Supply Chain Digital Risk Management

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Developing a Sustainable Framework to Alleviate Future Incidents from Global Supply Risks

A GROWING NEED FOR A ENTERPRISE DIGITAL CONTROL TOWER

As the most recent pandemic spread across the globe, one of the world’s largest manufacturers of mining and construction equipment was determined to develop strategies to mitigate the risk factors associated with the increasing uncertainty across its value chain. While it is difficult to predict the exact impact of a pandemic on a complex Supply Chain operation, the team found consensus on three major areas of focus: Assurance of Supply, Workforce Management and Demand Management. With countries implementing or coming out of nation-wide “lockdowns”, the repercussions were felt through the global Tier 1 and lower tier suppliers, creating a growing need for a centralized, data-driven platform to provide a real-time visibility into the supply chain status, risks and decision enabling levers.

What is COVID-19?

COVID-19 is an infectious and highly contagious disease, that affects the respiratory system. It was first reported in Wuhan, China on December 31st, 2019 and publicly declared a health emergency of international concern on January 30, 2020 and a global pandemic on March 11, 2020.

What are the impacts of COVID-19 on the supply chain?

To prevent the spread of the outbreak, many countries imposed total lockdowns to commercial activities. All levels of the value chain faced risks across their Tier 1 and lower tiers supplier networks.

Solution

A Fortune 100 industrial manufacturing client was seeking to host a digital control tower to provide the leadership and operations teams with end-to-end supply chain risk visibility and risk mitigation levers including: avoidance of workstream line downs, variable costs through plant shut downs, expedited freight cost through alternate modes and production shifts and support of plant recovery plans.

Objectives: ​ 

  • Provide real-time assessment of the global supplier risk profile​
  • Facilitate decision making (build prioritization between facilities) as suppliers reopen and recover ​
  • Mitigate disruption and create a framework to alleviate for future incidents​ using a sustainable digital solution

 

EXECUTION APPROACH:

5  PILLARS  FOR  SUCCESS

  1. Digital Supply Chain Control Tower 

There was a pressing need for a digital platform to provide real-time visibility into the supply chain, gather predictive insights and advise prescriptive recommendations on the immediate risks posed within the global supplier base. A reporting platform was deployed to gather part and supplier information from all entities to create unique-identifier data to analyze 16-week demand forecasts and supply planning. 

Digital Duplicate: Master Data exists throughout the value chain across entities and is essential to business operations. We created a Digital Duplicate of the business ecosystem by collecting and cleansing disparate data from Facilities, and Suppliers. 

  1. Production Facilities Health

Understanding the impact of the global supply disruption on the production schedules was an imperative first step to the digital control tower. 

  • Weekly meetings were conducted with 11 facilities to analyze demand, identify high risk parts and recommend part-level mitigation actions to avoid workstream line downs 
  • Proactive identification of critical single sourced components from suppliers in the most affected regions was performed and remedial measures were recommended 
  • With the closing of multiple international borders and restricted activity within intra-state and intra-country lines, transportation risks were monitored, and alternative modes were proposed to expedite parts 
  • Recommendations were provided to prioritize components and builds between facilities taking into consideration manufacturing costs, EBITDA and capacity metrics 
  • Inventory assurance was provided with recovery plans in facility health
  1. Global Suppliers Health

 The principal objective was to assess risk probability of supply impacts to the global supplier base.

  • Shutdown suppliers became one of the main risks, as the uncertainty of reopening dates remained unknown across the globe.

  • With the initial scope focusing on China and then Italy suppliers, the strategy focused on sending surveys to understand their capacity health and Tier 2 inventory capabilities.

  • As governmental lockdowns increased, monitoring of all suppliers became essential. Understanding their reopening dates and ramp-up abilities was the main goal to assure building schedules at the client’s manufacturing facilities.

  • As facilities started to resume operations, recovery plans were implemented to confirm components supply on-time and avoid any possible line-downs

  • After COVID-19 related risks started to be mitigated, additional concerns were analyzed: financial risks, transportation risks and COVID reoccurrences

 

  1. Risk Mitigation Levers 
  • Alternate sources historical suppliers​ were identified for parts from at-risk supplier hot spots.
  • Global inventories, ​facilities and warehouses were determined​ and inter-plant collaboration aided immediate shortage risks 
  • Production schedules were adjusted, and pro-active facility line down decisions were made to emphasize on EBITDA during weeks of low demand​

 5. Key Performance Indicators 

  • Week over Week Risk Score Change by Facility Region
  • Past Dues by Supplier Region
  • COVID-19 related Premium Freight Cost Avoidance
  • On-time Shipping Performance by Facility
  • Number of Collaborations by Facility

Key Accomplishments 

  • Created a framework to deal with future supply risks (Pandemics, Business shifts) 
  • Managed risk for 72K parts and 2.2K suppliers for 11 global production facilities
  • Enhanced collaboration and open line of communication between facilities​
  • Facilitation of tactical alternatives and levers​
  • Cost avoidance in material logistics finding alternate transportation modes​
  • Leadership situational decision-making enablement
  • Gained visibility on end-to-end supply chain​
  • Comprehensive coverage of critical parts and suppliers globally​
  • Expedited freight visibility and management​
  • Production schedules adjustments​
  • Supply Chain Risk Management and mitigation​
  • Early identification of “hot spots” / geopolitical impacts​
  • Evaluation of sourcing strategies​
  • Shutdown supplier health and recovery monitoring​
  • Standard Executive reporting
  • Change in thought leadership

 

Value Added

 

  • $0.5M Freight cost avoidance
  • $12M Past dues reduction
  • 5+ Workstream line down prevention globally 
  • 2 weeks Ramp-up time from initial scope agreement
  • Revenue loss mitigation
  • EBITDA improvement
  • Decision-making enablement
  • Efficiencies and velocity

 

Authored by,

Mahaalaxmi Ganesan, Consultant, Strategic Transformation

mahaalaxmi.ganesan@gmail.com

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