risk management exam 3
Historically businesses expend ____ of budget on goods and services from outside vendors
(3rd parties) - ANS1/3
Today, many companies spend over _____ of their budget on outside goods and services
- why difference? - ANS75%
- efficiency advantage
reasons outside vendors are used more - ANS1) globalization
- ex. China is huge outsourcer
(2) efficiency due to outsourcing
(3) just in time inventory control
- accounting gives managers ability to appreciate cost structure
just in time inventory - ANS- when bring in 3rd party components, have to store somewhere
in warehouse and also pay for storage
- pushes business to become more efficient so that if need weekly supplies don't have them
delivered once a month-cut down on excess non-productive product sitting around
disadvantages of outside vendor reliance - ANS- Additional regulatory compliance - both
- Increased levels of economic uncertainty
- Shorter _product cycles__ /rapid technological change
- constantly updating
- Demanding customers
- Supply side capacity constraints - think of changing supply chain
- Consolidation of operations to gain economies of scale
- 3rd parties have greater economies of scale bc instead of producing yourself, by going to
3rd party to numerous clients they may be producing way more than you would for your own
business so cost savings
result of increased third party reliance: - ANSSupply Chains are more _brittle___ than ever
before - Need to handle that increased risk
- brittle = easier to break, easier to have disruptions
- each new generation did something new with its products
- lawfirm example- weakest cyber link is lawfirm during outsourcing process when not
in-house
,supply chain risk - ANSthe likelihood and consequence of loss events at any point in the end
to end supply chain
COVID: supply chain risk example - ANShave totally unseen risks but did realize increasing
reliance on particular countries (ex. China)
sources of supply chain risk - ANS- Natural Events
- Social Factors
- Economic Issues
- Technological Issues
- Safety and Security
basic risk for supply chain: - ANSwhich raw materials and components in supply that if there
was a disruption would most effect profitability
- Porsche example- not necessarily highest cost risk in and of itself, but "cement truck"
examples- what events completely stop production
teams needed for supply chain risk management - ANS1. business continuity (sales,
marketing, customer service)
2. engineering and design
3. finance
4. compliance (regulatory- think import/export restriction)
5. logistics (moving product component, etc.)
6. manufacturing
7. procurement (bring product components to your organization)
8. quality control
9. security
10. senior management- backing and support
effective team includes members from these areas - ANS- finance
- logistics
- manufacturing
- quality control
- senior management
senior level "buy-in" - ANSdemonstrate that RM is a company priority at the highest level
RM must be embedded in ___________ to be effective - ANScompany culture
ways to embed in company culture? - ANS- Should meet regularly
- discuss risks
- changes in environment
- effects on contingency plans
- conduct simulations/tests
priorities of SCRM - ANS(1) revenue protection- not losing market share, lowering rebuilding
cost
, (2) competitors- if their plan is not as effective, can pick up their customers
(3) allows you to identify areas of operational cost saving
side: how can you improve (locate efficiencies and inefficiencies)
Nokia & Erikson Case - ANSErikson was the leading manufacturer- as introduced new levels
cell phones became smaller and smaller
- their phones were very small
Nokia was #2 manufacturer
- outside Albequerque intel plant had a fire that disrupted the manufacturing of chips- both
companies purchased chips from them but Erikson had no backup plan and Nokia did
- Erikson couldn't supply any product but Nokia had backup in Phoenix so also suffered loss
of components from NM plant could increase purchase of components from other plants
- Nokia ended up becoming largest manufacturer and Erikson doesn't even manufacture
phones anymore
see notional supply chain chart - ANS:)
major categories: supply chain chart - ANS- upstream input
- distribution
- manufacturing (side box is byproduct)
- downstream output
subcategories: supply chain chart - ANS- infrastructure
- utilities (raw & converted)
- process functions
- people (expertise, staff size)
Obvious that these sub-categories affect the Suppliers and Production / Manufacturing, but
why do we consider the Customers? - ANS1. Better customer relations- if customer
acknowledge and appreciates that looking out for them, more longstanding
2. By understanding customers can anticipate needs (increase demand for product and they
stick with you)
3. Allows you to assist with customer's planning (give them ideas about new services and
products) - less improbable that will switch to another company bc view you as trusted
partner
bow-tie risk analysis - ANSsee chart
bow tie method looks at - ANS(1) _Inherent Risk__________ - risk in absence of any
treatment (i.e. loss control)
(2) _Residual Risk_________ - risk remaining after treatment
Historically businesses expend ____ of budget on goods and services from outside vendors
(3rd parties) - ANS1/3
Today, many companies spend over _____ of their budget on outside goods and services
- why difference? - ANS75%
- efficiency advantage
reasons outside vendors are used more - ANS1) globalization
- ex. China is huge outsourcer
(2) efficiency due to outsourcing
(3) just in time inventory control
- accounting gives managers ability to appreciate cost structure
just in time inventory - ANS- when bring in 3rd party components, have to store somewhere
in warehouse and also pay for storage
- pushes business to become more efficient so that if need weekly supplies don't have them
delivered once a month-cut down on excess non-productive product sitting around
disadvantages of outside vendor reliance - ANS- Additional regulatory compliance - both
- Increased levels of economic uncertainty
- Shorter _product cycles__ /rapid technological change
- constantly updating
- Demanding customers
- Supply side capacity constraints - think of changing supply chain
- Consolidation of operations to gain economies of scale
- 3rd parties have greater economies of scale bc instead of producing yourself, by going to
3rd party to numerous clients they may be producing way more than you would for your own
business so cost savings
result of increased third party reliance: - ANSSupply Chains are more _brittle___ than ever
before - Need to handle that increased risk
- brittle = easier to break, easier to have disruptions
- each new generation did something new with its products
- lawfirm example- weakest cyber link is lawfirm during outsourcing process when not
in-house
,supply chain risk - ANSthe likelihood and consequence of loss events at any point in the end
to end supply chain
COVID: supply chain risk example - ANShave totally unseen risks but did realize increasing
reliance on particular countries (ex. China)
sources of supply chain risk - ANS- Natural Events
- Social Factors
- Economic Issues
- Technological Issues
- Safety and Security
basic risk for supply chain: - ANSwhich raw materials and components in supply that if there
was a disruption would most effect profitability
- Porsche example- not necessarily highest cost risk in and of itself, but "cement truck"
examples- what events completely stop production
teams needed for supply chain risk management - ANS1. business continuity (sales,
marketing, customer service)
2. engineering and design
3. finance
4. compliance (regulatory- think import/export restriction)
5. logistics (moving product component, etc.)
6. manufacturing
7. procurement (bring product components to your organization)
8. quality control
9. security
10. senior management- backing and support
effective team includes members from these areas - ANS- finance
- logistics
- manufacturing
- quality control
- senior management
senior level "buy-in" - ANSdemonstrate that RM is a company priority at the highest level
RM must be embedded in ___________ to be effective - ANScompany culture
ways to embed in company culture? - ANS- Should meet regularly
- discuss risks
- changes in environment
- effects on contingency plans
- conduct simulations/tests
priorities of SCRM - ANS(1) revenue protection- not losing market share, lowering rebuilding
cost
, (2) competitors- if their plan is not as effective, can pick up their customers
(3) allows you to identify areas of operational cost saving
side: how can you improve (locate efficiencies and inefficiencies)
Nokia & Erikson Case - ANSErikson was the leading manufacturer- as introduced new levels
cell phones became smaller and smaller
- their phones were very small
Nokia was #2 manufacturer
- outside Albequerque intel plant had a fire that disrupted the manufacturing of chips- both
companies purchased chips from them but Erikson had no backup plan and Nokia did
- Erikson couldn't supply any product but Nokia had backup in Phoenix so also suffered loss
of components from NM plant could increase purchase of components from other plants
- Nokia ended up becoming largest manufacturer and Erikson doesn't even manufacture
phones anymore
see notional supply chain chart - ANS:)
major categories: supply chain chart - ANS- upstream input
- distribution
- manufacturing (side box is byproduct)
- downstream output
subcategories: supply chain chart - ANS- infrastructure
- utilities (raw & converted)
- process functions
- people (expertise, staff size)
Obvious that these sub-categories affect the Suppliers and Production / Manufacturing, but
why do we consider the Customers? - ANS1. Better customer relations- if customer
acknowledge and appreciates that looking out for them, more longstanding
2. By understanding customers can anticipate needs (increase demand for product and they
stick with you)
3. Allows you to assist with customer's planning (give them ideas about new services and
products) - less improbable that will switch to another company bc view you as trusted
partner
bow-tie risk analysis - ANSsee chart
bow tie method looks at - ANS(1) _Inherent Risk__________ - risk in absence of any
treatment (i.e. loss control)
(2) _Residual Risk_________ - risk remaining after treatment
