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Metrics Track Update

This update provides an overview of standard metrics for measuring risk in supply chain operations. It includes definitions, formulas, data sources, and typical uses for metrics like Revenue Exposure and Time to Recover. The portfolio aims to improve business continuity planning and effectiveness.

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Metrics Track Update

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  1. Metrics Track Update October 2008 Ravi Anupindi Tim Astley Andrew Cox Feryal Erhun Frederick Hartung John O’Connor Dave Pollard Lance Solomon

  2. Agenda Track Scope & Objectives Track Deliverables Metrics Portfolio High Level Overview of Metric Definitions Format of Detailed Metrics Definitions Example Metric Definition: Revenue Exposure Next Steps

  3. Metrics Track Scope & Objectives • Develop a list of metrics that represent the standard for measuring risk • Develop standard definitions and mathematical formulas, where appropriate for metrics • Common data sources for creating metrics • Define typical uses for metrics

  4. Metrics Track Deliverables • Develop list of standard metrics to measure risk • Develop definitions of standard metrics, including math formulas, where appropriate • Define data sources & programs dependencies • Publish metrics and definitions to the council • Commitment from council to use metrics and report out progress • Publish metrics in SCRLC newsletter

  5. Metrics Portfolio Time to Recover Revenue Exposure Resiliency Index Business Continuity Plan Effectiveness Tactical Monitoring SCRLC Metrics Portfolio

  6. Metrics Portfolio Time to Recover Revenue Exposure Resiliency Index Business Continuity Plan Effectiveness Tactical Monitoring SCRLC Metrics Portfolio • Measures operational impact of a supply chain disruption • Useful in establishing recovery objectives • Enables assessment of multiple supply chain components

  7. Metrics Portfolio Time to Recover Revenue Exposure Resiliency Index Business Continuity Plan Effectiveness Tactical Monitoring SCRLC Metrics Portfolio • Measures financial impact of a supply chain disruption • Useful in prioritizing mitigation efforts • Allows assessment of supply chain disruptions to help target recovery plans

  8. Metrics Portfolio Time to Recover Revenue Exposure Resiliency Index Business Continuity Plan Effectiveness Tactical Monitoring SCRLC Metrics Portfolio • Combines multiple measures into a single metric • Enables comparison of different organizational entities (e.g. business units, product families, etc) • Useful for Executive Level discussions

  9. Metrics Portfolio Time to Recover Revenue Exposure Resiliency Index Business Continuity Plan Effectiveness Tactical Monitoring SCRLC Metrics Portfolio • Evaluates completeness of BCP programs • Evaluates quality of BCP response

  10. Metrics Portfolio Time to Recover Revenue Exposure Resiliency Index Business Continuity Plan Effectiveness Tactical Monitoring SCRLC Metrics Portfolio • Provide an early warning system for unknown events or weaknesses in the supply chain

  11. High level description of the metric Definition Mathematical Formula Details on how the metric can be calculated, where applicable Typical Data Source Level of Application Typical Uses Data sources that are typically used in the calculation Where the metric can be applied (e.g. Corporate, BU, Product) How the metric is used and what can it drive Format For Metrics Definitions

  12. Example Metrics Definition – Revenue Exposure • Definition • The maximum amount of gross revenue potentially lost during a supply chain disruption • Defined as an amount of time as TTR • Mathematical Formula • Revenue * TTR + Go Forward Market Share Loss • Go Forward Market Share Loss may be hard to estimate but it is included to drive thought around how TTR may impact revenue exposure based on how your competition can react • Revenue and TTR need to be in the same time units • Typical Data Sources • Sales/Shipment History • Forecasts • See TTR sources • Level of Application • From a piece of equipment on the factory floor to the enterprise • Typical Uses • Benchmarking with competitors • Prioritizing mitigation efforts • Trade-off cost of mitigation vs. TTR and Revenue Exposure reduction • Impact on stock price • Crisis response analysis

  13. Next Steps • Agreement to adopt the metrics by Council membership • Publish Metrics: Newsletter, Website • More Detailed Standards? • More definition on real time measurements?

  14. Backup

  15. Metrics Definition: TTR • Definition • Amount of time required to restore 100% operational output (units) following a supply chain disruption • Defined as an amount of time (i.e., weeks, days, hours, shifts, etc.) • Mathematical Formula • N/A • Typical Data Sources • BCP Program • Lead Times • Transit Times • Governmental Sources • Level of Application • From a piece of equipment on the factory floor to the enterprise • There are 2 measures of TTR • TTR at an alternate site • TTR at the impacted site • Typical Uses • Trade-off of TTR Mitigation vs. Cost • TTR Benchmarking with competitors • Need to look across all nodes to assess supply chain TTR • Setting TTR goals to focus mitigation efforts • Manage customer expectations on continuity of supply

  16. Metrics Definition: Revenue Exposure • Definition • The maximum amount of gross revenue potentially lost during a supply chain disruption • Defined as an amount of time as TTR • Mathematical Formula • Revenue * TTR + Go Forward Market Share Loss • Go Forward Market Share Loss may be hard to estimate but it is included to drive thought around how TTR may impact revenue exposure based on how your competition can react • Revenue and TTR need to be in the same time units • Typical Data Sources • Sales/Shipment History • Forecasts • See TTR sources • Level of Application • From a piece of equipment on the factory floor to the enterprise • Typical Uses • Benchmarking with competitors • Prioritizing mitigation efforts • Trade-off cost of mitigation vs. TTR and Revenue Exposure reduction • Impact on stock price • Crisis response analysis

  17. Metrics Definition: Resiliency Index • Definition • A Score from 0 to10, with 10 being most resilient supply chain • Index Components: • Substitution % • TTR (e.g., Mfg, Test Environments, Component Suppliers, etc) • % Single / Sole Sourced • Likelihood of Disruption • Network (Transportation, Factories, etc.) redundancy • IT Infrastructure & Process Redundancy • Relationships with recovery organizations (regulatory authorities, government, surveyors, damage assessment, etc.) • Organizational structure and dedicated risk management function • Mathematical Formula • Weighted average based on each component having a weight and a score from 0 to 10 • Each component scoring method will be industry specific • For example, TTR scoring could be scored on a range of 12 – 52 weeks or a range of 4 – 20 weeks • Typical Data Sources • Business Continuity Plan recovery times • Approved Vendor List • Lead times • Actuary data • Level of Application • Business Unit • Factory • Supply Chain • Product • Typical Uses • Driving behavior towards design for risk • Measuring overall supply chain risk • Insurance risk improvement discussions

  18. Metrics Definition: Business Continuity Plan Effectiveness • Definition • % of suppliers completed • % of revenue covered with BCPs • % of spend covered with BCPs • % of long lead time items with BCPs • % of part/site mappings completed • # of BCP exercises per time period • Frequency of BCP updates & reviewing • BCP Quality Score (0 to 10 with 10 being world-class) • 0, 1, 4, 7 and 10 are the only scores to use to provide differentiation • Critical assessment areas: BCP test/drilled (command post, table top, simulation), Frequency of updating, assessed by third party, communication plan, documented roles & responsibilities • Mathematical Formula • # of suppliers completed / # of suppliers surveyed • Revenue enabled by suppliers completed / Total Revenue enabled by suppliers surveyed • # of Part/Site mappings completed / # of Part/Site mappings requested • # of suppliers for parts with lead time > xxx with BCP/ # of suppliers for parts with lead time > xxx • Typical Data Sources • Approved Vendor List linked to BOM • Sales Order History or Forecast • BCP survey tracking results • Level of Application • Supplier, site and part level • Typical Uses • Measuring response rates for BCP requests • Measuring amount of revenue coverage for a BCP program

  19. Metrics Definition: Tactical Risk Measurement • Definition • Introduce a new metric which will track several tactical/operational indicators and warn decision makers about potential risks based on the current levels of these indicators. • Inventory levels, cycle times (demand and supply), quality, etc. • Mathematical Formula • (Potentially) Use SPC techniques to track the changes in indicators over time and issue warning signals for out-of-control indicators • Typical Data Sources • Planning System – inventory • Shop floor system – cycle time • Level of Application • Product level • Typical Uses • Early warning system for unknown risk or unknown events • A well-defined tactical/operational metric can bring a competitive advantage. (Remember the Nokia-Ericsson-Philips case.)

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