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

Supply Chain Risk ISQA 479

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

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.

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

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

External Risks: Infrastructure  Transportation Equipment  Roads  Railroads  Ports  River  Sea  Airports  Congestion

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

External Risks: Logistics  On Time  Freight Damage  Leakage/Shrinkage  Equipment Availability

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

External Risks: Price  Trends  Volatility  Global Economics

Internal Supply Chain Risks: Categories  Policies  Administrative Resources  Operational Activities  Organizational Resources  Ethics

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

Internal Risks: Resources  Labor  Attract, Retain  Finances  Equipment  Technology  Automation  Communication  Enterprise

Internal Risks: Operational  Personnel  Numbers  Expertise  Demand Management  Customer  Supplier  Forecasting  Specifications  Project Management

Internal Risks: Ethics  Conflicts of Interest  Supplier Relationships  Supplier Ethics  Organizational Reputation

. Sustainability

Sustainability  Triple Bottom Line  Environmental Sustainability  Social Responsibility  Organizational Sustainability

Environmental Sustainability  Non-Renewable Resource Use  Energy Consumption  Effluent Discharge  Atmospheric Emissions  Hazardous Material Use

Social Responsibility  Ethics  Gender Equity  Living Wage  Appropriate Labor  Labor Relations

Organizational Sustainability  Profitability  Customer Perception  Customer Satisfaction  Long-Term Viability

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

Risk and Sustainability Interactions

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

Risk and Sustainability Supply Chain Risk  External  Governmental  Infrastructure  Supplier  Logistical  Terrorism  Natural Disasters  Accidents  Internal  Policies  Administrative  Operational  Organizational  Ethics 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

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

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

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

Key Risk Management Activity  How Suppliers Are Chosen  Supplier Visits  Supplier Mapping  Forecasting  Daily Diligence

Food For Thought

Natural Disasters  Earthquake  Major Storm  Fire  Lightening Strike  Tornado

East Asia Supply Locations

Earthquakes and Volcanos

Frequency of Occurrence of Earthquakes, 2012  8 Plus   , ,453  ,111 Total Earthquakes 2012 = 16,667 Total Earthquakes 2004 = 31,194 Source: USGS

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  Totals 1,195  Total fatalities 1,463

Typhoon Patterns

Questions  Supply Chain Risks?  Sustainability Concerns?  Not Just Asia

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

Supplier Selection Criteria Supply Chain Risk  External  Governmental  Infrastructure  Supplier  Logistical  Terrorism  Natural Disasters  Accidents  Internal  Policies  Administrative  Operational  Organizational  Ethics 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

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

Questions, Comments, Observations, Conclusions, Arguments?