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Location of risk in the supply chain
Process Risk Demand Risk Control Risk Environmental Risk Source: Adapted from Mason-Jones, R. and Towill, D.R., ‘Shrinking the supply chain uncertainty cycle’, Control, September 1998, pp
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The supply chain risk management process
Understand the supply chain Improve the supply chain Identify the critical paths (nodes and links) Manage the critical paths Improve network visibility Establish a supply chain continuity team Work with suppliers and customers to improve supply chain risk management procedures
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Six sigma? 0.00034% 4.56% probability of probability of defect defect
Lower Lower Upper Upper Lower Lower Upper Upper Specification Specification Specification Specification Specification Specification Specification Specification Limit Limit Limit Limit Limit Limit Limit Limit 2s 2s 2s 2s 6s 6s 6s 6s Two Sigma Six Sigma
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Cause and Effect Analysis
Cause and effect analysis (also known as Root Cause Analysis) is used to gain an understanding of the real underlying causes of a problem. Typically it makes use of a sequential question and answer procedure often referred to as ‘Asking ‘why’ – five times’. The idea is not to accept the immediate answer but to drill down as far as possible. For example, if the problem to be analysed is poor on-time delivery performance the questioning might go along the following lines: 1 Q Why was this shipment delayed? A There was no stock available. 2 Q Why was there no stock available? A We failed to achieve the production plan. 3 Q Why did we fail to achieve the production plan? A There was a shortage of components. 4 Q Why was there a shortage? A There is a bottleneck in in-bound inspection. 5 Q Why is there a bottleneck? A We only have limited testing facilities. Now the real problem is revealed and appropriate action can be taken.
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Creating a Resilient Supply Chain : Strategic Approaches
Supply Chain Understanding Supply Chain Design Supply Base Strategy 1. Supply Chain (re)engineering Collaborative Planning Visibility 4. Agility The Resilient Supply Chain 2. Supply Chain Collaboration Supply Chain Intelligence Velocity 3. Supply Chain Risk Management Culture Supply Chain Continuity Teams Consider risk in decision making Board level responsibility & leadership
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Source: Based on Chopra and Sodhi (6)
Resilience vs. centralisation Cost Total cost Cost of resource Cost of disruption Number of facilities Centralised De-centralised Source: Based on Chopra and Sodhi (6)
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Mapping the supply chain
Second Tier First Tier Focal firm
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