24
Feb

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Supply Chain Risk Assessment Report

Case Study by Crest Advisory Africa (Pty) Ltd

Scope and Objectives

As requested by the Client, CAA performed an “Online Supply Chain Risk Assessment (OSCRA)” on a specific site within the Gauteng region. The Client is a leader in the Construction environment, working with a number of value chains and supply chain processes, specifically impacting on the Project Life Cycle and Project Delivery of each project.

The OSCRA consists of a three (3) stage process to identify Supply Chain Based Risks, whether (Strategic, Operational or Project) within the Inbound Supply Base and Processes.

Stages of the OSCRA

The OSCRA consists out of three interactive stages of implementation. These three stages are shortly defined in the bullets below:

  • Stage One (1) focuses on the internal activities within the site.
  • Stage Two (2) reviews 150 primary Suppliers / Vendors and their processes, whilst
  • Stage Three (3) focuses on Secondary Suppliers, where there are limited spend or deliveries.

For the purposes of this Case study, the review reflects the findings of Stage 1 only.

Comments and Recommendations

In the interests of brevity only matters needing management attention are highlighted. All items reported on are classified as either:

Red – High risk and requires focus in the short term

Amber – Medium risk and will require management action in the medium term

Executive Summary

Stage 1 – Internal Assessment

The assessment submitted by One (1) respondent has identified the entities inbound supply process as an overall medium risk. It is important to note that although the risk is identified as medium it is in the upper percentiles of medium closer to high risk. Notwithstanding being a medium risk the assessment highlighted high risk areas.

Below is a summary of the Nine (9) Supply Chain Risk Categories and their status reflecting the areas which should be prioritized. Further detail is provided as per Schedule 1, highlighting the potential risks to the specific entity.

Interpretation

The OSCRA is a fantastic tool to determine where the risks are in the total Supply Chain value chain. Through this in-debt analysis, one knows where to allocate resources or where to change a strategy.

From our observations, it has become evident that companies know the Supply Chain environment, but have very complex measurables.

The simplicity and the power of Risk Management within the Supply Chain environment are resulting in these nine (9) pre-defined areas of measurement.

CAA and its partners are exposed to a very diverse environment and clients. Taking this into account, our strategy for continuous improvement is evident in the products we deliver.

Conclusion

We would like to extend our appreciation to those involved for their assistance and co-operation afforded to us during the course of the assessment.

Contact us:

The CAA team can help you with the implementation of the recommendations, in addition to various adaptable templates and pre-designed processes ready to be implemented, please contact us on:

  • Nico Snyman
  • Mobile: 076-403-4307
  • Office: 011-534-8454
  • Fax: 011-534-8401
Schedule 1
Assessment Observation Risk Recommendation
Inter-company Supply Management
IC suppliers are not managed in accordance with a formal supplier management process.There is no documented SLA in place with IC suppliers.IC suppliers are not managed according to the same rigorous quality parameters as external suppliers.

The lack of control is exacerbated by the poor delivery performance of IC suppliers – <85%.

Manufacturing interruptions and financial losses owing to failing to meet committed delivery dates and quality expectations.Inability to hold IC suppliers accountable to agreed deliverables and improve poor delivery performance.Unable to recover any losses/compensation sustained.

Impact to customers and reputational damage to you as a supplier.

A formal contract and SLA should be implemented for each entity outlining the expectations and deliverables. Include penalties for poor performance, although they are the same company they will be different profit centers.The IC suppler should be invited to attend regular SRM meetings documenting their current performance.As with any the external suppliers they should be given the opportunity to improve their performance.
Supplier Management
Limited focus on supplier quality.A disconnect between Quality and Purchasing with regards to management of supplier quality.Mean Time Between Failures (MTBF) is not tracked to monitor supplier and component quality.

Supply of rejects is not trended to identify underperforming suppliers or delivering questionable quality.

New suppliers do not go through a QA approval process.

No formal procedure to ensure credit or replacement product is received for defects/returns.

Questionable supplier or materials used in manufacturing processes.Quality defects only identified at point of use, even worse by your customer.Continued delivery of inferior materials if supplier is not informed they are not meeting required specifications.

Limited compensation from suppliers for supply of defect products.

Inventory Business interruption.

Management should encourage Quality be included in an SRM program and attend the regular meetings.Combine supply chain and quality supplier audits.Purchasing and Quality should jointly develop a process to inspect, trend and manage reject materials.

A supplier onboarding process should include a section covering supplier quality expectations, which is reviewed and signed off by Quality.

Corporate Social Responsibility (CSR)
Corporate social responsibility is not well communicated through the business.It is unknown if there is a CSR strategy.No formal polices on bribery & corruption and anti-slavery in place.

Carbon footprint of the supply chain is not measured and trended.

Viewed not to support sustainability of society and the environment.Unable to present supporting evidence of CSR if requested by customers.Potential exposure to penalties for any non- compliance. Management should consider developing a CSR strategy to promote their commitment to sustainability of both society and the environment.In certain countries, it is regulatory to have policies and procedures governing this.