Sap Supplier Risk Performance 2011

Performance & Risk prepared for Analyst Briefing Henner Schliebs, 2011

©  2011 SAP AG. All rights reserved. 2

Agenda

1.  Performance Management: The SAP portfolio

2.  Managing Risk – The Virtuous Cycle a. Identifying & Analyzing Supplier Risk b. Measuring Impact To The Enterprise c. Assessing, Responding and Monitoring Risk

3.  Taking Risk Response Actions

a. Collaboration b. Evaluating Suppliers

c. Managing Supplier Performance 4. More Information

© SAP 2010 / 2


Agenda





c. Managing Supplier Performance 4. Wrap-Up

© SAP 2010 / 3


Barrier to Increased Performance Lack of visibility through entire cycle

Risks Opportunities

Confident Decisions

Predictable Performance

Strategic Alignment Strategy

Execution


Browsers

Enterprise Portals

MS Office

On Demand Services

Mobile

Other Application/ Data Sources

SAP

Data Sources/Warehouses Analytic Capabilities Access

Social Media Content

Unstructured Content

OLAP Servers, Data Warehouses & Marts

Dashboard/ Report

Services and Best Practices

Performance Management

Risk and Compliance Management

Business Intelligence

Data Foundation

Industry & LOB Analytic Applications

Governance Risk and Compliance


Enterprise Information Management

Data Warehouse Management

Overview of SAP’s Portfolio To Support Risk & Performance across all LoB

Enterprise Performance Management


Browsers

Enterprise Portals

MS Office

On Demand Services

Mobile

Other Application/ Data Sources

SAP

Data Sources/Warehouses Analytic Capabilities Access

Social Media Content

Unstructured Content

OLAP Servers, Data Warehouses & Marts

Dashboard/ Report

Services and Best Practices

Performance Management

Risk and Compliance Management


Data Foundation

Industry & LOB Analytic Applications

Governance Risk and Compliance


Enterprise Information Management

Data Warehouse Management

Included Solutions….

Enterprise Performance Management

Ø SAP Sourcing Ø SAP SRM Ø SAP Business Suite

Ø SAP BusinessObjects Spend Performance Management

Ø SAP BusinessObjects Ø Supply Chain Performance

Management

Ø SAP BusinessObjects Risk Management

Ø SAP BusinessObjects Data Enrichment and Classification


Supplier Risks Trigger Risks & Performance Impact Across The Enterprise

As global supply lines stretch, companies are increasingly vulnerable to high-impact/low-probability events (e.g., port strikes, terrorism, geo-political imbalance, trade embargos, natural disasters, weather, etc).

n  Lack of visibility beyond the four walls

n  Rising energy costs and increased regulations

n  Fear of poor customer service


Chief Procurement Officer What Keeps Them Up at Night?

© SAP 2008 / Page 8

Strategic Sourcing

How do I identify single source supply risk?

How do I establish the right sources of

supply?

Supplier Performance

How do I evaluate supplier performance

and ongoing development

Global Trade Cost & Compliance

How do I provide embargo checks &

trade cost inputs into source of supply

selection?

Supplier Risk Management

How do I assess supplier risk and

analyze the mitigation options?


Agenda






© SAP 2010 / 9


Managing Supplier Risks Process automation for the virtuous cycle

Actionable, role-based dashboards

and alerts include operational procurement

risk factors

Establish risk appetite

and thresholds for future embedded risk

management

Collaborate and aggregate supplier

risks across enterprise

Derive short term mitigation plan, act

accordingly and set up response action on

corporate level


1. Avoid Surprises Increase visibility and prioritization of key risks

Quantitative and Qualitative Risk Analysis Options

n  Point and scenario analyses

n  Survey functionality and guided activities

n  Workflow reminders for updates

Prioritization Using Risk Heat Map

n  Prioritization for response investment

n  Identifying shifting in risk profile

Identify and Manage Risk Status in Your Business Context

n  Automated risk assessment and surveys

n  Build, complete and consolidate risk assessment results


Identify & Analyze Supplier Risk Solution: SAP BusinessObjects Spend Performance Management

SAP Differentiators

SAP Solution

n  Know your at risk suppliers n  Identify supplier concentration

and sole sourced risk factors n  Assess impact to your spend n  Find and act on qualified alternate

supplier sources

Internal Supplier Data: Incorporate internal supplier performance indicators to analyze risk trends for early risk detection (e.g. SAP Sourcing, SAP Supplier Risk Management, SAP Business Suite) External And Market Data: Combine external and market data on suppliers to determine supplier viability (e.g. Lexis Nexis, Bureau VanDijk, Directory of Corporate Affiliations, Kompass International, US Government Central Contracts - Diversity, US Treasury Department - OFAC, US Census Bureau- Congressional, World Bank - Debarred entities, UK Post, Numerous state agencies) Assess Impact of Supplier Failure: Quantify impact on your business, spend volume and locations to help prioritize and establish alternate suppliers

1. Identify Root Cause Analysis

2. Appraise Impact Analysis

3. Act Devise Mitigation Strategy


Out Of The Box Supplier Risk Hierarchy* * Can be customized or extended

Example Screenshots from Supplier Risk Demo


identify risk

Track and monitor the suppliers risk and performance �  overview over the supplier risk

information �  Analysis of different risk

indicators �  Top high risk supplier analysis

Figure out the high risk suppliers from this

overview dashboard


analyze risk

What impact has supplier with high risk on the company �  Detail with third party data

shows e.g. on time delivery declining

�  Maybe looking for a short term alternative

�  Establish a mitigation plan longer plan

�  Can now negotiate better pricing with alternate vendor due to higher volume

Search risk attributes and…

..find alternate supplier for that item


take action

longer term mitigation �  Strategic sourcing project with

SAP Sourcing directly out of SPM

�  Include all relevant data to negotiate prices

Take immediate action and start sourcing initiative


Agenda






© SAP 2010 / 18


Assessing Impact To Enterprise In A Manufacturing Company: Supplier Risk Scorecard


‘cost of risk’ and the impact to overall Performance


Why SAP for Supplier Risk Identification & Analysis?

Compare supplier risk attributes to quickly asses the risk impact and take action to minimize risk exposure for fulfillment of a critical item:

1.  IDENTIFY potential at RISK suppliers

2.  ANALYZE the RISK and the potential effects on your business including potential alternate supplier analysis

3.  TAKE immediate ACTION on short term and derive a mitigation plan for longer term.

HOLISTIC VIEW OF YOUR SUPPLIERS including your company's spend pattern


Agenda





c. Managing Supplier Performance

4. Wrap-Up

© SAP 2010 / 22


Mitigate Risks Across Multiple Processes and Risk Categories

2. Respond Intelligently Make more informed, risk-intelligent decisions

Mismatch of Demand with Supply

Employee health and safety

Non-compliance with emissions

Production disruptions

Supplier disruptions

Non-compliance with RoHS/WEEE

Non-compliance to regulatory requirements

Top Industry Risks

Track Mitigation Response Status

n  Response status monitoring

n  Response cost tracking

n  Analysis done before and after responses

View Aggregate Risks by Process and Category

Finance

Sales

IT

Supply

. . . .


3. Stay Informed Increase transparency by automated monitoring

Automatically Monitor Risks

User receives email alert – data updated in SAP BusinessObjects Risk Management

n  Embedded into key business processes

n  Controls monitoring based upon the level or risk associated with each business process

n  Workflow delivers assessments to experts

Capture Incidents and Losses

n  Create risk knowledgebase to learn from previous experiences

n  Incorporate and document workflow capabilities into response playbook

Align Risks with Corporate Strategy

n  Ensure risk management methodology is aligned with organizational goals

n  Execute strategy with increased visibility and understanding of risk

n  Increase effectiveness of strategies and initiatives by clearly understanding the risk exposure


4. Plan For Future Develop and execute a proactive risk strategy

Document Risk Appetite

n  Proposed risks based on business process

n  Define appropriate risk categories and thresholds

Create Risk and Activity Catalogs

Organization Unit

n  What types of risks do we want to track?

n  Align risks to corporate goals

n  Customizable, pre-delivered content

Risk Catalog

Model and Align Risks to Organization Structure

n  Data models aligning organizational units, process activities, risk categories and indicators

n  Consolidated view of risk information supporting information needs


Manage Supplier Risk Solution: SAP BusinessObjects Risk Management

SAP Differentiators

SAP Solution

n  Know your enterprise risk n  Increase visibility into the impact

of risk against performance n  Reduce risk and cost across

strategic initiatives n  Increase Strategic Effectiveness

through Automated Monitoring of Risks

Framework: § provides a best-practice framework so we can identify, analyze, respond to, and monitor obstacles to reaching out firm’s

growth objectives. Efficiency: § Automate key risk management processes and controls § Repeatable framework for risk-based analysis § Minimized audit time and audit-related costs Assess Impact of Failure: § Continuous monitoring of compliance and risks §  More reliable and trustworthy risk and compliance data §  Optimized management of risk initiatives

1. Assess Root Cause Analysis

2. Reponse Impact Analysis

3. Monitor Risk and Strategy


Enterprise Risk Management

Operational Supplier Risk is pushed to Enterprise Risk Management


assess risk

Assess Risk �  Heat map shows effect and

probability �  Overview of cost related to the

risk –  Inherent and –  Residual total loss

Supplier risk might roll up into Logistics disruption,

valued at $55m loss


create risk response

�  Take risk into enterprise consideration �  Create risk response �  Estimate total loss reduction

�  Assign control proposal �  Assign regulation policy �  Assign to Risk Management process

Possible responses to supplier risk on enterprise level include increase

of lead time or sourcing initiative

New controls established to monitor new supplier…

…by including non-preferred vendors


setup risk monitoring

�  Set up Monitoring �  Assign to controls �  Set up rules �  Assign monitoring frequencies

�  View result in Enterprise scorecard �  Supplier risk has been rolled up to

enterprise risks

Controls are assigned to purchases from non-preferred vendors…

…and will be included in the alerting scorecard


Why SAP Risk Management

Take supplier risk into enterprise consideration to quickly asses the risk impact and create risk responses to minimize potential losses and violate regulations:

1.  ASSESS potential RISK for the enterprise

2.  CREATE the RISK REPONSE and take risk into controlled environment

3.  MONITOR your RISK and include it into enterprise risk monitoring

HOLISTIC VIEW OF YOUR ENTERPRISE RISK including operational supplier risk


Agenda




a. Collaboration b. Evaluating Suppliers c. Managing Supplier Performance

4. Wrap-Up

© SAP 2010 / 32


Supplier Risk Assessment Project


Supplier Risk Assessment Project


Supplier Risk Assessment Project - Link to StreamWork for Collaboration


StreamWork Collaboration Activity


StreamWork Activity


Supplier Scorecard Report


Supplier Score Trend Report


Supplier Scorecard Dashboard – Single Supplier


Supplier Scorecard Dashboard – Comparison of Two Suppliers


Supplier Development Action Items


Agenda




a. Collaboration b. Evaluating Suppliers c. Managing Supplier Performance

4. Wrap-Up Wr

© SAP 2010 / 43


Wrap Up: Delays In Supplier Drop Shipments Respond to Missed Customer Commits

Business Process

Inbound Shipments & Receipt Confirmation

Risk Event

Missed customer commitments

Business Impact

Delayed Production

Customer dissatisfaction

Financial - Lost sales revenue

Key Performance Indicators Supply Lead Time Order Fulfillment Cycle Time

Preventive responses reduce probability of event

Recovery responses reduce impact of event

n Quality checks n Establish or tighten contract SLAs

n Cancel Shipment and Re-Source

n Provide alternate shipping source

Controls Support Replace Avoid Reduce

Responses

n  Change to new supplier

Planned functionality – subject to change

Drivers Key Risk Indicators

Supplier drop shipments

Improper or Inaccurate Shipping Documentation

Inspection failures

Delayed Lead Time

% of blocked imports

High Defect Rates


Lines of Business

Directors & Executives

Risk Managers

SAP’s Differentiator Risk-adjusted enterprise performance management

n  Embedded in existing processes

n  Reapply best practice mitigations

n  Enable performance (and risk) innovation

n  Risk in context of corporate strategy and performance

n  Understand true exposure of risk to performance

n  Achieve proactive transparency

n  Automatic risk monitoring

n  End-to-end risk processes across the value chain

n  Become a driver of business change

Thank You!

Contact information: Henner Schliebs [email protected] #hschliebs


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Sap Supplier Risk Performance 2011