Managing Risk in Your Organization with the SCOR® Methodology

Managing Risk in Your Organization with the SCOR Methodology Dave Morrow, Taylor Wilkerson & Melinda Davey On Behalf of Supply Chain Risk Management Team, Supply Chain Council, Inc. February 20, 2009

Abstract SCC members have reported that less than half of enterprises have established metrics and procedures for assessing and managing supply risks and organizations lack sufficient market intelligence, process, and information systems to effectively predict and mitigate supply chain risks. From this need arose the Risk Management Project Team approved by the SCC to enhance the SCOR model. The objective is to help organizations avoid/minimize costs, mitigate supply chain disruptions by managing risk proactively and thus, offering a competitive edge. The session presents the outcome of a global multi-industry team that has worked passionately to integrate risk management into the SCOR model.

Global Risk Project Team Team Composition : Risk Management through SCOR Model Name Organization Represented Dave Morrow Dr. Kevin McCormack Taylor Wilkerson Deanna Yee Melinda Spring Mitul Shah Melinda Davey Ray VanderBok IBM DRK Research LMI Satellite Logistics Group Supply-Chain Council Infosys Technologies, Ltd. TechTeam Government Solutions, Inc. TechTeam Government Solutions, Inc. John A. Deasy Roberto Pinto Avi Roseznberg John M. Barineau Maurice Uiterweerd George Borowsky Gregory Grehawick Hitesh Attri Mark Hillman Nishanth Vallabhu Andre Rego Macieira Arne Ziegenbein Daniel Vital Chiarini Koh Juay Meng Marc Finkelstein Transitions Group LLC University of Bergamo AROI E.I. DuPont de Nemours & Co., Inc Groenewout Lockheed Martin Aeronautics Booz Allen eKNOWtion AMR Research, Inc. Cognizant Grupo de ProducaoIntegrada Coppe/UFRJ Bosch Grupo de Produção Integrada Supply-Chain Council (South East Asia) Capgemini Accenture Jade Rodysill Team Role Chair Team Lead Team Lead Coordinator Project Manager Key Member Key Member Key Member Member Member Member Member Member Member Member Member Member Member Member Member Member Member Member Member

Supply-Chain Council The SCC is an independent, not-for-profit, global corporation with membership open to all companies and organizations interested in applying and advancing stateof-the-art supply chain management systems and practices. – – – – Founded in 1996 Over 800 Company Members Cross-industry representation Chapters in Australia/New Zealand, Brazil, Europe, Japan, North America, South East Asia, South Africa and China with petitions for additional chapters pending. The Supply-Chain Council (SCC) has developed and endorsed the Supply Chain Operations Reference model (SCOR) as the cross-industry standard for supply chain management. 4

Supply-Chain Product Design DCOR Sales & Support CCOR Customer processes Supplier processes Product Management Supply Chain SCOR 5

The SCOR Framework SCOR defines supply chain as the integrated processes of Plan, Source, Make, Deliver and Return, spanning your suppliers’ supplier to your customers’ customer, aligned with Operational Strategy, Material, Work & Information Flows. Plan Plan Deliver Suppliers’ Supplier Plan Source Make Plan Deliver Source Make Deliver Source Make Plan Deliver Supplier YOUR COMPANY Customer Internal or External Return Internal or External Supply Chain Operations Reference Model Source Customer’s Customer

SCOR Hierarchy Level 1 Level 2 Level 3 Level 4 Level 5 Scope Configuration Activity Workflow Transactions Supply-Chain Supply-Chain Source Source S1 S1 Source Source Stocked Product Product Stocked S1.2 S1.2 Receive Product Receive Product EDI EDI XML XML Differentiates Business Differentiates Complexity Names Tasks Sequences Steps Links Transactions Defines Scope Differentiates Capabilities Links, Metrics, Tasks and Practices Job Details Details of Automation Framework Language Framework Language Framework Language Industry or Company Specific Language Technology Specific Language Standard SCOR definitions Company/Industry definitions

Maps to Organizations Level 1 Level 2 Level 3 Level 4 Level 5 Scope Configuration Activity Workflow Transactions Supply-Chain Supply-Chain Source Source S1 S1 Source Source Stocked Product Product Stocked S1.2 S1.2 Receive Product Receive Product EDI EDI XML XML CxO EvP, SVP SVP VP VP, Director Line Manager Manager Team Lead Team Lead Individuals Strategic DecisionMaking Line of Business Management Activities Management Job Management Transaction Management Enterprise Supply-Chain Requirements Operations Strategy Fine-Tuning Operations Adjusting Process Performance Tuning Technology Performance Standard SCOR program Company/Industry implementation

The SCOR Model and Risk What is Supply Chain Risk Management?

What is Risk Management? Business Continuity Management (BCM), defined by the Business Continuity Institute as “a holistic management process that identifies potential impacts that threaten an organization and provides a framework for building resilience and the capability for an effective response that safeguards the interests of its key stakeholders, reputation, brand and value creating activities” (BCI, 2005). Business Vulnerability, defined as an exposure to serious disturbances, arising from risks within the supply chain as well as risks external to the supply chain (Christopher, 2003). Vulnerability is a result of any weakness within a complex system that can seriously jeopardize its activities (Ayyub, 2003). Enterprise Risk Management (ERM) as a set of coordinated actions about protecting and enhancing share value to satisfy the primary business objective of shareholder wealth maximization (Chapman, 2006). Resilient enterprise meaning the ability of the company to recover quickly from a disruption (Sheffi, 2005).

Risk Defined The International Organization for Standardization (ISO, 2002) defines two of the essential components of risk: 1. losses (along with related amounts) and 2. uncertainty of their occurrence. In the financial industry, operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events (New Basel Capital Accord, 2006).

Risk & Supply Chain Risk in general can be defined as a collection of pairs of likelihood (L) and outcomes / impact (O) of events. The combination of all the (likelihood; outcome) pairs is called a risk profile. Definitions of risk must also have a time dimension or a specific time horizon (day, month, year, etc.) and a specific perspective or view that defines the scope (boundaries, what’s not included, etc.). Supply Chain Disruptions Any event that negatively impacts the intended functioning of the supply chain. Discrete Events Can be a rare event or frequent event that happens at a specific instance in time Internal (machine break down, fire, strike, product failure) External (weather related, earthquake, etc.) (yes/no) Continuous Events (a matter of degree) Internal (performance metrics variability, warranty trends) External (supply / demand shifts, economic factors) Sometimes group into buckets

Supply Chain Risk Perspectives Global Environment Organization’s Environment Suppliers’ Environment Supplier (And outsource Facing Suppliers Customers’ Environment Organization Customer Facing Customers Manufacturing) Internal Facing Relationship Risk Supplier Performance Risk Human Resource Risk Supply chain disruption risk Supplier Environment Risk Market Dynamics Risk Disaster Risk Political / Country Risk Supplier Financial Risk Regulatory Risk Operational Risk Technical Risk Financial Risk Legal / Regulatory Risk Environmental Risk HR / Health and Safety Risk Political/ Country Risk Financial Risk Distribution Risk Relationship Risk Market Risk Brand / Reputation Risk Product Liability Risk Environmental Risk Political/ Country Risk

Supply Chain Risk Management Defined Supply chain risk management is the systematic identification, assessment, and quantification of potential supply chain disruptions with the objective to control exposure to risk or reduce its negative impact on supply chain performance. Potential disruptions can either occur within the supply chain (e.g. insufficient quality, unreliable suppliers, machine break-down, uncertain demand etc.) or outside the supply chain (e.g. flooding, terrorism, labor strikes, natural disasters, large variability in demand etc.). Management of risk includes the development of continuous strategies designed to control, mitigate, reduce, or eliminate risk. 14

The SCOR Model and Risk Why is Supply Chain Risk Management Important?

Supply Chain disruptions are a reality Mattel had massive recall due to lead content in paint. United States experienced significant disruptions from Long Beach longshoreman strike. United States experienced significant disruptions when borders and air transportation shut down after 9/11. Fuel distribution in the United Stated was disrupted after hurricane Katrina damaged pipelines. Nokia production shut down due to supplier plant fire. Kobe earthquake resulted in computer memory shortage, impacting multiple companies UPS strike severely impacted ability to ship small packages in the U.S. Others GM Halts Work at More GM Halts Work at More Plants Plants Due to Strike at Parts Due to Strike at Parts Supplier Supplier Chrysler Shuts Down Chrysler Shuts Down Four Plants Four Plants Baxter Pulls Remaining Baxter Pulls Remaining Heparin from the Market Heparin from the Market

Large Reputation Impacts Source: The View of the Supply Chain From Wall Street – J. Stuart Francis - Lehman Brothers, February 2003

Mattel Toys to Be Pulled Amid Lead Fears 18.5% Decline On a 10 Bil Market Cap Or 1.9 Bil loss Verbal Report To CPSC "We heard in early July that we had a possible issue," said Mr. Walter, who added the company stopped production in the Chinese factory around July 7. After further investigation, Mattel approached the Consumer Product Safety Commission with a verbal report July 20. A written report was filed July 26. The product is being recalled under the "fast-track" recall program whereby Mattel has admitted to the contamination and the CPSC hasn't done additional testing.

Supply Disruption Profiles Detection and response Recovery - minimized Sustaining Impact 0 Performance Initial Impact Full Impact – Avoided! Sustaining Impact 0 Initial Impact Preparation Detection and Response Full Impact Recovery Disruption Event Time

Strategies & Risk Tolerance Strategies that focus on customer service (e.g., reliable delivery) or where the cost of late or lost deliveries are high will have low tolerance for risk. Strategies that focus on cost reduction or where the cost of late deliveries is low will have a higher tolerance for risk. Ultimately, the tolerance for risk will determine how much the enterprise will invest in mitigation measures vs. reactive efforts. What Whatisisthe thebusiness businessimpact impactof ofaabroken brokensupply supplychain? chain? How Howmuch muchare areyou youwilling willingto torisk? risk?

The SCOR Model and Risk How does Supply Chain Risk Management fit in the SCOR Model?

SCOR model as the foundation of SCRM Supply chain risk management (SCRM) is a means for ensuring uninterrupted customer service. The SCOR Model is a framework for modeling and managing supply chain processes, practices and performance. – SCOR 9.0 will include Risk Management processes, practices, and performance indicators. Using SCOR as a Risk Management foundation will provide a better SCRM program. – – – – Faster implementation More comprehensive identification of potential risks Better application of SCRM best practices Better SCRM coordination with customers, suppliers, and stakeholders.

Where does SCRM fit within SCOR?

SCOR Enable Processes Plan Source Make Delive r Return Manage Business Rules EP.1 ES.1 EM.1 ED.1 ER.1 Manage Performance of Process EP.2 ES.2 EM.2 ED.2 ER.2 Manage Process Data Collection EP.3 ES.3 EM.3 ED.3 ER.3 Manage Process SC Inventory EP.4 ES.4 EM.4 ED.4 ER.4 Manage SC Capital Assets EP.5 ES.5 EM.5 ED.5 ER.5 Manage Integrated SC Transportation EP.6 ES.6 EM.6 ED.6 ER.6 Manage Process Configuration EP.7 ES.7 EM.7 ED.7 ER.7 Manage Process Regulatory Compliance EP.8 ES.8 EM.8 ED.8 ER.8 Manage Supply Chain Risk EP.9 ES.9 EM.9 ED.9 ER.9 Manage Financial Plan Alignment EP.10 Manage Supplier Agreements ES.10

Risk Management utilizing the SCOR model Process Area Set up “rules” and strategies Assign “perspectives”, roles and responsibilities PLAN X X Assess, analyze, organize, communicate and mitigate (S,M,D,R Enablers) X (PLAN only) Coordinate , align X Monitor and act X (PLAN only) SOURCE X X MAKE X X DELIVER X X RETURN X X

Typical Enabler High Level Flow Overall Business Risk Management Program Overall Supply Chain Risk Plan/Results (Rules, strategies, tools, etc. (Bus Strategy) Internal Information EP.9 Manage Supply Chain Plan Risk Suppliers Monitoring Risk Management Program for Process Area EP EP.1- Manage Business Rules EP.2- Manage SC Performance EP.3- Manage Plan Data Collection EP.4- Manage Integrated SC Inventory EP.5- Manage Integrated SC Capital Assets EP.6- Manage Integrated SC Transportation EP.7- Manage Planning Configuration EP.8- Manage Plan Reg. Compliance EP.10- Align SC Unit Plan with Financial Plan Internal Adjustments Internal Customer & Product Customer & Supplier Rules Resources External Information External Monitoring External Adjustments Plan / Results Internal Information ES.9 Manage Supply Chain Source Risk Risk Management Program for Process Area -External Monitoring Internal Adjustments Risk Management Program for Process Area - Internal ES ES1- Manage Sourcing Business Rules ES.2- Assess Supplier Performance ES.3- Manage Source Data ES.4- Manage Product Inventory ES.5- Manage Source Capital Assets ES.6- Manage Incoming Product ES.7- Manage Supplier Network ES.8- Manage Import/Export Requirements ES.10- Manage Supplier Agreements

SCRM Best Practices 10 Best Practices under the following categories: RM Programs’ Coordination with Partners Supply Chain Risk Identification Supply Chain Risk Monitoring Supply Chain Risk Assessment Supply Chain Risk Management Formal Risk Management Sourcing Risk Mitigation Strategies Configure to Reduce Risk : Crisis Communication Planning Supply Chain Business Rules Supply Chain Information Coordinated Risk Management Visibility and Quantification of Risk Best Practices Supply Chain Risk Management Supply Chain Network Supply Chain Designed for Risk

Best Practices - Formal Risk Management Supply Chain Risk Management (SCRM) Systematic identifying, assessing, and resolving of potential disruptions in supply chain networks with the objective to reduce their negative impact on the network’s performance

Best Practices - Visibility & Quantification of Risk Supply Chain Risk Identification Creating of a list potential events that could disrupt or harm any aspect of the supply chain’s performance (more details included in exercises) Supply Chain Risk Monitoring Creating of a list potential events that could disrupt or harm any aspect of the supply chain’s performance (more details included in exercises) Supply Chain Risk Assessment – Quantifying risk to understanding of where the greatest risks may exist in order to prioritize resources for risk mitigation and management – Measures include Likelihood and Impact (more details included in exercises)

Best Practices - Coordinated Risk Management Risk Management Program’s Coordination with Partners – Coordinating risk management with your supply chain partners by emphasizing cooperation among departments within a single company and among different companies of a supply chain to effectively manage the full range of risks as a whole – Establishing a Risk Management Coordination Committee Sourcing Risk Mitigation Strategies Includes strategies to address source risks, for example multiple sources of supply, strategic agreements with suppliers, and supplier partnerships (more details included in exercises) Crisis Communication Planning Creating a plan for managing a crisis when it occurs (more details included in exercises)

Best Practices - Supply Chain Designed for Risk Several things can be configured to reduce risk: Supply Chain Business Rules Establishing business rules (e.g., customer priority, supplier priority, production routing, transportation routing, etc.) based on minimizing the risk to the supply chain Supply Chain Information Managing supply chain information networks to minimize the risk to the supply chain. This includes information sharing with partners as well as internal locations. This helps all parties to be quickly informed of a real or potential disruption and respond quickly and appropriately to minimize the disruption impact. Supply Chain Network Designing node locations, transportation routes, capacity size and location, number of suppliers, number of production locations, etc. in a fashion that mitigates potential disruptions to the ability to deliver product and service to the end customer

Risk Management Implementation using the SCOR Model five phase approach. Phase Name Initial BUILD Organizational Support Risk Management Program Who is the sponsor? DISCOVER Supply-Chain Definition Supply-Chain Risk Priorities Project Charter/Risk Program definition What will the program cover? ANALYZE What is the risk tolerance of your supply chain? ASSESS Geo Map Thread Diagram Risk assessment Initial Analysis – where and how big are the risks? MITIGATE Mitigation plans Level 3, Level 4 Processes Best Practices Analysis Final Analysis – how will risk be eliminated or mitigated? IMPLEMENT How to deploy mitigations? I II III IV V Deliverable Scorecard Benchmark Competitive Requirements Customer service requirements Opportunity Analysis Mitigation Definition Deployment Organization Monitoring and response programs Resolves

Value-At-Risk Metric 1 2 3 4 Value-at-risk (VaR) is a category of risk metrics that describe probabilistically the market risk of a trading portfolio. Value-at-risk is widely used by banks, securities firms, commodity merchants, energy merchants, and other trading organizations. Such firms could track their portfolios' market risk by using historical volatility as a risk metric. They might do so by calculating the historical volatility of their portfolio's market value over a rolling 100 trading days. The historical volatility would illustrate how risky the portfolio had been over the previous 100 days. Source: www.riskglossary.com

Risk Measures Hierarchy Total Supply Chain Costs ( ) Level 1 Supply Chain Value at Risk (Gross VaR) Level 2 Level 3 Supply Chain Residual Risk ( , %) Supply Chain Value at Risk (VaR ) Supply Chain Event Risk (EVAR ) Supply Chain Value at Risk (VAR ) By PSMDR Supply Chain Event Risk (EVAR ) By PSMDR Value at Risk (VAR ) By PSMDR & individual performance metric Risk by Event (EVAR ) By PSMDR & individual event category Internal Enabler Process and Data Quality measures Supply Chain Mitigated Risk ( , %) By PSMDR Supply Chain Mitigation Costs ( ) Supply Chain Mitigation Cost( ) By PSMDR Mitigated Risk by Category ( ) By PSMDR & individual performance metric & event category Mitigation Cost( ) By PSMDR and event

Value-at-Risk (VaR) (i.e. 10 out of 100 total occurrences) P – Probability Quantifies the value of potential disruptions in terms of both Probability (likelihood) and impact on the supply chain. Target I1 Impact 1 P1 I2 Impact 2 P2 T Event 1 Value at Risk (VAR) (P1 x I1) (P2 x I2) P percentage of total negative events I impact of event Event 2

Which supplier (AA or NW) has the highest risk (likelihood of being late)? Ave % Late by Airline Risk Event – Late Arrival Percent Late 6 5 4 Count 3 2 by Airline 1 Std. Dev 7.61 Mean 25.3 N 21.00 0 7.5 12.5 10.0 % LATE 17.5 15.0 22.5 20.0 27.5 25.0 32.5 30.0 37.5 35.0 Airline % Late Hawaiian Airlines Inc.: HA 6.95 Aloha Airlines Inc.: AQ 8.01 Southwest Airlines Co.: WN 18.26 Delta Air Lines Inc.: DL 19.66 AirTran Airways Corporation: FL 20.52 Frontier Airlines Inc.: F9 21.35 Pinnacle Airlines Inc.: 9E 22.45 Alaska Airlines Inc.: AS 25.53 Skywest Airlines Inc.: OO 25.85 All Rows (including those not displayed) 26.42 Continental Air Lines Inc.: CO 26.47 Expressjet Airlines Inc.: XE 27.84 United Air Lines Inc.: UA 28.15 Mesa Airlines Inc.: YV 28.20 Atlantic Southeast Airlines: EV 30.36 American Eagle Airlines Inc.: MQ 30.39 Northwest Airlines Inc.: NW 30.87 American Airlines Inc.: AA 31.00 JetBlue Airways: B6 33.35 Comair Inc.: OH 33.45 US Airways Inc.: US 36.30 NW AA

VaR - Illustration Distributions Historical Data NW Historical Data 0.15 13.7 13.2 11.0 10.7 Late Events 0.10 Probability Late Events 8.0 7.5 6.0 0.05 4.8 4.0 3.4 2.8 2.1 1.9 1.7 0.8 1.4 1.1 0.3 0.0 0.1 -40 -30 -20 -10 0 10 20 30 40 0.8 0.7 0.6 0.5 0.4 0.3 0.3 0.2 0.2 0.2 0.2 0.2 0.1 0.1 0.1 50 60 Min Late 70 80 90 100 110 120 Min Note: there is a broader range of values than for NW Normal(9.95833,39.1969) Normal(9.95833,39.1969) Quantiles 100.0% maximum 99.5% 97.5% 90.0% 75.0% quartile 50.0% median 25.0% quartile 10.0% 2.5% 0.5% 0.0% minimum 1426 169 84 38 17 3 -7 -14 -23 -31 -63 VaR Table AA Min 5 10 15 20 25 30 35 40 45 Assume 1 Min Late 1 USD Moments Mean Std Dev Std Err Mean upper 95% Mean lower 95% Mean N 9.9583321 39.196899 0.2089706 10.367921 9.5487431 35183 Percent 10.00% 7.70% 5.40% 3.80% 3.30% 2.40% 2.10% 1.90% 1.60% 195 200 205 210 215 220 225 250 275 VaR 0.50 0.77 0.81 0.76 0.83 0.72 0.74 0.76 0.72 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% VaR Fitted Normal Parameter Estimates Type Parameter Location µ Dispersion s Value at Risk for NW Estimate Lower 95% Upper 95% 9.9583321 9.5487431 10.367921 39.196899 38.909422 39.488686 Fitted Normal Parameter Estimates Type Location Parameter µ Estimate Lower 95% Upper 95% 9.9583321 9.5487431 10.367921 Value at Risk for AA 0.20 0.20 0.21 0.21 0.22 0.22 0.23 0.25 0.28 19.60

AA and NW Comparison Which supplier (AA or NW) has the most impact to the business? Supplier Ave % Late VaR NW 30.87% 14.24 AA 31.00% 19.60 Which supplier (AA or NW) has the most risk?

Case Study – Bio World Meter and Core Kit Plastic Injection Molding Mfg. Electronic Circuit Mfg. Assembly, Test Pack Care Kit Instrument Contractor Strips in Bottle Plastic Roll Suppliers (circuit) Bottle and Lid Supplier (w/ desiccant) Test Meter Customers Bio World Care Kit Plastic Roll Suppliers (plain) Strips Channel Adhesive Suppliers 12 pack of Strips in Bottles Channel Chemical Suppliers A,B,C

Case Study Risk Identification ID 1 Process Area Source Risk Identification Event Plastic Strip supplier shut down by labor strike Description The main plastic strip supplier has been in talks with their worker's union. The talks have broken down and the union has gone on strike, shutting down all operations and shipments for 30 days The actual sales and distribution of kits is 50% higher than the forecast for the north eastern US. Distributors are out of stock leading to lost orders and emergency shipments from other regions. The Bio World plant is on over time and it will take 30 days to catch up. 2 Plan out of stock incidents with the distributors 3 Make Packing Equipment Failure Product cannot be packaged automatically. Increase labor costs due to additional overtime to package the products manually. Deliver Increased delivery costs due to high price of fuel Higher delivery costs from Bio World to distributor resulting in higher costs per unit. Loss of competitive advantage as the low cost diabetes meter/strips. 4

Risk Assessment ID Process Area Risk Identification Event Plastic Strip supplier shut down by labor strike Risk Assessment Risk Zone (H,M,L) Annual Probability (%) Impact VaR 10.0% 5,000 500 H 1 Source 2 Plan out of stock incidents with the distributors 25.0% 1,000 250 M 3 Make Packing Equipment Failure 25.0% 300 75 L 4 Deliver Increased delivery costs due to high price of fuel 65.5% 400 262 M Total Risk Magnitude (VAR) 1087 Note: All costs are in ‘000

Risk Mitigation ID Risk Mitigation Strategy 1 Plastic Strip supplier shut down by labor strike Identify suppliers that are unionized and assess their relationship with their union. Need to certify back-up supplier and pay them an annual fee for stand by production capability. 50 10.0% 2 out of stock incidents with the distributors Maintain a central inventory at the Bio World plant equal to 2 weeks of 50% of demand for a region. Include the distributors in S&OP meetings. 100 3 Packing Equipment Failure Follow a schedule of equipment retirement & replacement with new equipment. 4 Increased delivery costs due to high price of fuel Purchase oil futures to hedge against an increase in fuel costs. Total Mitigation Costs New VAR L*I Original VAR ROI 1500 150 500 300 5.0% 500 25 250 125 20 15.0% 10 1.5 75 53.5 10 100% 1 1 262 251 178 1087 730 Implement Cost 180 New Prob (L) New Impact (I) Note: All costs are in ‘000

Risk Mitigation – Action Plan ID Mitigation Action Person Responsible Status 1 Identify suppliers that are unionized and assess their relationship with their union. Need to certify back-up supplier and pay them an annual fee for stand by production capability. Supplier Liaison Manager Suppliers identified. Annual fee to be negotiated. 2 Maintain a central inventory at the Bio World plant equal to 2 weeks of 50% of demand for a region. Include the distributors in S&OP meetings. Demand Planner New inventory level defined for the product. 3 4 Frequent maintenance of equipment. Follow a schedule of equipment retirement & replacement with new equipment. Purchase oil futures to hedge against an increase in fuel costs. Floor Manager In Progress TBD Risk Management Team working with Finance Dept to obtain person responsible for mitigation action Due Date Risk(s) Addressed End of Q2’08 Plastic Strip supplier shut down by labor strike Done out of stock incidents with the distributors Immediately Packaging equipment failure End of Q3’08 Increased delivery costs dues to high price of fuel

SCOR model as the foundation of SCRM Supply chain risk management (SCRM) is IMPORTANT The SCOR Model is a framework for modeling and managing supply chain processes, practices and performance. Using SCOR as a Risk Management foundation will provide a better SCRM program. SCRM provides ROI, competitive advantage and improvement opportunities.

The SCOR Model and Risk When & where can I start to: “Manage Supply Chain Risk in Our Organization with the SCOR Methodology”?

SCRM with the SCOR Methodology - Resources Access to the SCOR model version 9.0 – SCC members can access the full model online which contains the recent additions for supply chain risk management processes, best practices, & metrics Risk Project – Phase 2 – Volunteer for the next phase of the Risk Project involving: Risk in DCOR Research Additional enhancements to SCOR & DCOR SCRM using SCOR training – Next class offered on March 19, 2009 in Houston, Texas, USA)

One Day SCOR SCRM Workshop Supply Chain Risk Management (SCRM) Fundamentals – Introduction to each SCRM component and how each can support the firm's supply chain management – Discussion of SCRM process and all components – Presentation of several example projects and discussion of component use for each specific project The SCOR Model and Risk management – Background, components, strategies and implementation Participants who complete this works will be able to – Understand the purpose and goals of SCRM within the context of their firm and supply network – Develop a basic SCRM strategy and plan for their organization – Understand and articulate the business value of a SCRM program Prerequisite - Attendees must be conversant in the basic SCOR model in order to attend this workshop. The SCOR Framework training includes the required basics

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