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Bublu Thakur-Weigold
Chair of Logistics Management
05.06.2019Bublu Thakur-Weigold Contact: [email protected] 1
Tackling risks in modern supply chains
New Trends
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Supply chain disruptions are as old as trade
What is different today?
Bublu Thakur-Weigold Contact: [email protected]
Source: C. Bode / S. Wagner, ETHZ
05.06.2019
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IT, containers, specialization, liberalization
have resulted in today’s Global Supply Chains
Bublu Thakur-Weigold Contact: [email protected] 05.06.2019
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Known as Global Value Chains (to economists)
All of us are implicated and dependant
De Backer and Miroudot 2014Mapping Global Value Chains
“World trade volume of goods and services
exhibited an average annual
growth of around 6 per cent
over the period 1970-2005,
well above the real growth
rate of world GDP of around
3.5 per cent.”
- Amador and Cabral 2014
Bublu Thakur-Weigold Contact: [email protected] 05.06.2019
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Global Supply Chains are inherently vulnerable
Why
ComplexTightly-
CoupledClusters Global
The Chartered Institute ofProcurement and Supply’s(CIPS) Quarterly Risk Index found that the likelihood thata SC is disrupted had almostdoubled between 1995 and2015, from 40.4 to 79,1
Bublu Thakur-Weigold Contact: [email protected]
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Recent trends affecting Global Supply Chains
Lead times
FlexibilityCosts
Quality
Suppliers Customers
Source Make Deliver
InterconnectednessIndustry Clock speed
Pace of change(Anti) Globalization OM Trends
�More dependencies (“Tight coupling”)
� Increasing complexities�Mutual trust becomes a
focus in relationships between buyer & supplier
�Shorter product life cycles�Explosion of product variety�Mass customization�Demand forecasts
increasingly difficult�Smaller margins of error
�Globalization of markets�Global sourcing�Longer paths in supply
chains�Populism and border
closures�Re-shoring
�Outsourcing �Single Sourcing�Lean Production�Focus on cost efficiency but
not on robustness�Technologies like Blockchain
and Big Data�Sustainability
Bublu Thakur-Weigold Contact: [email protected]
Adapted from: C. Bode / S. Wagner, ETHZ
05.06.2019
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Geopolitical risk Example
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Populism and trade policy Example
Bublu Thakur-Weigold Contact: [email protected] 05.06.2019
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Populism and trade policy Example
Bublu Thakur-Weigold Contact: [email protected] 05.06.2019
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Cyberattack Example
Bublu Thakur-Weigold Contact: [email protected]
“Four business sectors - hospitals, banks, securities firms and market infrastructure providers - potentially face the most significant financial impact from cyberattacks that could lead to a weakened credit profile, according to a new report from Moody’s Investors Service.
‘ In our view, cyber risk is event risk, and we see a rising tide," according to the report from Moody's, a U.S. credit ratings agency. "Digitization continues to increase, supply chains are becoming more complex and attacker sophistication is improving. However, the universe of cyber threat actors remains the same: socially motivated attackers - hacktivists – criminals - and nation-states.’ “
MK McGee, March 4, 2019www.bankinfosecurity.com
05.06.2019
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Natural Disaster
• Volcanic ash cloud leaves shops facing shortages of fruit, vegetables and medicine
• BMW closes down 3 plants for lack of inbound parts• Asia’s link to global supply chains is temporarily disabled,
goods back up at ports and are sent back to plants• Ireland faces a shortage of pharmaceuticals
• A volcano in Iceland erupts
• 20 March to 12 April 201062 Consecutive days of disruption
Example
Bublu Thakur-Weigold Contact: [email protected] 05.06.2019
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Structural supply chain complexity
The Mercedes E-class
~ 150 direct suppliers
� Many of them deliver on a JIT or JIS basis
Source: C. Bode / S. Wagner, ETHZ
Bublu Thakur-Weigold Contact: [email protected]
Example
05.06.2019
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Tight coupling drives both efficiency and risk
Lean thinking, Just-in-Time, Industrial Clusters
“Lean has not been knocked off its pedestal but people are starting to create back-up plans
and thinking about Balancing.” - 15/9/10 Bruce Arntzen, Senior Research Director MIT Center for Transport and Logistics
Bublu Thakur-Weigold Contact: [email protected] 05.06.2019
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� Large Claims Data, larger than $0.5 million, 2002–2014
� Risk increases in step with growing global trade flows
� BI claims are less frequent than PD claims but larger.
� The larger the claim, the higher proportion was BI
� Different industries have different: � Exposures to risk
� Recovery times
� Average recovery time was 9 months (not meaningful to measure in weeks)
� Not all causes have the same impact. Claims for lightning, machinebreakdown, burst pipes and fire cause have the highest BI share
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Summary of 2018 ETH Big Data Study*
Business Interruption claims
* Mizgier, K. J., Kocsis, O., & Wagner, S. M. (2018). Zurich Insurance Uses Data Analytics to Leverage the BI Insurance Proposition. Interfaces, 48(2), 94-107.
Bublu Thakur-Weigold Contact: [email protected]
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Generic risk management strategies for firms
Generic risk management strategiesGeneric risk management strategies
Prevention
Transfer,
Insurance,
Sharing
Avoidance
Mitigation
Retention
Adapted from S. Wagner / ETHZ
05.06.2019Bublu Thakur-Weigold Contact: [email protected]
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Segment RM strategies across the SC
What root cause does it address? 8and Where?
Increase
flexibility
Reduce
complexity
Supply side Product / Production
� Reduce supply base
� Reduce complexity in inbound logistics
� Standardization; Modular product design
� Reduce product variability
� Flexible sourcing policies (supply contracts)
� Real Options
� Flexible manufacturing
� Pooling of capacity
� Universal product design
� Delayed differentiation (postponement)
Demand side
(Distribution / Customers)
� Reduce channels
� Reduce complexity in distribution networks
� Pooling of customer demand
� Responsive pricing (Dell)
Increase
redundancy
� Multi-sourcing (instead of single-sourcing)
� Add safety stock
� Add excess capacity
� Serve more markets
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Source: S. Wagner / ETHZ
05.06.2019Bublu Thakur-Weigold Contact: [email protected] 16