Managing Supply Chain Sustainability and Risk: Keys to Success

1. Managing Supply Chain Sustainability and Risk: Keys to Success Lee Buddress, Ph.D., C.P.M. Robert G. Gleason Professor and Director Supply and Logistics Program Portland State University leeb@sba.pdx.edu

2. Supply Chain Risk ISQA 479

3. The Importance of Supply Chain Management • How to Increase Shareholder Value • Supply Chain Management is the Key • Changes in Supply Chains • Extensive, Lengthy, Complex • Geographically Disbursed • Global Nature Creates Uncertainty • Uncertainty Creates Risk

4. Supply Chain Risk • Most Research Focused From Buying Firm Down Through Suppliers • The Firm Itself and the Path to Customers Should Be Included • Definitions: • Events or actions that result in a transaction or project differing negatively from budget or plan • Events or Actions that Prevent Delivery to Customers As Promised.

5. External Supply Chain Risks:Categories • Governmental • Infrastructure • Supplier • Logistical • Terrorism • Natural Disasters • Accidents • Ethics • Price

6. External Risks: Governmental • Export Policies • Intellectual Property Protection • Protective Tariffs and Duties • Regulatory Changes • Taxes • Currency Fluctuations • Political Unrest

7. External Risks: Infrastructure • Transportation Equipment • Roads • Railroads • Ports • River • Sea • Airports • Congestion

8. External Risks: Suppliers • Operational • Equipment • Facilities • Management • Financial • Cultural/Language • Resources • Labor • Scalability • Quality • Lead Times • Monopoly/Oligopoly • Technology • Communication • Operational • Sustainability • Social Responsibility • Ethics

9. External Risks: Logistics • On Time • Freight Damage • Leakage/Shrinkage • Equipment Availability

10. External Risks • Terrorism • Physical Harm • Personnel • Cyber Attacks • Heart Bleed • Natural Disasters • Earthquakes, Tsunamis • Weather Related • Accidents

11. External Risks: Price • Trends • Volatility • Global Economics

12. Internal Supply Chain Risks: Categories • Policies • Administrative Resources • Operational Activities • Organizational Resources • Ethics

13. Internal Risks: Policies • Outsourcing • Low Bid • Freight Terms • Not Managing Processes • Reverse Logistics • Excess Inventory • Sustainability/Social Responsibility • No Standardization • Equipment • Procedures • No Formal Strategies • Not Having Policies • Ethics • Repairs

14. Internal Risks: Resources • Labor • Attract, Retain • Finances • Equipment • Technology • Automation • Communication • Enterprise

15. Internal Risks: Operational • Personnel • Numbers • Expertise • Demand Management • Customer • Supplier • Forecasting • Specifications • Project Management

16. Internal Risks: Ethics • Conflicts of Interest • Supplier Relationships • Supplier Ethics • Organizational Reputation

17. .Sustainability

18. Sustainability • Triple Bottom Line • Environmental Sustainability • Social Responsibility • Organizational Sustainability

19. Environmental Sustainability • Non-Renewable Resource Use • Energy Consumption • Effluent Discharge • Atmospheric Emissions • Hazardous Material Use

20. Social Responsibility • Ethics • Gender Equity • Living Wage • Appropriate Labor • Labor Relations

21. Organizational Sustainability • Profitability • Customer Perception • Customer Satisfaction • Long-Term Viability

22. Past Research • Sustainability and Risk Studied in Isolation • Usually Interact • Actions in One Area Create Outcomes in Others

23. Risk and Sustainability Interactions

24. Risk and Sustainability Interaction Examples • Policy: Buy from Low Price Supplier • Distant Location • Risks of Lengthy Supply Chains • Social Responsibility • Refuses to Pay Minimum Wage • Reflects Badly Onto Buying Organization • Undermines Reputation With Customers • Governmental Intervention • Environmental Questions • Organizational Sustainability

25. Risk and Sustainability Supply Chain Risk Sustainability Environmental Non-Renewable Resource Energy Consumption Emissions Hazardous Materials Social Responsibility Ethics Gender Equity Living Wage Labor and Relationships Organizational Profitability, LT Viability Customer Perceptions Customer Relationships • External • Governmental • Infrastructure • Supplier • Logistical • Terrorism • Natural Disasters • Accidents • Internal • Policies • Administrative • Operational • Organizational • Ethics

26. Risk and Sustainability Interaction Examples • Ethics • Resonates From Supplier to Internal Risks to Social Responsibility • Bribes Paid to Influence Buying Decisions • Supplier Reputation • Buying Organization Reputation • Governmental Intervention • Organizational Sustainability • Marketing • Financial

27. Risk and Sustainability Interaction Examples • Logistical Risks • Internal Operations – Continuity • Slow Steaming • Emissions – Governmental Restrictions • 200 Mile Limit – Low Sulfur Diesel • Energy Consumption • Profitability • Steamship Lines • Buying Organizations

28. Risk Prevention/Remediation • Safety Stock • Safety Lead Time • Additional Suppliers • Geographic Dispersion • Ts and Cs • Business Continuity • Ours • Suppliers • Training • ISO 31000 2009 • Supply Chain Mapping • Review Supplier Selection Process • Supplier Visits • Daily Diligence • Forecasting • Project Management

29. Key Risk Management Activity • How Suppliers Are Chosen • Supplier Visits • Supplier Mapping • Forecasting • Daily Diligence

30. Food For Thought

31. Natural Disasters • Earthquake • Major Storm • Fire • Lightening Strike • Tornado

32. East Asia Supply Locations

33. Earthquakes and Volcanos

34. Frequency of Occurrence of Earthquakes, 2012 • 8 Plus 2 7 - 7.9 12 • 6 - 6.9 108 5 - 5.9 1401 • 4 - 4.9 9,534 3 - 3.9 2,453 • 2 - 2.9 3,111 Total Earthquakes 2012 = 16,667 Total Earthquakes 2004 = 31,194 Source: USGS

35. 2013 Earthquakes • 9.0 Magnitude+ 0 • 8.0−8.9 Magnitude 2 • 7.0−7.9 Magnitude 15 • 6.0−6.9 Magnitude 114 • 5.0−5.9 Magnitude 1.064 • Totals 1,195 • Total fatalities 1,463

36. Typhoon Patterns

37. Questions • Supply Chain Risks? • Sustainability Concerns? • Not Just Asia

38. Supply Chain Concerns • Europe • Severe Storms • Political Instability • Economic Instability • U.S.A. • Severe Storms • Drought • Infrastructure • Mexico • Corruption • Drug Wars • Infrastructure • India • Corruption • Infrastructure • Quality

39. Supplier Selection Criteria Supply Chain Risk Sustainability Environmental Non-Renewable Resource Energy Consumption Emissions Hazardous Materials Social Responsibility Ethics Gender Equity Living Wage Labor and Relationships Organizational Profitability, LT Viability Customer Perceptions Customer Relationships • External • Governmental • Infrastructure • Supplier • Logistical • Terrorism • Natural Disasters • Accidents • Internal • Policies • Administrative • Operational • Organizational • Ethics

40. Conclusions • Re-evaluate How We Select Suppliers • Not Just The Supplier • The Supplier’s Environment • Recognize Internal Supply Chain Risk Creation • Recognizing Interactions • Supply Chain Risk • Supply Chain Sustainability • Strategies to Consider Collectively

41. Questions, Comments, Observations, Conclusions, Arguments?