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Risk Management Model
Data Organization and Issues
Dr. Kevin McCormack
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s
s
s
s
s
s
s
SCNetwork
Organizer
Commodity Category
Interactions and Relationshi
Sulier !ttri"utes
Sulier #nvironment
Supply Chain Network:! comle$ adative suly network is a
collection o% %irms that seek to ma$imizetheir individual ro%it and
livelihood "y e$changing in%ormation& roducts& andservices
with one another'' (Choi et al.& )**+,. Choi& -..&
Dooley& K./.&Rungtusanatham& M.& )**+. Suly
networks and comle$ adative systems0
Control versus emergence. /ournal o% Oerations Management +1
(2,& 23+4255.
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Classi%ication Coding
6N7S8SC Code9 6niversal Standard 8roduct and Service
Classi%ication Code. ! :lo"al commoditystandard ; +* digit&
hierarchical code used to consistently classi%y roducts andservices
-he 6NS8SC is a hierarchical classification with five levels. -hese
levelsallow analysis "y drilling down or rolling u to analyze
e$enditures. #ach level in thehierarchy has its own uni
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SulierSurveys
Risk
Indicators
Risk#vents
Internal8er%ormance
Data
#nvironmental!nalysis
Internal!nalysts and SM#s
Risk
#vent8ro"a"ility
Com"ine andCalculate
Risk
#ventImact
'erall &ata .low
MarketDynamics
Merger&!c
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Internal 8er%ormance Data
Jaria"ility and Risk
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-he Fie o% the Meanor the truth o% distri"utions
!ll o% the distri"utions a"ove have the same mean. hichis the
"etter er%ormance ro%ile>
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-he Fie o% the Meanor the truth o% distri"utions
!ll o% the distri"utions a"ove have the same mean. hichis the
"etter er%ormance ro%ile>
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Risk and Distri"ution
Occurrences (or events, outside o% the uer limit (or a"ove the
mean,are disrutions and have signi%icant negative imacts.
6er Fimit Disrutions
Mean
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&i%tri*ution% an$ alue at i%k (
usiness 8rocess 8er%ormance (esecially suly chains, have alog
normal distri"ution as shown here. -hat is "ecause very %ew
thingsare early or "etter that e$ected due to the comle$ity and
interactions.-he J!R %or this rocess is also show as a sum o% the
ro"a"ility o% theevent times the imact %or suly chain events
related to this rocess
(I.#. delivery in days,
-arget
#vent+
Imact +
8+ ; 8ro"a"ility+* out o%+** total
occurrences,
#vent)
Imact )8)
Jalue at Risk (J!R, ? (8+ $ I+7-, (8)$ I)7-,
Normalized as a ercentage o% the target
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I+
I)
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Fog Normal Distri"ution
J!R can "e reduced "y eliminating the root cause o% the event
(reducethe ro"a"ility, or mitigating the imacts (reduce the imact
o% the event,thus reshaing the distri"ution.
-arget
#vent+
Imact +8+
#vent)
Imact )
Reshaed distri"ution
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Jalue at Risk (J!R, ? (8+ $ I+7-, (8)$ I)7-,
Normalized as a ercentage o% the target
8)
I+
I)
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#%%ectiveSuly ChainRiskManagement
can radicallyreshae thedistri"ution o%SC events.
Increasingscoea
nde%%ectivenesso%aSC
Ris
kManagement8rogram
Relationshi
Suly ChainDisrution
GumanResources
8er%ormance
BinancialGealth
#nvironmentalIndicators
ualityDeliveryCaa"ilityCost
In%luence!lignmentIn%ormation Sharing
-urnover6nion issues
+
)
2
@
3
5
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Revenue Imact
Send is not the answerL
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