Supply Chain Risk And What About Ethics? Lee Buddress, Ph.D., C.P.M. Robert G. Gleason Professor and Director Supply and Logistics Program Portland State University

Supply Chain Risk  Events or actions that result in a transaction or project differing from budget or plan  Events or actions that prevent delivery to customers as promised

Order Winning Characteristics  Design  Lead Time  Cost  Quality/Durability  Service  What Risks Most Impact  Ability to Serve Customers  Profitability

Supply Management Objectives  Continuity of Supply  Least Total Cost of Ownership  Create Competitive Advantage  Sustainable  What Risks Interfere With These Objectives

Supply Chain Risks  Big, Expensive Risks with Low Probability  Medium Risks with Medium Probability  Smaller Risks with High Probability

External Risks

Supply Chain Risk Classification  External Risks  Governmental  Infrastructure  Supplier  Logistical  Price  Terrorism  Natural Disasters  Accidents

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

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

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

External Risks: Logistics  Supplier Selection  Transportation Equipment  On Time  Freight Damage  Leakage/Shrinkage

External Risks: Price  Trends  Volatility

External Risks  Terrorism  Physical Harm  Personnel  Cyber Attacks/Hacking  Natural Disasters  Earthquakes, Tsunamis  Weather Related  Lightening Strikes  Accidents

Key External Risks  Labor Issues  Quality  Timing  Supplier Selection Process  Total Cost Analysis

Things to Watch  East & Gulf Coast Longshore Contract  West Coast Longshore Grain Contract  Ongoing Row Over Refer Plug-ins  Port Subsidizes Shipping Firms  Carriers Add $150 per Container  UPS/Teamsters Contract Negotiations  New Panama Canal  EU/ Airline Row Over Carbon Emissions  Carrier Capacity Constraints

Internal Risks

Supply Chain Risk Classification  Internal Risks  Policies  Resources  Operational

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

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

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

Order Winning Characteristics  Design  Lead Time  Cost  Quality/Durability  Service  What Risks Most Impact  Ability to Serve Customers  Profitability

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

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

Risk and Ethics

Ethics  More than Gifts and Gratuities  Cialdini’s Influence  Appearances

Unethical Sales Practices  Commercial Bribery  False Shortages  False Price Breaks  Market Allocation  False Delivery Promises  Quotation vs. Invoice  False Representation  Counterfeit  Back Door Selling

Unethical Purchasing Practices  Shopping Bids  Shopping Ideas  Samples  Favoritism  Payment Terms  Contract Quantities  Conflict of Interest International Ethics Issues  Cultural Issues  Reciprocity

Foreign Corrupt Practices Act  Illegal to Make Payments Influencing Purchase Decisions  Exempts “Processing Payments”  Accounting Requirements  Applies to ALL Publicly Traded Companies

Risk and Ethics  Risks to the Organization  Customer Loss  Reputation  Personal Risks  Job  Reputation  Personal Liability

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Questions, Comments, Observations, Conclusions, Arguments?