White Paper - Leveraging Risk Management

In this episode of the Auto Supply Chain Prophets podcast, hosts Cathy Fisher, Terry Onica, and Jan Griffiths explore the critical topic of risk management in the automotive supply chain. The conversation commenced with the hosts sharing their experience with an EV startup, underlining the crucial role of robust supply chain processes for successful scaling.

Transitioning to the main topic of risk management, Cathy and Terry discussed their recently updated white paper, which explores risk management strategies and the development of resilient supply chains. They further delved into the paper's relevance amid current supply chain challenges, including the COVID-19 pandemic and the semiconductor crisis.

The conversation highlights the necessity of cross-functional collaboration in identifying and addressing supply chain risks. The hosts stress the significance of CEO involvement, cost considerations, and risk appetite in creating effective contingency plans. The episode concludes by emphasizing the critical role of proactive risk management, with a continual focus on the dynamic nature of risks, necessitating frequent assessments and quarterly reviews.

Themes discussed in this episode:

• Supply chain challenges
• Future of supply chain in the EV era
• Working with EV startups
• Importance of robust processes
• Update on risk-based thinking
• Cost considerations and risk appetite
• Proactive risk management
• Cross-functional collaboration 

At the heart of The Prophets’ vision are “The 24 Essential Supply Chain Processes.” What are they? Find out, and see the future yourself. Click here

Featured on this episode: 

Name: Cathy Fisher

Title: Founder and President, Quistem

About: Cathy’s firm helps its clients, particularly automotive manufacturers, eliminate customer complaints and increase their profits. She has worked in the automotive supply chain since the 1980s when she started her career with General Motors.

Connect: LinkedIn

Name: Terry Onica

Title: Director, Automotive at QAD

About: For two decades, Terry has been the automotive vertical director of this provider of manufacturing Enterprise Resource Planning software and supply chain solutions. Her career began in supply chain in the late 1980s when she led a team to implement Electronic Data Interchange for all the Ford assembly and component plants.

Connect: LinkedIn

Name: Jan Griffiths

Title: President and Founder, Gravitas Detroit 

About: A veteran executive in the automotive industry, Jan previously served as chief procurement officer for a $3 billion, Tier 1 global automotive supplier. As the president of Gravitas Detroit, Jan provides online courses, speeches, podcasts, and workshops to break the mold of command-and-control leadership to help you unleash the potential of your team and allow authentic leadership to thrive.

Connect: LinkedIn

Mentioned in this episode:

• 24 Essential Supply Chain Processes
• AIAG, MMOG/LE 
• ISO 9001 & IATF 16949
• White Paper for Leveraging Risk Management in Automotive

Episode Highlights:

[03:32] Elevating risk management in the supply chain: Explore the updated white paper's focus on practical risk-based approaches for tackling today's supply chain challenges like COVID-19 and the semiconductor crisis. Learn about the essential need for collaboration across different company parts, involving CEOs, to identify, assess, and manage supply chain risks effectively.

[09:25] Leadership role in risk management: Discusses the challenges of supply chain leaders embracing risk management. They stress the CEO's pivotal role, share a compelling example highlighting the impact of contingency planning, and emphasize the need for a broad risk evaluation, including suppliers and customers.

[16:52] A guide for supply chain leaders: Terry and Cathy explain why the white paper is a good read for supply chain leaders, giving essential information on compliance requirements and a guide to robust contingency plans. The document encourages thinking differently, seeing risk management as a tool to try new ideas and innovate confidently.

[19:08] Key advice for auto suppliers: The hosts discussed the critical role of proactive risk management, emphasizing the need for frequent risk assessments and quarterly reviews. Highlighting the dynamic nature of risks, they stress the industry's resilience while urging the importance of cross-functional discussions for strategic risk preparation.

Top Quotes:

[04:57] Terry: “What's really nice about the document is that there are a lot of new people in the industry who don't necessarily understand risk management, risk assessment, or contingency planning. And so, I think it's a really excellent document to help those who are new to the automotive industry.”

[05:39] Cathy: “What we noticed even as a result of COVID was that a lot of organizations were still sitting in their silos in addressing risk. And today that is just, it's not possible. You can't do that. It wasn't effective before, but it's even more ineffective now, mainly because of the interconnectedness of what's happening in business and the reliance on the supply chain.”

[07:07] Terry: “You got to break down the silos and get together when it comes to looking at risk. Because in a lot of cases, there are shared risks. If there's an earthquake, it's going to affect quality, it's going to affect supply chain, manufacturing, everything, right? So, you can really come together and build one cohesive plan in a lot of cases.”

[18:51] Cathy: “Embracing risk assessment and risk-based thinking in your business actually helps you be a better innovator than if you're just not looking at the risks at all.”

[19:22] Cathy: “We should be identifying risks and we should also be reviewing our plans on a frequent basis as well to make sure that we have viable plans to address when those risks are realized within the business.”

[19:37] Terry: “I think to proactively manage risk you need to be sitting down a few times a year because they change, right? A pandemic was not a risk on anybody's radar several years ago. So, keep looking at risk, doing it once a quarter if anything new bubbles up.”

[Transcript]

Hello and welcome to another episode of the Auto Supply Chain Prophets Podcast. Let's check in with my co-host, Cathy Fisher. What have you been up to lately?

And so, they leveraged our 24 Essential Supply Chain Processes to see where they were at. Now good thing that they did it after the ramp is that they were able to see how that went, what went well and what didn't. And so, it became very clear as we went through the 24 processes with them where they needed to improve.

A lot of "aha" moments. So, they really see the benefit of using automation as they begin to do their mass ramp.

It's like you've taken all the knowledge of the industry and boiled it down into a nice, easy-to-read document. And I love that. I'm all about easy-to-read documents. Well, talking about documents, let's talk about our main focus for today's episode, which is risk management. Now, when we talk about supplier risk and supply chain risk, I will tell you in my life in supply chain, when I think about that, my mind immediately goes blank.

And I think, oh no, there's so much risk, and gosh, we've seen it, haven't we, lately? I mean, we've had COVID, we've had chip crisis, we've got the strike. There is risk at every turn and somehow supply chain leaders, we have to think about that. We have to have a process to be able to identify it, to mitigate it, to put plans in place. So, tell us about your latest white paper that you've written. So, Cathy, tell us about it.

We recognized, especially since COVID, how much more important risk is. It's always been important, right? But I think certainly the experience that all organizations, all industries even, but especially the automotive industry has experienced as a result of COVID and the resulting ripple effects, semiconductor crisis, et cetera, has really elevated the focus on risk-based thinking and incorporating risk as a key focus, not only within the organizations, but also in managing the supply chain as well.

So, we went back through the work that we had done and refreshed it with the experiences the lessons learned from the past several years since COVID. And also put a lot more emphasis on the expectations around contingency planning and helping to really clarify. Where contingency planning comes from as a result of risk analysis or performing that risk assessment up front first and then figuring out what do we really need to be building contingency plans around.

And today that is just, it's not possible. You can't do that. It wasn't effective before, but it's even more ineffective now, mainly because the interconnectedness of what's happening in business and the reliance on the supply chain as well, especially as you look to the lower tiers in the automotive industry and exactly what we experience with the semiconductor crisis. So, we're really encouraging and highlighting in this updated version of the white paper that organizations come together as a cross-functional team. And when they're looking at supply chain risk, you really have to have the voice, not just of supply chain and purchasing and the voice of the supplier, but you also have to incorporate the voice of the manufacturing, the voice of the customer, of course, and even from the business perspective. So, it absolutely has got to be a cross-functional activity. And along those lines, the other mistake that we see a lot of organizations making because they're staying siloed is that when they are creating contingency plans or even doing risk assessments then they're actually missing a lot of the interfaces or interrelationships of risks and making sure that as an organization they're planning collectively for addressing those risks and that's where organizations oftentimes are going to get caught off guard when they realize those risks and they don't really have a holistic plan for addressing them.

And when I say, show me your supply chain disruptions. They don't think about it, I need to look at transportation. What if my ASNs don't get there on time? Packaging. Quality people just don't think about that. And that's why you got to break down the silos and do it together.

Unfortunately, they may not have the right. reach and leverage in the organization to bring all parties together, and certainly, they're not necessarily going to have that broad-based perspective that the CEO's office can then encourage when we get all those leaders from the different sectors of the business sitting together and assessing those risks.

The other thing too is that the ownership of those risks ultimately lands with the CEO, and with the top leadership of the organization and especially the contingency plan. So when I go into organizations and contingency planning has been delegated to another department, I'm like, this is not a good situation because the resources that are going to be necessary to support that contingency plan, the focus on testing performing routine drills around those contingency plans, and even just the global perspective of the types of risks that are emerging may not be within the organization. And typically, the CEO has a lot more external focus in terms of the position of their business relative to the overall industry and just even to the global markets that they're serving.

So when you look at risks that may impact the organization, it's very important that as part of that risk assessment, you're looking at what could be the financial impact to our business; if we shut our customer down, if we are not able to continue running our operations and paying our employees, if we're having to shift our supply from a current supplier to another supplier, or even shift our entire production to another location to overcome a disruption that may happen in our plant.

All of those scenarios have costs associated with them. And it's not impossible to figure out what those costs are. I mean, that information can be generated. It's not necessarily going to be 100 percent accurate, but as long as you have a general idea of what those costs are going to entail, that'll help the organization in prioritizing the resources. It'll also help in terms of the organization determining where should we focus our time and efforts in communication, drilling the process, making sure that those contingency plan actions of business continuity activities are going to be viable when we find ourselves in that disruption.

As a supply chain leader, and our audience are all supply chain leaders, why would I devote my time and attention to reading this white paper? What am I going to get out of it?

What could be the impact to our customers and other stakeholders when we are innovating and we're able to realize if we have not the desired result out of those innovations, we understand what the impact is going to be. We don't have any surprises on the other side of that. So, you know, embracing risk assessment and risk-based thinking in your business is it actually helps you be a better innovator than if you're just not looking at the risks at all.