Supply Chain Risk Management

Today’s Challenge:
Many companies attempt to optimize their supply chain. The underlying business cases predict savings and improvements. But optimizing operational supply chains often includes the implicit assumption of “normal operating conditions”. Studies show however that 73% of the companies suffer from a major disruption in their supply chain every 5 years. The costs accompanying such disruption may surpass the anticipated savings of the optimization projects easily.
Regardless of industry or geography, risk impacts all elements of today’s economy and its supply chain; such as increased competitiveness, elevated chain complexity, a high focus on efficiency, outsourcing, an overconcentration of locations, and a diversity of cooperative and collaborative relationships between chain partners. Accountability and transparency are common expectations. In order to succeed in this environment and maintain consumer and investor confidence, firms need a clear sense of risk events impacting the value chain, mitigation strategies and impact on EBITDA.

MÖBIUS' added value:
Disruptions of the supply chain flow can have a calamitous impact on business profitability. Supply Chain Risk Management therefore forms one of the key areas of interest in supply chain management. To help businesses cope with disruption probabilities, MÖBIUS, in cooperation with Vlerick Leuven & Gent Management School has developed a Supply Chain Risk Management (SCRM) approach to aid managers and facilitate their process of identifying, quantifying and responding to risks in their supply chains.

Through simulation modelling a company will obtain a clear understanding of the critical risks endangering its supply chain, the impact that goes with it and the possibly beneficial effect that mitigation strategies can bring. These insights are defined not only in a qualitative way, but are, most importantly, based on quantitative information :

Account for risks associated with a broad range of supply and demand uncertainties. For this we can rely on our own in house developed stochastic modeling tool (MÖBIUS Risk Management Suite (MRMS)).
Manage risk. It is important the total SC process can be looked at. That is why our methodology is an end-to-end solution. We can quantify the total risk associated. This is important because solving one problem can generate additional risk in another area.
And last but not least, within risk assessment focus on the expected financial impact (EBITDA) and the opportunity costs associated with each decision.

MÖBIUS addresses projects related to:
The MRMS tool will have the capability to show the dynamics of a client’s supply chain subject to disturbances and contingency management. As such, we can advise and support a company in assessing and making investments for the management of supply chain risks.

Our tool has the capability to :

Develop a realistic (and sometimes complex) supply chain model, which can easily be adapted to the customers’ actual supply chain.
Based on a classification model, the availability of a choice of risks that have the biggest impact on the customers’ financial results and therefore need extra attention and further investigation. Eventually come to a number of measures to reduce or even avoid certain risks.
Through different models and scenario’s (a combination of risks and mitigations) conduct simulations that can lead to reality based results. Estimate the risk of those uncertainties and disturbances and their financial impact (EBITDA).

MÖBIUS’ MRMS methodology

Supply chain risk management is a step-by-step process that needs to be followed to create an overview of all possible factors that influence risks and to come to well identified quantitative measures to :

Eliminate the supply chain risk
Reduce probability
Reduce impact
Transfer supply chain risk
Accept the supply chain risk

The figure beneath shows the relative context between the different steps that have to be taken and the corresponding modules of the underlying tool.

MÖBIUS' solution provide:

Robust supply chain design, anticipating future evolution
Scenario based design plans (with its corresponding likeliness of actual occurrence)
A scientifically advanced approach

SC Risk Project Management

Model the context
Through the software “Supply Chain Modeler” the customers’ supply chain network will be designed and will form the basis of all further research.
Model / define the SC Risks
Select the relevant risks that can possibly occur in his supply chain. This can be done by selecting a specific risk out of a predefined list that contains 60 of the most common supply chain risk, or by manually defining a new risk.
Analyze impact of risk
Through the “Scenario & Simulation Generating Engine” the impact of a risk on EBITDA can be calculated and simulated and thus prioritized.
Mitigation Strategies
After simulation has provided the results the risks will have on the supply chain parameters, mitigation strategies can be defined. Such a strategy could be to adjust the current supply chain model.
Evaluate and implement best strategy
By using the “Reporting Tool” the different mitigation strategies that have the best result can be identified and which risk should be prioritized in comparison with other risks. Finally determine the largest “Bang for Buck” and evaluate the implementation feasibility by looking at the investment capability and the elapsed time to implement that strategy.