Managing Supply Chain Risk

Taken from Purchasing.com

What is Our Carbon Footprint?

A carbon footprint is a measure of the impact our activities have on the environment, and in particular climate change. It relates to the amount of greenhouse gases produced in our day-to-day lives through burning fossil fuels for electricity, heating and transportation etc. The carbon footprint is a measurement of all greenhouse gases we individually produce and has units of tonnes (or kg) of carbon dioxide equivalent.

The pie chart above shows the main elements whichmake up the total of an typical person's carbon footprint in the developed world.

A carbon footprint is made up of the sum of two parts, the primary footprint (shown by the green slices of the pie chart) and the secondary footprint (shown as the yellow slices).

1. The primary footprint is a measure of our direct emissions of CO2 from the burning of fossil fuels including domestic energy consumption and transportation (e.g. car and plane). We have direct control of these.

2. The secondary footprint is a measure of the indirect CO2 emissions from the whole lifecycle of products we use - those associated with their manufacture and eventual breakdown. To put it very simply – the more we buy the more emissions will be caused on our behalf.

The Focus of the S&OP in These Troubled Times

While the basic format of the S&OP process—that of running periodic, multi-functional planning meetings—should not change, the areas of discussion and focus should, in order to consider increased supply-demand uncertainties. In this regard, in this regard wthere are five pieces of advice to help forecast and plan with these increased risks:

Since new products and promotions are instituted to gain market share, there is a need for better forecast and planning the supply needed to make them successful. Planners need to communicate more effectively with Sales and Marketing. These promotions and new product launches must be closely monitored to ensure adequate supply.

One must be quick to detect changes in consumption. A change in consumption might come and go before it is detected if one is looking at shipment data alone. We need to better understand the impact of economic volatility on demand. Planners then need to stay abreast of what is going on in the economy to project future impacts.

Minimizing demand uncertainties by focusing on the customer, channel, and product segments that most contribute to revenues and profitability. Leverage formal risk management techniques as supply-demand risks increase. Wemust move away from the use of point forecasting to range forecasting and scenario planning to better recognize demand uncertainties.

Supply planners will need this level of recognition to mitigate risks via the implementation of hedging, buffering, and multi-sourcing strategies aimed at ensuring reliable supply.

The process of S&OP meetings should remain the same, planners can gain from following the above advice during these turbulent times. Companies that focus their S&OP in this way stand a good chance of making it over that last big wave on the way to calmer economic waters—meanwhile, their competitors that don't, might not.

The latest Supply Risk

The Forecast Just Got Worse

Report from Standard &Poors dated Feb 5, 2009

"We expect the speculative-grade default rate to escalate to a mean forecast of 13.9% by December 2009, but it could reach as high as 18.5% if economic conditions are worse than expected.”

What does this mean for the supply chain?

Default rates are a leading indicator for business bankruptcies. Supply managers should take measures to detect risk of supplier bankruptcies, disruptions and quality issues in the coming 12 months as the recession takes hold. The question is: Which suppliers are most at risk. How can you find out whether your suppliers are really at risk of financial ruin? What are the tools available to you?

Tools

• 
  Audit the financial, operational, and balance of trade exposure of your most strategic or critical suppliers.
• Look for early warning signs. Drops in quality or shipment delays can be indications that the supplier has cut into its operations. Requests for early payment or changes in support personnel should also raise a red flag.
• Increase the frequency of supplier performance reviews. Do regular performance reviews with suppliers. In the face of highly volatile markets where credit is tight, you should step up these reviews to at least quarterly with your most strategic suppliers and semi-annually with your next tier of suppliers.
• Pay close attention to the balance of trade and the underlying market for the materials that comprise inputs into your suppliers’ products. These reviews serve as an opportunity to identify additional cost and waste.
• Automate your supplier management process. Do this by leveraging supplier management tools that combine self-service portal for suppliers to publish and manage their own profile information ; score carding and performance KPI’s, such can improve visibility and control of risk and enable you to extend supplier management to a broader portion of your supply base.

Key Atributes to an Effective Sypply Chain

This may be of interest to individuals who are not sure just what is required to have an effective supply chain:

Transparency - Supply chain processes and procedures should be transparent to all stakeholders. The higher the visibility, the easier it is to identify problems in the system.

Speed – Determine the speed of each process and procedure in the supply chain and assess how to improve on it. Benchmarking can play an important role here.

Collaboration - Sharing of information and key learning's among supply chain partners can drastically improve your supply chain.

Trust - Sharing of information and knowledge will lead to improved partnerships and trust.

Consumer orientated - The needs of the consumer should always be the focus point of any supply chain system.

Flexibility - A rigid supply chain system can not respond to market changes.

Variability - A one size fits all solution is highly unlikely to work for all channels and customers segments.

Ongoing assessment - Supply chains are not static. Trends need to be evaluated regularly.

Patience - Newly implemented systems require a patient approach as changes are unlikely to yield immediate results.

Risk. - We must understand what WILL . happen if we have a broken link and decide BEFOR what our course of action will be>