Title: Supply Chain Management Under International Terrorism
1Supply Chain Management Under International
Terrorism
- Yossi Sheffi
- Professor of Engineering Systems
- Head, MIT Center for Transportation Studies
2Outline
- The Nature of the Challenge
- Preparing for another attack
- Managing supply chains under increased
uncertainty - New public-private partnerships
- Organizing to meet the challenge
3September 11, 2001The US Perception Has Changed
4On the Following days
- Ford idled several production lines
intermittently due to delays at the Canadian
border
- Toyota came within hours of halting production
since a supplier was waiting for steering wheels
shipped by air from Germany
5The Long Haul
- The War on terrorism is unlike any other that the
US experienced. - Instead of a hired army everybody is exposed
and everybody is involved. - How do you win? And when would you know that
you won?
6Aspects of the Effort
- Preparing for another attacks (including attacks
on supplier, partners and customers) - Managing supply chains under increased
uncertainty - Rethinking the role of the government
- Organizing to meet the challenge
7Preparing for Another Attack
- Supplier relationships
- Inventory management
- Knowledge backup
8Preparing for Another AttackSupplier
Relationships
- Core suppliers vs. public auctions
- Use of off-shore suppliers
- Dual supply relationships
9Dual Supply Example
- Medical devices made by Malaysian contractor
- Cost 100/device
- Revenue 400/device
- Fixed costs 200/device
- P1 400 - 100 - 200 100/device
- Disruption probability 1
- P2 0.99(400-100)-200 97/device
- Local vendor can supply at 150/device and needs
20 of the volume to have full capability - If there is no disruption P3 400
(0.81000.2150) - 200 90 - If there is a disruption P4 400 - 150 - 200
50 - Expected profit P5 0.99 P3 0.01 P4 89.6
- The expected added costs of dual manufacturing
is P2 - P5 7.4 This is the insurance premium
10Preparing for Another AttackInventory Management
- The vulnerability of JIT manufacturing
- Advantages of JIT manufacturing
- Strategic Inventory
- SoSo Management
- Where?
- For which items?
11Preparing for Another AttackKnowledge Backup
- Developing backup processes
- Backing up the companys knowledge
- Standardization and cross-training
- CRM and customer relationships
12Supply Chains under Uncertainty
- Better visibility
- Better collaboration
- Better forecasting
13UncertaintyBetter Visibility
- Transportation visibility involves multiple
handoffs - Need for full supply chain visibility
- Reasons for the carriers not to share data
- Independent data acquisition sources
14UncertaintyImproved Collaboration
- Last decade VMI, CMI, EDR, QR, JIT, JIT II, CPD,
CPFR - Now implementation
- New joint emergency planning (alternate shipping
methods alternate suppliers) - Also security knowledge sharing
15UncertaintyRisk Pooling
- Postponement
- Build-to-order
- Product variability reductions
- Centralized inventory management
- Keeping generic parts in centrally-managed
strategic inventory
16Public-Private Partnership
- Information sharing
- Assuming certain tasks
- Hazardous materials
- Direct emergency assistance
17Public-Private PartnershipInformation Sharing
- Use of government know-how on nature of threats
and possible responses share problems with the
government - Change professional/ethical code of conduct
18Public-Private PartnershipAssuming
Responsibilities
- Current US procedures still immature
- Profiling of cargo
- Scalability of current methods
- Certification programs
- FAA known shippers program
- ISO 9000 like program
- Certified carriers tracking, sealing, follow-up
- Certified shippers loading procedures
19Public-Private PartnershipHazardous materials
- Many regulations now in place
- Community right-to-know act
- Labeling and placarding rules
- Local emergency planning committees
- For early response air-traffic-control system
for moving hazardous materials
20Public-Private PartnershipDirect Assistance
- Corporate resources
- Merchant marine
- Civil Reserve Air Fleet
- Data bases of heavy equipment and trained
personnel
21Trade-Offs
- Repeatability vs. predictability
- Lowest bidder vs. the known supplier
- Centralization vs. dispersion ( ,
) - Managing risk vs. delivering value
- Collaboration vs. secrecy
- Redundancy vs. efficiency
- Government cooperating vs. direct shareholder
value
22Organization
- Chief Security Officer
- A business person
- Meeting business objectives in the new
environment - A central coordination function
- Incorporating security in the daily life of
corporations
23Summary
- A long term adjustment
- collateral benefits
- Better collaboration
- Better supply chain operations
- Better controls (less theft, IP loss, better
standards) - Participation in communities
24Any Questions?
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Yossi Sheffi SHEFFI_at_MIT.EDU