Supply Chain Risk Management at HBM

CASESTUDY

- 1 -

BENEFITSThe riskmethods Supply Risk Network can be activated using a se-quence of simple manual actions, and offers HBM a cloud-based soft-ware solution with daily, up-to-date data on all risks for all suppliers, production sites and countries. This has proved to be a profitable ad-vantage, especially to medium-sized companies that have integrated the Supply Risk Network into their organization. Ongoing risk monito-ring, an early warning system, impact evaluation and action planning ensure that risks are more easily recognized and the extent of damage minimized. In this way, HBM ensures its profitability and increases its competitive advantage.

SOLUTIONAn all-inclusive approach enables HBM to monitor its key suppliers. „All-inclusive“: first because HBM monitors suppliers, locations, coun-tries and hubs for all types of risks (natural disasters, strikes, com-pliance breaches, etc.) by way of riskmethods‘ Supply Risk Network. And „all-inclusive“: second because HBM can map its extensive risk management process cycle in the Supply Risk Network. Risks are monitored along the entire supply chain and the impact is determined using an evaluation matrix so that, in a risk event, transparency on the ramifications is immediately available. This allows for professional action planning in order to quickly activate appropriate risk mitigation measures and activities in an emergency.

CHALLENGEHottinger Baldwin Messtechnik (HBM) was faced with the challenge of creating transparency along global supply chains to minimize risks in its supply chain, secure production and ensure profitability.

With this in mind, HBM came up with three questions that would be relevant for creating an all-inclusive concept for successful supply chain risk management:

• What risk is associated with every single supplier?• How does each supplier influence the profitability?• How can transparency be created so as to prevent crippling of the entire production due to default by a supplier that works with penny articles?

- 2 -

HBM soon realized the meaning of risk management in global supply chains and consequently already started tackling the challenge proactively four years ago. In collaboration with universities, it defined a concept for determining and minimizing the risks in procurement, and for creating transparency in global supply chains. Establishing of the HBM supply chain risk management concept in the entire organi-zation is defined in three steps:

1. What risk is associated with a supplier?2. How should the impact be evaluated?3. What measures can be taken to minimize the risk?

Originally, all risk and supplier data was collected and prepared using extensive Excel lists. As the risks and data volumes steadily increased, this procedure could however not meet the requirements for very much longer. Data preparation via Excel became increasingly confusing, difficult to process and finally antiquated. A new innovative solution approach was required. One that could guarantee that the data was not only integrated throughout the organiza-tion, but that also ensured optimum use of the risk information for implementing suitable preventive actions.

1. What risk is associated with a supplier?This issue could be fully solved using the riskme-thods cloud-based SaaS solution approach. HBM meanwhile monitors 120 global suppliers and subcontractors, their locations and countries, as well as key logistics hubs, using the Supply Risk Network. All of these risk objects and the entire flow of goods

along the supply chain are clearly displayed in the Supply Risk Network via a world map, irrespective of the complexity of the supply structure. All risks such as natural disasters, compliance, strikes, financial indicators and political risks are depicted for quick identification.

HBM adopts an all-inclusive approach for creating transparency in the entire supply chain and requires a variety of data for this. The Supply Risk Network generates this information via numerous connected databases, such as MunichRE NATHAN Risk Suite, World Bank, United Nations Data, or CIA, as well as via riskmethods’ Risk Intelligence, which monitors more than 300,000 online sources in near real-time and, in addition, feeds in 100% fully automated information. HBM relies on its employees as an ad-ditional important source of information. The staff is able to create its own risk notifications in the Supply Risk Network.

The Supply Risk Network provides HBM with latent, underlying risks for all risk objects. These risks are used for recognizing risk potential, such as strikes or natural disasters, in the existing supplier base. As a result, the risk information gained allows for evaluation, analysis and comparison of suppliers or locations even in the business initiation stage.

2. How should the impact be evaluated?HBM has developed an evaluation matrix to analyze the impact for each and every supplier: In this way,

„The riskmethods solution inte-grates seamlessly into our pro-cesses and provides all relevant risk data.“

Karl-Heinz PöhlmannGroup Vice President Supply Chain

„Ensuring profitability through transparent supply chains“

„We cannot live with anti-quated Excel tables! riskme-thods supplies near real-time risk data and an early war-ning system for safeguarding our supply chain!“

Karl-Heinz PöhlmannGroup Vice President Supply Chain

„We do not practice the head-in-the-sand policy.“ We want to know the risks in the supply chain and are developing an all-inclusive SCRM concept so that we can minimize risks and secure our production and

Karl-Heinz PöhlmannGroup Vice President Supply Chain

About HBMSince 1950, Hottinger Baldwin Messtech-nik (HBM) has been synonymous with leading-edge measuring technology, and is known for reliability, precision and reliabi-lity throughout the world. HBM‘s product range covers the entire measurement chain and provides solutions for determining both electrical and mechanical parameters. HBM employs a total of 1800 staff at its four production sites in Darmstadt (head-quarters), Porto, Marlborough (Massachu-setts) (USA) and Suzhou (Jiangsu, China) and its 31 additional sales and develop-ment centers (status as of 2015). The com-pany operates in the areas of measuring amplifiers for the research industry, strain gages, sensors and transducers, load cells, and evaluation and analysis software.

HBM receives an exact prognosis on the extent and nature of damage in the event of default by a sup-plier and how this impacts on the profitability. The riskmethods „Impact Validator“ module then allows HBM to perfectly reconcile its own evaluation matrix with the innovative and technologically advanced approach. The combination of risk information and criticality data indicates where an urgent need exists for proactive addressing of risks with appropriate preventive actions. In addition, the Impact Validator offers comprehensive options for analyzing supplier criticality and dependency. That way, HBM is able to identify which suppliers require measures for risk prevention.

3. What measures can be taken to minimize the risk?In order to be able to act quickly in an emergency, HBM has introduced a set of measures for suppliers on which it is very much dependent and without which it would not be possible to tolerate an inter-ruption. For this reason, HBM has created not only a watch list of the Top 5 (sometimes Top 10) suppliers in the nine strategic categories, but also an associated action plan catalog that specifies which steps must be taken in the event of supplier failure. Appropri-ate preventive actions are, for example, setting up alternative suppliers as well as stockpiling products over the period during which an alternative supplier is set up. On the basis of this comprehensive set of measures, HBM will be actively involved in the deve-lopment of the riskmethods Action Planner module. This module is already in the planning phase, and

- 3 -

provides companies with recommendations for so-lutions and preventive actions that are in each case adapted to the current situation and the associated risk. Consequently, the Action Planner directly builds on the concept implemented by HBM and combines this approach with state-of-the-art technology.In addition, HBM is planning on extending the user group in future. Currently Purchasing and Supplier Development are working with the riskmethods Supply Risk Network, but there are already plans for introducing the SaaS solution in other departments and for implementing the solution even further in the organization. Ultimately, HBM‘s aim is to establish the riskmethods Supply Risk Network as standard software for all departments dealing with suppliers.

riskmethods GmbH Orleansstraße 481669 München Germany

Phone +49 (0)89 9901 648-0Fax +49 (0)89 9901 648-10Mail info@riskmethods.netWeb www.riskmethods.net

KONTAKT