MIT Supply Chain Risk Survey

Findings: South Africa

Contents• Supply Chain Risk Management

• Introduction & Context

• Survey Span

• Respondent Description

• Key Findings

– Most important supply chain risks

– Major internal & external risks

– Company urgency alignment

– Broad risk occurrence frequency

– Response focus areas

– Risk Management

• Next Steps

• Questions

Supply Chain Risk Management

Poor Product Quality

Poor Delivery

UnexpectedPoor CustomerPerformance

Poor Performance

due toInternal Business Practices

People

Technology & Systems

SC Interruptions due to External

Factors

UnexpectedPoor FinancialPerformance

Poor Asset Management

Poor Profits

• Excess Inventory

• Excessive A/R

• Abuse of A/P

• Cost too high

• Sales too low

• Prices too low

• Out of RM Stock

• Out of FG Stock

• Poor Distr Process

Loss of Control

Supply ChainInterruption

Difficult Business Climate

Political & Social

Mother Nature

Health & Environment

Crime & Terror

Economic & Financial

Introduction and Context

• Global risk survey undertaken in 12 countries, with respondents

from over 70 countries. Over 250 respondents visited South African

survey.

• Motivation was to identify common supply chain risk perceptions,

management thereof & meaning within a South African context.

• Risk environment in South Africa can now be compared to

international findings.

• Conditions at the time of Survey:

– Global recession nearing end

– Eskom power price hikes in question, not yet confirmed

– Ongoing strikes & high volume of job losses

– Soccer world cup “anticipation”

Survey Span

BRA 58

COL 17

RSA 142

UK 21SPA 113NDR 12GER 12SWI 129ITA 74

CAN 23

USA 466

MEX 37

CHI 53

AUS 20

IND 65

• A total of 2434 people visited the survey• 1461 people from over 70 countries completed survey• Significant responses (10+) recieved from countries shown• Mixture of “supplier” and “consumer” countries

Respondent description

• 81% male respondents.

• 88% of all respondents over the age of 30.

• 65% have a college/university degree or higher with the vast

majority of these in the business, and to a lesser degree,

engineering fields.

• Generally respondents work in middle management/supervisory

roles.

• Respondents work mainly in South African urban centres.

• Operations, supply chain planning and consulting fields are most

prominent job positions.

Respondent description

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Grew Up in Work in

Pe

rce

nta

ge o

f re

spo

nd

en

ts

Setting grew up in/work in

Large City

Small City

Suburban

Small Town

Rural

Farm

70%

75%

80%

85%

90%

95%

100%

Grew Up in Work in

Pe

rce

nta

ge o

f re

spo

nd

en

ts

Country grew up in/work in

Other

UAE

Austrailia

Cameroon

Namibia

USA

UK

Zimbabwe

South Africa

Respondent description

0% 5% 10% 15% 20% 25%

Sales

Marketing

Manufacturing

Transportation

Customer Service

R&D

Sourcing

Engineering

Risk Management

Finance

General Mgmnt

Purchasing

Distribution

Other

SC Planning

Operations

Job and Supply Chain Position

Respondent description

•Operations and planning activities

are where many respondents are

involved

•“Other” positions are generally

consulting or technology related.

Key Findings

Most Important

Supply Chain

Risks

Frequency of Major

disruptions –

Internal & External

Risk Response

Management

Risk Response

& Perceived

Action Areas

Frequency of

broad types of

Risk

1

2

4

6

5Company

Urgency

Alignment

3

Key Survey

Findings

0

10

20

30

40

50

60

70

80

Raw Material supplier failure

Transportation carrier failure

Finished Goods manufacturing

failure

Product Quality Failure

Economic Recession or

Market Collapse

Failure of major software systems

Spike in raw material costs

Extended Loss of Electricity (>

1 day)

Inventory write-off due to new design change

Cash crisis due to customers

delaying

payment

Top 10 Supply Chain Risks

1st most important Risk 2nd most important Risk 3rd most important Risk

Key Findings

Nu

mb

er o

f R

esp

on

ses

1

• Respondents rated list of possible risks

by 1st, 2nd, 3rd most important.

• Accumulation of responses shown for

each risk.

• Raw material supplier failure ranks as

most important risk – Follows

international trend.

Key Findings

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

Cash crisis due to sudden drop in credit rating

Price collapse due to a new competitor

Sales collapse due to a new competing product

Spike in energy costs

Spike in raw material costs

Cash crisis due to customers delaying payment

Employee theft and executive misdeeds

Failure of major software systems

Inventory write-off due to new design change

Raw Material supplier failure

Finished Goods manufacturing failure

Product Quality Failure

Transportation carrier failure

Internal Events - Major Distruptions

2

• Respondents rated major

external disruptions according to

frequency of their occurrence

• Data weighted according to

disruption frequency (Higher

frequency carries higher weight)

• Four top disruptions generally in

line with international findings

Key Findings

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

Earthquakes or Tsunamis

Hurricanes, Tornados, or Typhoons

Floods or Mudslides

Civil Unrest or Terrorism

Disease or Infestation

Fires or Explosions

Product Tampering or Counterfeit Products

Computer Virus or Cyber Attack

Sudden Currency Devaluation

Economic Recession or Market Collapse

Extended Loss of Electricity (>1 day)

Protracted Labor Disputes

External Events - Major Disruptions

2

• Respondents rated major

external disruptions according to

frequency of their occurrence

• Data weighted according to

disruption frequency (Higher

frequency carries higher weight)

•Protracted labour disputes and

extended loss of electricity occur

most frequently. Unique South

African conditions.

Key Findings 3

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Supplier/Company Alignment Customer/Company Alignment

Company Urgency Alignment

Completely Different Sense of Urgency Mostly different sense of urgency

Midway alignment Similar sense of urgency

Exactly the same sense of urgency

•Lack of urgency alignment

indicates greater risk potential.

• Alignment stronger with customer

than supplier

Key Findings 4

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

Run out of cash

People are not available

Cannot ship or deliver your products

Sudden drop in customer demand

Cannot communicate with vendors/customers/other sites

Lose supply of quality materials

Internal operations distruption

Frequency of Major Supply Chain Risks

Never Rarely About Yearly Weekly or Monthly Almost Daily

• Respondents rated

major types of

disruptions according to

frequency of their

occurrence.

• Greater frequencies

weighted higher.

• Severity indicated by

fade to red.

• Internal and supplier-

related disruptions are

most prominent and

occur most frequently.

Key Findings 5

0%

5%

10%

15%

20%

25%

30%

35%

Much more effort on Risk Prevention

Slightly more effort on Risk

Prevention

Equal effort to each

Slightly more effort on Event

Response

Much more effort on Event

Response

Pe

rce

nta

ge o

f R

esp

on

de

nts

Mitigation Actions

Risk Mitigation Perceptions

• Respondents rated the effort they believe

should be placed on “prevention vs cure”

• More emphasis should be placed on

prevention.

• This suggests that not enough is currently

being done to prevent risks from occurring.

Key Findings

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Response Action vs Direction of effort

Planning Risk Prevention Measures Planning Event Response Actions

Implementing Prevention Measures Performing event response Actions

Directed Centrally Directed LocallyEve

nt

Re

sp

on

se

R

isk

Pre

ve

nti

on

Ac

tio

ns

M

ea

su

res

• Respondents rated the scale at which planning vs responding activities should be directed

• The scale shifts from central to local the more immediate the measure/action is

• Site level would thus see the implementation of a centrally planned event response or preventative measure

5

Key Findings

0% 1% 2% 3% 4% 5% 6% 7% 8% 9%

Simulate different supply chain risks and disruptions

Have emergency operations center

Have business continuity manager/group

Risk manager goes beyond just buying insurance

Work with customers on SCRM

Work with law enforcement/emergency managemen on SCRM

Work with suppliers on SCRM

Have a formal security strategy

Monitor world events for incidents that affect us

Have a "risk" manager or group

Actively work on supply chain risk management

Have business continuity plan

Analyze incidents, identify process improvements

Approaches to SCRM

• Respondents rated the actions that

are currently being undertaken at their

organisations to deal with supply chain

risk

• Most companies have a plan or risk

manager/group, or approach SCRM

on an ad hoc basis

6

Phase 2: International Benchmarking

• Compare South African data to international findings.

• Understand differences and underlying drivers

Phase 3: Applied Research

• More analysis on specific risk factors and mitigation

factors.

• Apply findings to future risk scenarios.

• Investigate company specific approaches

Next Steps

Questions?