Supply Chain Risk Leadership Council 1 SCRLC Metrics Package October 2008 Ravi Anupindi Tim Astley...

Supply Chain Risk Leadership Council 1

SCRLC Metrics PackageSCRLC Metrics Package

October 2008Ravi Anupindi

Tim AstleyAndrew CoxFeryal Erhun

Frederick HartungJohn O’ConnorDave Pollard

Lance Solomon


Metrics PortfolioMetrics Portfolio

Time to RecoverTime to Recover

Revenue ExposureRevenue Exposure

Resiliency IndexResiliency Index

Business Continuity Plan Effectiveness


Tactical MonitoringTactical Monitoring

SCRLC Metrics PortfolioSCRLC Metrics Portfolio










Measures operational impact of Measures operational impact of a supply chain disruptiona supply chain disruption

Useful in establishing recovery Useful in establishing recovery objectivesobjectives

Enables assessment of multiple Enables assessment of multiple supply chain componentssupply chain components










Measures financial impact of a Measures financial impact of a supply chain disruptionsupply chain disruption

Useful in prioritizing mitigation Useful in prioritizing mitigation effortsefforts

Allows assessment of supply Allows assessment of supply chain disruptions to help target chain disruptions to help target recovery plansrecovery plans










Combines multiple measures Combines multiple measures into a single metricinto a single metric

Enables comparison of different Enables comparison of different organizational entities (e.g. organizational entities (e.g. business units, product business units, product families, etc)families, etc)

Useful for Executive Level Useful for Executive Level discussionsdiscussions










Evaluates completeness of BCP Evaluates completeness of BCP programsprograms

Evaluates quality of BCP Evaluates quality of BCP responseresponse










Provide an early warning Provide an early warning system for unknown events or system for unknown events or weaknesses in the supply chainweaknesses in the supply chain


Format For Metrics DefinitionsFormat For Metrics Definitions

High level description of the metricHigh level description of the metricDefinitionDefinition

Details on how the metric can be calculated, where applicableDetails on how the metric can be calculated, where applicableMathematical FormulaMathematical Formula

Data sources that are typically used in the calculationData sources that are typically used in the calculation

Typical Data SourceTypical Data Source

Where the metric can be applied (e.g. Corporate, BU, Product)Where the metric can be applied (e.g. Corporate, BU, Product)

Level of ApplicationLevel of Application

How the metric is used and what can it driveHow the metric is used and what can it drive

Typical UsesTypical Uses


Example Metrics Definition – Example Metrics Definition – Revenue ExposureRevenue Exposure

DefinitionDefinition•The maximum amount of gross revenue potentially lost during a supply chain The maximum amount of gross revenue potentially lost during a supply chain disruptiondisruption•Defined as an amount of time as TTRDefined as an amount of time as TTR

Mathematical FormulaMathematical Formula•Revenue * TTR + Go Forward Market Share LossRevenue * TTR + Go Forward Market Share Loss

oGo Forward Market Share Loss may be hard to estimate but it is included to drive thought Go Forward Market Share Loss may be hard to estimate but it is included to drive thought around how TTR may impact revenue exposure based on how your competition can reactaround how TTR may impact revenue exposure based on how your competition can react

•Revenue and TTR need to be in the same time unitsRevenue and TTR need to be in the same time units

Typical Data SourcesTypical Data Sources•Sales/Shipment HistorySales/Shipment History•ForecastsForecasts•See TTR sourcesSee TTR sources

Level of ApplicationLevel of Application•From a piece of equipment on the factory floor to the enterpriseFrom a piece of equipment on the factory floor to the enterprise

Typical UsesTypical Uses•Benchmarking with competitorsBenchmarking with competitors•Prioritizing mitigation effortsPrioritizing mitigation efforts•Trade-off cost of mitigation vs. TTR and Revenue Exposure reductionTrade-off cost of mitigation vs. TTR and Revenue Exposure reduction•Impact on stock priceImpact on stock price•Crisis response analysisCrisis response analysis


Metrics DefinitionsMetrics Definitions


Metrics Definition: TTRMetrics Definition: TTR DefinitionDefinition

•Amount of time required to restore 100% operational output (units) following a Amount of time required to restore 100% operational output (units) following a supply chain disruptionsupply chain disruption•Defined as an amount of time (i.e., weeks, days, hours, shifts, etc.)Defined as an amount of time (i.e., weeks, days, hours, shifts, etc.)

Mathematical FormulaMathematical Formula•N/AN/A

Typical Data SourcesTypical Data Sources•BCP ProgramBCP Program•Lead TimesLead Times•Transit TimesTransit Times•Governmental SourcesGovernmental Sources

Level of ApplicationLevel of Application•From a piece of equipment on the factory floor to the enterpriseFrom a piece of equipment on the factory floor to the enterprise•There are 2 measures of TTRThere are 2 measures of TTR

oTTR at an alternate siteTTR at an alternate siteoTTR at the impacted siteTTR at the impacted site

Typical UsesTypical Uses•Trade-off of TTR Mitigation vs. CostTrade-off of TTR Mitigation vs. Cost•TTR Benchmarking with competitorsTTR Benchmarking with competitors•Need to look across all nodes to assess supply chain TTRNeed to look across all nodes to assess supply chain TTR•Setting TTR goals to focus mitigation effortsSetting TTR goals to focus mitigation efforts•Manage customer expectations on continuity of supplyManage customer expectations on continuity of supply


Metrics Definition: Revenue ExposureMetrics Definition: Revenue Exposure

DefinitionDefinition•The maximum amount of gross revenue potentially lost during a supply The maximum amount of gross revenue potentially lost during a supply chain disruptionchain disruption•Defined as an amount of time as TTRDefined as an amount of time as TTR

Mathematical FormulaMathematical Formula•Revenue * TTR + Go Forward Market Share LossRevenue * TTR + Go Forward Market Share Loss

oGo Forward Market Share Loss may be hard to estimate but it is included to drive Go Forward Market Share Loss may be hard to estimate but it is included to drive thought around how TTR may impact revenue exposure based on how your thought around how TTR may impact revenue exposure based on how your competition can reactcompetition can react

•Revenue and TTR need to be in the same time unitsRevenue and TTR need to be in the same time units

Typical Data SourcesTypical Data Sources•Sales/Shipment HistorySales/Shipment History•ForecastsForecasts•See TTR sourcesSee TTR sources

Level of ApplicationLevel of Application•From a piece of equipment on the factory floor to the enterpriseFrom a piece of equipment on the factory floor to the enterprise

Typical UsesTypical Uses•Benchmarking with competitorsBenchmarking with competitors•Prioritizing mitigation effortsPrioritizing mitigation efforts•Trade-off cost of mitigation vs. TTR and Revenue Exposure reductionTrade-off cost of mitigation vs. TTR and Revenue Exposure reduction•Impact on stock priceImpact on stock price•Crisis response analysisCrisis response analysis


Metrics Definition: Resiliency IndexMetrics Definition: Resiliency Index DefinitionDefinition

•A Score from 0 to10, with 10 being most resilient supply chainA Score from 0 to10, with 10 being most resilient supply chain•Index Components:Index Components:

oSubstitution %Substitution %oTTR (e.g., Mfg, Test Environments, Component Suppliers, etc)TTR (e.g., Mfg, Test Environments, Component Suppliers, etc)o% Single / Sole Sourced% Single / Sole SourcedoLikelihood of DisruptionLikelihood of DisruptionoNetwork (Transportation, Factories, etc.) redundancyNetwork (Transportation, Factories, etc.) redundancyoIT Infrastructure & Process RedundancyIT Infrastructure & Process RedundancyoRelationships with recovery organizations (regulatory authorities, government, surveyors, damage assessment, etc.)Relationships with recovery organizations (regulatory authorities, government, surveyors, damage assessment, etc.)oOrganizational structure and dedicated risk management functionOrganizational structure and dedicated risk management function

Mathematical FormulaMathematical Formula•Weighted average based on each component having a weight and a score from 0 to 10Weighted average based on each component having a weight and a score from 0 to 10•Each component scoring method will be industry specificEach component scoring method will be industry specific

oFor example, TTR scoring could be scored on a range of 12 – 52 weeks or a range of 4 – 20 weeksFor example, TTR scoring could be scored on a range of 12 – 52 weeks or a range of 4 – 20 weeks

Typical Data SourcesTypical Data Sources•Business Continuity Plan recovery timesBusiness Continuity Plan recovery times•Approved Vendor ListApproved Vendor List•Lead timesLead times•Actuary dataActuary data

Level of ApplicationLevel of Application•Business UnitBusiness Unit•FactoryFactory•Supply ChainSupply Chain•ProductProduct

Typical UsesTypical Uses•Driving behavior towards design for riskDriving behavior towards design for risk•Measuring overall supply chain riskMeasuring overall supply chain risk•Insurance risk improvement discussionsInsurance risk improvement discussions


Metrics Definition: Business Continuity Plan Metrics Definition: Business Continuity Plan EffectivenessEffectiveness

DefinitionDefinition•% of suppliers completed% of suppliers completed•% of revenue covered with BCPs% of revenue covered with BCPs•% of spend covered with BCPs% of spend covered with BCPs•% of long lead time items with BCPs% of long lead time items with BCPs•% of part/site mappings completed% of part/site mappings completed•# of BCP exercises per time period# of BCP exercises per time period•Frequency of BCP updates & reviewingFrequency of BCP updates & reviewing•BCP Quality Score (0 to 10 with 10 being world-class)BCP Quality Score (0 to 10 with 10 being world-class)

o0, 1, 4, 7 and 10 are the only scores to use to provide differentiation0, 1, 4, 7 and 10 are the only scores to use to provide differentiationoCritical assessment areas: BCP test/drilled (command post, table top, simulation), Frequency of updating, Critical assessment areas: BCP test/drilled (command post, table top, simulation), Frequency of updating, assessed by third party, communication plan, documented roles & responsibilitiesassessed by third party, communication plan, documented roles & responsibilities

Mathematical FormulaMathematical Formula•# of suppliers completed / # of suppliers surveyed# of suppliers completed / # of suppliers surveyed•Revenue enabled by suppliers completed / Total Revenue enabled by suppliers surveyedRevenue enabled by suppliers completed / Total Revenue enabled by suppliers surveyed•# of Part/Site mappings completed / # of Part/Site mappings requested# of Part/Site mappings completed / # of Part/Site mappings requested•# of suppliers for parts with lead time > xxx with BCP/ # of suppliers for parts with lead time > # of suppliers for parts with lead time > xxx with BCP/ # of suppliers for parts with lead time > xxxxxx

Typical Data SourcesTypical Data Sources•Approved Vendor List linked to BOMApproved Vendor List linked to BOM•Sales Order History or ForecastSales Order History or Forecast•BCP survey tracking resultsBCP survey tracking results

Level of ApplicationLevel of Application•Supplier, site and part levelSupplier, site and part level

Typical UsesTypical Uses•Measuring response rates for BCP requestsMeasuring response rates for BCP requests•Measuring amount of revenue coverage for a BCP programMeasuring amount of revenue coverage for a BCP program


Metrics Definition: Tactical Risk Metrics Definition: Tactical Risk MeasurementMeasurement

DefinitionDefinition•Introduce a new metric which will track several Introduce a new metric which will track several tactical/operational indicators and warn decision makers about tactical/operational indicators and warn decision makers about potential risks based on the current levels of these indicators. potential risks based on the current levels of these indicators. •Inventory levels, cycle times (demand and supply), quality, etc.Inventory levels, cycle times (demand and supply), quality, etc.

Mathematical FormulaMathematical Formula•(Potentially) Use SPC techniques to track the changes in (Potentially) Use SPC techniques to track the changes in indicators over time and issue warning signals for out-of-control indicators over time and issue warning signals for out-of-control indicatorsindicators

Typical Data SourcesTypical Data Sources•Planning System – inventoryPlanning System – inventory•Shop floor system – cycle timeShop floor system – cycle time

Level of ApplicationLevel of Application•Product levelProduct level

Typical UsesTypical Uses•Early warning system for unknown risk or unknown eventsEarly warning system for unknown risk or unknown events•A well-defined tactical/operational metric can bring a A well-defined tactical/operational metric can bring a competitive advantage. (Remember the Nokia-Ericsson-Philips competitive advantage. (Remember the Nokia-Ericsson-Philips case.)case.)

Supply Chain Risk Leadership Council 1 SCRLC Metrics Package October 2008 Ravi Anupindi Tim Astley...

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