supply Chain Insights LLC Copyright © 2014, p. 41
Most Important Risk Management Techniques:
Business Continuity Plans, Conversations with Suppliers
and Customers, and Inventory Buffers

42. Supply Chain Insights LLC Copyright © 2014, p. 42
Overall Back-up Plans Are Most Important Type
of Risk Management Technique

43. Supply Chain Insights LLC Copyright © 2014, p. 43
Expected New Risk Management Techniques
(Open-Ended)