AFEI Supply Chain Innovations
Savannah, GA
February 23, 2012
Some Perspectives on Supply Chains,
Innovation & Risk Management
Robert E. Mansfield, Jr., Brig Gen USAF (RET)
Executive Director, Center for Aviation and Aerospace Leadership
Talking Points
 Innovation, Invention, Transformation
 Changing Views of Competitive Advantage
 Next Generation Supply Chains
 Multi-disciplinary Contest
 Military Supply Chains
 It’s About the Supply Chain Management
 Some Technology—COTS
 Supply Chain Risk Management
 Q&A
About Embry-Riddle Aeronautical University
 Over 36 graduate and




undergraduate programs.
Regionally accredited by the
Southern Association of
Colleges and Schools (SACS).
26,000 students annually and
100,000 alumni.
More than 150 locations
around the world.
Residential campuses in
Daytona Beach, FL and
Prescott, AZ.
Daytona Beach, FL
Worldwide
Prescott, AZ
Why a Dedicated Leadership Center?
 There are a number of Centers for Leadership around the
country:
● Center for Creative Leadership
● Center for Leadership Studies
● Center for Public Leadership
● Boeing Leadership Center
● FAA Center for Management and Executive Leadership
 But none are focused on what it means to be a leader across
the aviation and aerospace industry.
 Create something new and unique for the industry – the
Center for Aviation and Aerospace Leadership
How We Think Influences How We Act
“I haven’t tried it yet,” the knight said, gravely; “so I
can’t tell for certain – but I’m afraid it will be a little
hard”
Lewis Carroll:
Alice’s Adventures in Wonderland
“If it’s easy, why are we doing it?”
Innovation, Invention, Transformation
 Innovation*, making processes and things better:
● Has replaced price as basis of competition globally
● Is best managed and routinized as a process
● Is encouraged by economic incentives
● Requires enforceable contracts and immunity from arbitrary expropriation
● Benefits expanded by opportunities for profitable dissemination and rental
(e.g. licensing)
 Invention, creating brand new things
 Innovation is also the ability to create and produce economic value from
invention
 Transformation is changing how things are done to make fundamental,
dramatic and radical improvement in outcome — my definition
● Transformation requires both innovation and invention
* Adapted from: The Free-Market Innovation Machine, by William J. Baumol, 2002
Strategic Context – Competitive Advantages.
Performance-Centric:
 Product-Centric vs. Performance-Centric
 Classic economic theory, product-centric, place value in product
● This old focus emphasized tangible resources embedded value,
and transactions
● Advantage based in land, labor, capital
● Measured through production output
 Implies a focus on the product, its specifications, its production.
Performance-centric perspective
 A new perspective that finds value in performance outcome
● The new focus is on intangible resources
● Knowledge as a source of competitive advantage, role of
relationships
● Co-management / co-creation of performance
● Excellence in knowledge integration across the supply chain
 Implies a focus on the customer’s perception of value
Next Generation Supply Chain Characteristics G
Real time responsiveness to demand (agile and flexible)
Performance based (customer is co-manager of outcomes)
Robust (risk management/networked response/diagnostics)
Dynamically configurable; analytical frameworks and tools
Technology enabled visibility (process/factory floor/MRO)
Co-management/co-creation of performance/innovation &
metrics
 Real time status for recognition of performance leading
indicators
 Knowledge and skills are source of advantage (build
sustainable talent pipeline)






“Outsource capacity-never capability”
Forces Driving Aerospace Supply Chain
Transformations and Competitiveness
New Frontiers
Technologies
• Composites
• Access to Space
• Nanoscience
• UAS’s
• Optics and Photonics
• Green
• Energy
Next Generation
Supply Chain
OEM & Supply Chain Shift
Defense Pressures
• Systems integration-outsourcing
• Expeditionary
• Foreign Strategies
• Shifting threats
• Dynamic networks
• Persistent conflict
• Cost Volatility
The Supply Base is a Key Focal Point
 Programs tend to get the emphasis, but for components and
parts the Supply Base is critical
Program 1
OEM
20%
OEM
30%
Outsourced
70%
Outsourced
80%
Accessories
Program 3
OEM
15%
Outsourced
85%
OEM
25%
Outsourced
75%
Multidisciplinary Context to An Integrated Supply
Chain
Logistics
•Maintenance
•Materiel
•Movements
Value Chain
Processes Aligned to
Desired outcomes
Applications
•Fin Mgmt
•Contracting
•Inv Mgmt
Business
Technology
11
•ERP
•PLM
•APS
12
Military Supply Chains Have Their Challenges
 Challenges with DoD Supply Chains:
• Demand: variable, long planning cycles, constrained by
budgets and political forces; leading to frequent schedule
and quantity changes
• Complex supply chain networks and systems have
developed, generally independently since the end of WWII
based on functional and geographic and doctrinal
orientations vs. enterprise orientation
• Designed when people were inexpensive; IT was not
• Difficult to create data once and share it across system
boundaries thereby reducing the time required for
decision-making and avoiding the cost of redundant efforts
These create challenges for Enterprise Management
and Enabling IT
13
JSF Extended Team – U.S.
HOTAS
• Essex
RIUs
VMC
Lift Fan
Alt Engine
• BAE Systems Controls
• Rolls Royce Allison • Smiths Aerospace • GE
Canopy Actuator
ICP
LGS
EPGS • MPC
• LM Owego
• Goodrich
• Hamilton Sundstrand
Ext. Lighting
Anti Ice
ICP
• LSI
•
Goodrich
• LMTS
EHAS
CNI -Components
• Rockwell Collins
MFD
• Rockwell Collins
(Kaiser)
• Moog
Gun System
• General Dynamics
Landing Aid Antennas
• EDO
EW/CM
• BAE IEWS
Driveshaft
• Goodrich
Engine
• Pratt & Whitney
HMD
• VSI
RF Cables
• Times Microwave
Stores & Rel. Sys
TRS
• McCormick Selph
• EDO
TDE
• Smiths Aerospace
Radar, EO-DAS
• NG ES
EW/CM components
• NG
Edges
• LM Aero- Palmdale
Rudder Pedal
• Pacific Scientific
Transparency
• ATK
Center Fuse
• NG
ADS
• Avionics Specialties, Inc.
Forebody Test Sled Articles
• Advanced Technologies
AME
• Marvin
Raytheon
• GPS
LEFD, Wing Fold
• Moog
Fuel System
• Parker Aerospace
CNI
• Northrop Grumman RS
ICP Panel
• L3 Comm
CNI Apertures
• Ball
PTMS
Supply Chain
• Honeywell
• Honeywell/Cat Alliance
Raytheon
• Weapons
Source: Lockheed Martin Aeronautics Company
Final Assy, Fwd Fuse, Wing
• LM Aero-Ft Worth
HPGS
• Eaton
NDB
• MTI
Boeing
• Weapons
CNI
• Components SCI
ICP Components
• Raytheon Systems
LEFAS
• Curtiss Wright
Fire Protection
• Kidde
Radome
• General Dynamics Marion
INS
• Honeywell
T&S
• LMIS
EOTS
• LM Missiles & Fire Control
Harris
• Common Components
F-35 Extended Team - International
Industrial Participation
Turkey
U.K.
Gate Elektronic
TAI
BAE SYSTEMS
ALP Aviation
Ayesas
Goodrich Adv. Sys
Aselsan
Havelsan
Helmet
AYESAS
KaleKalip
Integrated Sys.
Gate Elektronic
TAI
Martin Baker
Havelsan
Aselsan
Hambles Sturc.
Hema/Alp
MIKES
Smiths +Others
Kale Kalip
Hema
Beaufort
Marconi
KaleKalip
Smiths
Mikes
ALP
GKN
Parsan Steel
Parsans
Microfiltrex
Forging
HS Claverham
TAI
HS Marston
TEI
QinetiQ
+ Others
Didsbury Engr
Kennard
Netherlands
+ Others
ATS Kleizen
Fokker Elmo, Aero, Defense
Sun Electronic
Philips Aerospace
SP Aerospace
Thales Cyrogenics
DAP
Thales Optronics
Sun Electronic
Phillips Aerospace
Thales Cyrogenics + Others
Axxiflex
Senior Aerospace Bosman
PHM Group
Urenco
+ Others
Source: Lockheed Martin Aeronautics Company
Norway
Kongsberg
Metronor
Techni
NERA
Kongsberg
Kitron
3D Perception
Applica
Ericsson
Kitron
Metronor
Nammo
Natech
NERA
Presens
SensoNor AS
SINTEF
T & G Elektro
Thales Comm.
+Others
Australia
Micro LTD
Ferra Engineering
Hovitt
Cablex
Varley
Production Parts
Calytrix Technologies
+ Others
Micreo
Cablex
Lovitt + Others
Compucat
Rosebank Eng
+ Others
Denmark
Terma AS
GPV
SSE
IFAD
HiQ Wise
Corena
Terma
SSE
GPV
E.Falk Schmidt
Maersk Data Def
Elbo Production
Danish Aerotech
Hamann Electronics
+ Others
Italy
Alenia
Marconi Sirio Panel
Galileo
Piaggio
Moog- Caselle
UOP
Secondo Mona
Samputensilli
Marconi Selenia
York
+Others
Global Development and Production
Canada
Herovx-Devtek
Magellan-Chicopee
Honeywell Eng. Sys
DY4
Mindready
Howmet
Virtek +Others
Mustang Surv. Co
Bristol Aerospace
Graphico
Novatronics
DMG + Othes
Bombardier
Air Data Inc
CMC Electronics
Noranco + Others
OMA
Mecaer
Aerea
Aermacchi
Galileo
ASE
Forgital
Inossman
Logic
+ Others
Thinking About Military Customer Service
“Customer – a person or organization who receives a good, service, or information” APICS Dictionary, 10th ed, 2002
“The only entity that puts money into a supply chain is the end customer. Until the end
customer decides to buy a product, the rest of us are shuffling his money back and forth
among supply chain members” – Handfield & Nichols, Supply Chain Redesign, 2002
But “who” is the customer of the DoD Supply Chain?
16
The Customer of the DoD Supply Chain Is…
17
Military Supply Chain Outcomes
Combat/Training
priorities
Replacement
Unit
Supply
Levels
Wholesale
Supply
Levels
Component Removal
By Flight Line Crews
CCRF
Repair
Times
Sorties
CAOC - F-15C/D
80
70
60
50
40
30
20
10
0
Required
Projected
1
4
7 10 13 16 19 22 25 28
Source: RAND
Campaign Weeks
Depot
Repair
Times
SRM Sustains the Value Added
Over Time, It’s Where the Money is!
Strategic Sourcing Value
Time
Source: Allstate Insurance, ISM Conference, Dec 2002
19
Trust – Supplier Working Relations Index
Components
©
Working Relations Variables
Buyer–Supplier
Relationship
1) Supplier trust of Buyer
2) Supplier perception of working relations with Buyer
Buyer
Communication
3) Buyer open and honest communication with suppliers
4) Buyer communicates timely information
5) Buyer communicates adequate amounts of information
Buyer Help
6) Help Buyer gives to suppliers to reduce costs
7) Help Buyer gives to suppliers to improve quality
Buyer
Hindrance
8) Buyer late/excessive engineering changes (reverse measure)
9) Conflicting objectives across Buyer functional areas (reverse measure)
10) Supplier given flexibility to meet piece price/tooling cost objectives
11) Supplier involvement in Buyer product development process
Supplier
Profit
Opportunity
12)
13)
14)
15)
16)
17)
Buyer shares savings from suppliers' piece price cost reduction proposals
Buyer shares savings from suppliers' value chain cost reduction proposals
Buyer rewards high performing suppliers with new/continued business
Buyer covers sunk costs on cancelled or delayed programs
Buyer concern for supplier profit margins when asking price reductions
Suppliers' opportunity to make acceptable return over long term
Source: Planning Perspectives, Inc. Copyright 2010
©
GOOD–VERY GOOD
ADEQUATE
VERY POOR–POOR
Company – Supplier Working Relations Index
Working Relations Index : Industry
Comparison
Source: Planning Perspectives, Inc. Copyright 2010
Industries
Aircraft Engines
Aircraft Framers
Auto OEMs
Auto Tier 1 Suppliers
Baby Food
Construction Tools
Electronics/Computers
Energy
Medical Equipment
Medical Nutrition
Pet Food
Small Construction Tools
Heavy Trucks
Supply Chain Modeling
Init Orders Back log
Orders Bac klog
~
Units Reject ed by Cus tomer
Table 3
Back logs
Orders
Deli very
Product ion Capaci ty Proces s
~
Average Yi eld
Units Reject ed by Cus tomer
Rework Switch
Work Pac kages Ready
Order Ful fill ment Proc ess
Init Produc tion Capacity
Rework Proc ess
Product ion Capaci ty
Product ion Process
Init Orders Back log
Init Rework To Do
Init Raw Materi al Inventory
Add Capacity
Rework Switch
Init Fini shed Goods Inventory
Refi lled Orders
Required Uni ts per Parent Unit
Remove Capaci ty
Rework To Do
Ti me to Remove Capac ity
Demand in Units
Raw Material Inventory
~
Orders Bac klog
Correc ted Orders
Orders Bac klog
Average Delivery Time
Ti me to Add Capaci ty
Capacity Rati o
Rece ive Raw Materi al
Arriving Orders
Incomi ng Rework
Finished Goods Inventory
Product ion
Deli very
~
Orders Fulfil led
~
Average Time to Rework Order
Product ion Multi plier
~
~
Planned Capacity Changes
Where is Capacity? Tie i t to Produc tion Capacity so they
sh are? this tak es pri ority?
Normal Produc tion Time
Act ual Produc tion Time
Orders to Product i on
Shipping Process
Labor
Orders Bac klog Adjust ment
Target Raw Material Inventory
Product ion Order Adjust ment
Remove Labor
Add Labor
Rework Switch
Shipments Out to Cust omer
~
Average Yi eld
Target Finished Goods Inventory
Correc ted Orders
Desi red Days of Finished
Goods Inventory
Add Labor Del ay
Deli very
Remove Labor Delay
25%
Adjust Labor
Refi lled Orders
Labor Schedule
~
Rework Switch
Arriving Orders
Product ion Multi plier
Init Orders Back log
Units Ac cepted by Cus tomer
Average Yi eld
Shipments Out from
Chil d Suppl ier
Finance s
Init Accounts Rece ivable
Equi pment
Raw Material Orderi ng Proce ss
~
~
Average Delivery Time
for Child Supplier
Product ion
Add Equipment
~
Average Yi eld for Child Suppli er
Remove Equipment
Raw Material Inventory
Init Cash Bal ance
Work Space
Raw Material Rec eiving Process
Orders to Child Supplier
~
Profi t
Average Time to Ins pect
Incomi ng Material
Perce nt Profit
Average Time for
Cust omer Paym ent
Acco unts Rec eivabl e
Add Work Space
Target Raw Material Inventory
Remove Work Space
Supplier Order Adj ust ment
Rece iving Inspect ion
In Trans it
Cash Balanc e
Information
Revenues
Cust omer Bill ings
Arriving Suppli es
Shipped Supplies
Expenses
Units Ac cepted
Orders to Child Supplier
Add Information
Remove Information
Organi zation with No Chil d Suppl iers
50%
~
Average Unit Price
Units Rejected
Average Profit
OF CT In 17
Work Pac kages Ready
OF CT Out 17
Required Uni ts per Parent
Unit for Child Suppli er
~
Average Delivery Time
for Child Supplier
Demand in Units
for Child Supplier
~
Average Yi eld for Child Suppli er
Profi t
Movi ng Avg Time
Chil d Suppl ier Proce ss
Required Uni ts per Parent
Unit for Child Suppli er
Supply Chai n Management Cost
Table 6
Chil d Suppl ier Rece ive
Chil d Suppl ier Deli ver
Cost of Goods Sol d
~
Shipments Out from
Chil d Suppl ier
Chil d Suppl ier Delay
Average Unit Price
for Child Supplier
Finished Goods Inventory
Raw Material Inventory
Upsi de Supply Chai n Flex ibil ity Proce ss
Perfect Order Fulfillment Proce ss
Deli very
Product ion
~
Average Yi eld
Table 4
Perfect Order Fulfillment
Sust ained Value Range
Up SC Flex Counter
Average Cash to Cas h Cycl e Time Process
Counter Out 10
Counter In 10
Raw Material Inventory
Days of Supply
Acco unts Pay able Process
Init Accounts Paya ble
Up SC Flex Duration Met
Average Time to Pay Suppliers
Bill ings from Suppliers
Finished Goods
Inventory Day s of Supply
Total Inventory Day s of Supply
Up SC Flex Within
Range Condi tion
Acco unts Pay able
Sust ained Duration
Up SC Flex
Paym ents to Suppli ers
Days Sales Outst anding
Counter In 12
Direc t Materi al Cost
Days Payabl e Outst anding
Cash to Cash Cyc le Ti me
Up SC Flex Start Condition
Average Order Fulfi llment Cycl e Time Process
Average Cash to Cas h Cycl e Time
Average Order
Ful fill ment Cyc le Ti me
OF CT In 2
Up SC Flex Start Switch
OF CT In 3
OF CT Out 3
Counter In 11
OF CT Out 2
Acco unts Pay able
Acco unts Rec eivabl e
Order Ful fill ment Cyc le Ti me
Upsi de Supply Chai n Flex ibil ity
Movi ng Avg Time
Orders Bac klog
Revenues
Arriving Orders
Movi ng Avg Time
Orders Fulfil led
Average Return on Supply Chain Fi xed Ass ets Proce ss
Movi ng Avg Time
Average Supply Chain Management Cost Proces s
Average Return on Supply
Chai n Fixe d Assets
Average Supply Chain
Management Cos t
Average Cost of Goods Sold
Paym ents to Suppli ers
Orders Fulfil led
Shipments Out to Cust omer
Movi ng Avg Time
Average Cost of Goods Sold Proc ess
OF CT In 6
OF CT In 4
OF CT In 5
OF CT Out 4
OF CT Out 5
~
~
Average Cost of
Goods Sold per Unit
Cost of Goods Sol d
OF CT Out 6
Average Cost of Supply
Chai n Fixe d Assets per Day
Average Other
Overhead Cost per Day
Supply Chai n Management Cost
Return on Supply
Chai n Fixe d Assets
~
Average Product i on
Overhead Cost per Day
Shipping Cost s
Capacity Const ruct i on Cost s
Direc t Materi al Cost
~
Product ion
Average Shippi ng Cost per Unit
Product ion Cost
Inventory Hol ding Cost s
Supply Chai n Management Cost
Average Di rect
Labor Cost per Unit
Product ion Capaci ty
Rework Switch
~
Average Holding Cost per
Day per Unit for Raw Material
Raw Material Inventory
~
Average Unit Price
for Child Supplier
Cost of Goods Sol d
Avg Cost To Double
Product ion Capaci ty
Correc ted Orders
~
Rework Cos ts
~
Average Holding Cost per Day
per Unit for Fi nish ed Goods
Revenues
Finished Goods Inventory
Units Ac cepted
Bullwhip
effect:
No
intervention
Add Capacity
Shipments Out to Cust omer
Movi ng Avg Time
Agent model
embedded
in “brix” icon
25%
Brix are
dragged,
dropped,
and
connected
Bullwhip
effect:
Added
capacity
Bullwhip
effect:
Buffer
inventory
VIASIMSolutions, 2010
Supplier Data Aggregation
What?
Web-based system enabling
the collection of a wide range of
performance data via Excel
templates
Perfect for industry groups and
decentralized organizations
Features
The performance distribution
chart provides a quick summary
of all members in the network
Members’ template completion
status at a glance
Source: www.vontik.com (KPMG)
And EDICT, Inc, 2010
23
Supplier Data Aggregation
Features
• Traffic lights quickly interpret
results on a consistent basis
across suppliers
• Supplier benefit from seeing
their performance benchmarked
against their peers. You gain
context to understand relative
position in the market
Benefits
• Better sourcing and planning
•
•
•
•
Source: www.vontik.com (KPMG)
And EDICT, Inc, 2010
decisions
Greater transparency and
communication
More cost effective than manual
template entry
Higher likelihood of participation
with third party
Benefit to supplier of
benchmarking data and one data
entry point
24
Real-Time Supply Chain Visibility
Copyright Omnitrol Solutions, Santa Clara, CA, 2010
Value Added

Automate Global Track and Trace
● Sensor-driven tracking and traceability services
● Multi-site multi-tier reporting for exception
management directly from operations
● Incremental deployment integrating over 10,000
customer sites

Real-Time SaaS-based Supply-Chain Collaboration
● Secure web-portal access between partners to
review asset location, timing and delivery issues
● Remove tedious manual reports and excel
spreadsheets
● 24x7 – anytime, anywhere access

Real-Time Supply Visibility
● Automated KPIs
– Cycle-time, open-cycle, on-time delivery,
stock-level
– Inventory, activity, volume in/out
● Lower asset losses and track damages
● Customer web-portal for real-time supply visibility
● Improve customer billing accuracy
● Increase customer service level

Enables measuring & tracking of future “green”
compliance measures
Copyright Omnitrol Solutions, Santa
Clara, CA 2010
SC Interoperability is a Key Need
Supplier Relationships
SOA
Services
OEM
Prime Vendor
DLA ICPs
Base Supply
Depot Operations
Customers
Service ICPs
OEM
I-Level Maint Shop
DLA Depot/
Depot Supply
Flightline
Other
Suppliers
Off-Site Repair
Relationships
Organic Maintenance Depot
NATO
Other Services
FMS
Other Customers
OEM
Engine Center
OEM Engine
Repair Center
Source: LMI
OEM
Module Repair
Off-Site
Capacity For
Module Repair
Flightline
Parts Movement
Carcass Movement
Operations People Understand Supply Chains
 Supply chain professionals understand the importance of
supply chains
● And their importance to the smooth running of the business
 But Financial people don’t always appreciate the impact of
supply chains
● Until something goes wrong!
Link the importance of the
supply chain and shareholder value
Focus of Enterprises is to Increase Shareholder
Value:
Disruption and Supply Chain Failures Reduce Value
 Shareholder value has been created by driving out cost
● Lean approaches
● Offshore sourcing of supply
● Increased reliance on specialized suppliers
 As a result, costs have declined and profitability of major
enterprises has increased, at least relative to traditional insourcing
 But this cost reduction has come at the expense of increased
volatility and unpredictability of enterprise earnings
Enterprise Value is directly affected by
how well supply chain risk is managed
Capital Markets Reward Consistent, Visible
Earnings
 Capital markets reward companies for earnings which are:
● Consistent
● Visible
● Predictable
 Companies which produce consistent earnings are rewarded
with higher firm value
● Academic studies support this conclusion: Allayannis and Rountree
(2005)1
 Portfolio managers prefer to own shares in companies with
earnings visibility and bid up prices relative to lesser
companies2
 Lower earnings volatility is associated with higher quality
ratings (Standard and Poor’s, 2005)
Lower volatility of earnings leads to higher enterprise
value
Low Volatility = Higher Firm Value - Evidence
 Allayannis and Rountree (2005) show that a one standard
deviation increase in cash flow volatility results in an
approximate 32% decrease in firm value.
 In addition, earnings/cash flow volatility is found to:
● increase the likelihood of negative earnings surprises*
● increase the perceived borrowing costs*
● result in lower analysts’ coverage and lower institutional
investor following*
*See also Trueman and Titman (1988), Brennan and Hughes (1991), Lang et al. (2003), and Badrinath et al. (1989), and Francis
et al (2004)
Case Study: Mattel
 Mattel’s business model was affected by lead paint in certain




toys made in China
Significant recalls occurred beginning in June 2007
Costs of the recall were significant:
● Direct – recalling products from shelves
● Indirect – impact on future revenues
Issues have been front and center for the press and financial
community since then
The capital markets have not been kind
Mattel’s Stock Price
 Stock declined approximately 33% with the first recall
Shareholders have lost approximately $3.5 BILLION in value
Case Study: Menu Foods
 Publicly traded supplier of pet foods
 Hit by issues related to allegedly tainted ingredients
 Stock Price on day before announcement:
 On Day of announcement:
 On announcement of loss of major customer:
 90 days after announcement:
 120 days after announcement:
$7.25
$5.50
$4.09
$2.33
$3.30
Impact on shareholder value:
Over 50% decline
Positive Impact on Shareholder Value
Resilient Portfolio
Cumulative Return
100
80
60
Resilient
40
R1000
S&P500
20
S&P EW
0
07
1q
06
3q
06
1q
05
3q
05
1q
04
3q
04
1q
03
3q
03
1q
-40
02
3q
02
1q
-20
Managing Risk in the Supply Chain:
Planning for the Inevitable
 Why care?
 What is it?
 What do we do?
 Is it worth it?
 Do we only want to “mitigate?”
 When will our supply chain fail?
 How do we respond?
Managing Risk in the Supply Chain:
A perspective
 Responding to demand is growing in importance (Lean; Shareholder
Value)
● Surge
● Disruption
 Variability of demand is a fact of life for many supply chains
● Forecasting is an inexact “science”
 Supply chains are by nature complex and dynamic
● Much of value add is in the supply chain
 Supply chains are rarely engineered
● Inherited or limited sources
● Hard to engineer social systems
 Supply chains all will fail at some time to meet demand
● Question is when, how often and severity
 Resilient, Recoverable, Reconstitutable
Managing Risk in the Supply Chain:
How to cope
 There is more to risk management than “mitigation!”
● Avoid? Transfer? Accept? Insure? Share?
 Response to failure – Time to recover
● What to do when; how to do it; who’s involved; what’s it cost?
 The value of the wargame
● Test assumptions, and how much you really know
● Think the unthinkable
● Involve others (It’s more that purchasing)
● Safe place for failure
● Test management concepts and peoples’ skills
● Improves chance of successful recovery or reconstitution
● Develop alternative courses of action…”if”
● Creates a planning mind-set
Managing Risk in the Supply Chain:
 Some Things in a Wargame to Think About:
● Raw Materials
● Components of a product
● Product (What the Customer Buys)
● Services (Internal and external)
● Infrastructure (Internal and external)
● Data/IT Systems
● Logistics/Distribution System
● Customers
● Employees
● Location(s)
 Model and Simulate where you can, but table top is fine
 Always plan the game; record and evaluate actions/results
Take a Holistic View of Supply Base and Operating Environment
Recap
 Supply Chain Management, particularly military
supply chains, is complex; the IT solutions and
tools are too
 The ultimate customer of DoD logistics processes
has no commercial (legal) counterpart
● Think about the weapons system as the customer
 Supplier Relationship Management is where the
ultimate money is
 Risk needs to be MANAGED
 The supply chain members are needed to fully
realize transformation—some may need help
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Leadership and Competitive Advantage
Requires more than Understanding the Problem
“The
greatest danger in times of turbulence is not the
turbulence; it is to act with yesterday’s logic.”
Peter F. Drucker
Aviation and Aerospace Manufacturing Summit
 Planning 3rd Annual Aviation and Aerospace
Manufacturing Summit
 Theme: “Ensuring Aerospace Supply Base Vitality”
 To be held 8 – 10 February 2012 in Fort Worth, Texas
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THANK YOU for Listening to Me!
Questions?
Robert.Mansfield@erau.edu
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