Supplier Risk Management

Industry Value Accelerator

Your Supply Chain is Only as Strong as the

Weakest Link

Manufacturer

Continuous change in market dynamics

Fluctuating commodity prices

Increased Volatility

Supplier Viability

Credit crunch, business failure, bankruptcies

Failure of second and n-tier suppliers

Global production centers- impact of regional conditions

Higher operational risk and cash flow

pressure on 3rd party logistics providersHigher Operational Risk

Lower inventory levels, Just in Time, etc.

Challenges to Your Business in the

Current Economy

Top Executive Issues

Who are my most strategic suppliers?

Which of my strategic suppliers are at risk in the current crisis?

How can I pre-empt the impact of one of my major suppliers failing ?

What actions can I take to reduce the impact from such failures?

How can I measure the effectiveness of my actions to change course if needed?

Impact on Supplier Ecosystem

Exacerbated by Credit Crisis

Component

Suppliers

& CMs

HQ

Customer Service

Materials

Management

Supply Chain

Ops

Sales &

Channel

Management

Sales Ops,

Legal, Finance

Delayed, partial or missing deliveries Prices falling Product shortage Capacity bottlenecks

3) Early Signs

Supply Chain

Ops

Business Health Credit Worthiness SLA/Delivery performance

1) Supplier Health

Environment ecosystem imbalances Economic Weather Forecast

2) Economy & Environment

© SAP 2008 / Page 4

Business Impact: Risks of Revenue loss, increased competitive threat & unsatisfied customers

Delayed or unfulfilled deliveries Revenue Loss / Margins Dissatisfied customers & Channels Increased competitive threat

5) Customer Impact

Planning challenges, e.g. due to long planning cycle time

Disconnected processes, e.g. no feedback into S&OP

No consideration of product and supplier substitution options

4) Business Planning

Current Conditions Causing Extreme

Pressure on Suppliers

Qimonda's woes will zap gamers, PC and servers

usersQimonda's problems are already rippling across the globe and could take down others, as well as

cause a sharp rise in DRAM prices for users. Qimonda's problems could also zap computer

gamers and businesses in the short term because the company supplies DRAM or specialty chips

to around a quarter of each market.There could be a number of follow-on effects from the credit

crisis on Intel's business, including insolvency of key

suppliers resulting in product delays…‖Except from Intel’s 3Q08 report,

Parts Supplier Bankruptcy Could Delay Camaro Debut

The all new Chevrolet Camaro isn't the car that will make General Motors, but it certainly could

become the one to break the automaker if problems with a major parts supplier

manages to delay its February 17, 2009 introduction.

Supplier Bankruptcy Forces Chrysler Plant ClosuresManufacturing.Net - February 04, 2008

DETROIT (AP) — Chrysler LLC plans to close four assembly plants temporarily due to the

bankruptcy protection filing of one of its plastic parts suppliers, a company spokeswoman said

Monday.

Manufacturing.Net - February 04, 2008; Matthew Keegan, Ezinearticles.com, December 29, 2008; COMPUTERWORLD, Dan Nystedt (IDG News

Service) January 27, 2009. Intel’s 3Q 2008 report, October 3, 2008

How can Supplier Risk be Mitigated?

Assess the strategic importance of suppliers by analyzing the product portfolio

Identify key components and their suppliers

Analyze spend profiles to recognize strategic suppliers

Appraise the health of suppliers that can cause highest vulnerability

Ongoing reviews and audits of suppliers

Performance management of suppliers and internal impact analysis

Strategize and take actions to mitigate the identified risks

Use external data for due diligence on suppliers and market and industry trends

Proactive discussions with suppliers

SAP BusinessObjects Supplier Risk Management

Anticipate and Prevent Supply Disruptions

Key components at risk

Product deliveries at risk

Strategic importance of

suppliers

Annual spend with suppliers

Current supplier

performance & financial

strength

Leverage external data

feeds to get a holistic view

of the economic conditions

and your suppliers financial

health

Assess

Supplier impact on

operations

Financial impact

(Revenue, Margin)

Inventory impact

Supplier Impact on

customers

Orders impacted or at

risk

Dollar impact of

customer orders

Appraise

Detailed comparison of

actions to assess

effectiveness and costs

Identify detailed activities

for each alternative with due

dates, duration and point of

contact

Track progress of actions

Source from new vendor

Assist original vendor

Replenish from alternate

vendor

Act

Discover the Potential Factors that can

Cause Delays or Disruptions

Strategic

Assessment

Comprehensive view of supply risk via interactive dashboard to improve visibility and decision making

Better management over the vendor portfolio to identify, assess, decide and monitor multiple areas of supply risk exposure

External analytics (news feeds, credit ratings, etc) to supplement the ―within the fours walls‖ analysis of internal sourcing departments

Understand Your Supplier’s Performance,

Reliability and Economic Viability

Performance and

Financial health

Pop-up displays provide key

insight into Supplier Risks

and reliability indicators

Ability to see key trends of

metrics to identify anomalies

or deteriorating indicators

Current news article feeds

related to your supplier

ecosystem to ensure you

have the latest, up to date

information

Assess the Impact of Disruptions on Your

Customers and Business

Risk and Impact

Analysis

Unified view of holistic risk

exposure to assess the

impact of supply disruption

Ability to measure the impact

of supply disruption on key

metrics like sales, revenue

and inventory

Identify alternative sources of

supply from various suppliers

and assess their overall

viability in one place

[Preview alternative sources

of supply to establish

alternative mitigation actions]

Examine the Effect of Your Decisions and

Execute with Confidence

Decide on

mitigation option

Interactive Alternatives-

Analysis to allow users to

select different alternatives

for different situations

Detailed views into the

effectiveness and costs of

the various alternatives

Ability to track and monitor

the impact of the various

alternatives chosen

[Supports decision on the

optimal alternative action]

A comprehensive supplier risk management

solution for SAP BusinessObjects

Supplier Risk dashboard

Spend Perf.

Mgmt

Risk

assessment

and establish

alternatives

Risk Management

Analyze

spend and

supplier

profiles, act

on decisions

ERP

Other

External

Data

Federator

Protect Existing Value

Streamline cross-enterprise risk identification,

analysis, and mitigation

Prevent incidents and losses through automatic

risk monitoring

Create New Value

Increase the success of strategies and initiatives

Improve performance through risk-adjusted

forecasts and plans

Increase Enterprise Transparency

Ensure business units operate within appropriate

risk appetite

Improve governance by aligning business

processes, risks, and controls

Risk-adjusted management of enterprise performance

© SAP 2008 / Page 13

SAP BusinessObjects Risk Management

© SAP 2008 / Page 13

Maximize Savings, Reduce Supplier Risk

SAP BusinessObjects Spend Performance Management

Driving insight into vulnerable suppliers

Gain full spend visibility Automate data capture from disparate systems

Accurate and trustworthy data

Enriched supplier and spend data

Reduce supplier risk Pin-point single supplier dependencies

Identify vulnerable and non-viable suppliers

Establish supply risk mitigation priorities

Rapidly identify savings opportunities Find and act on savings potential

Pro-actively monitor contract compliance

Increase spend under management Set up performance goals

Incorporate external market conditions

Collaborate effectively to act on insights

GL

P-Cards T&E

BI

ERP

For more information: www.sap.com/spend-analytics

Seizing the Advantage in the Current

Global Economic Downturn

Gain a holistic view of your risk of supply disruption

due to performance or economic viability issues

within your supply chain

The Supplier Risk Management solution flexibly

complements and extends your existing IT

infrastructure and data sources

This Industry Value Accelerator comes complete

with proven deployment assets that will accelerate

your time to value and provide a quick ROI

Sign up for an onsite vision workshop today to find

out how what the Supplier Risk Management

solution can do for your business today

Appendix

Supply Chain Operations

Supplier Management Visibility and Execution

End-to-end cross functional process

Chief Operating

Officer

Supply ChainManufacturing

Supply Chain

Planning

Materials

Management

Internal

Production

Operations

Contract Manufacturer

Raw Material Supplier

etc.

ProductionExecution &

Visibility

Outsourced Materials Visibility

Outsourced Materials Visibility

ProductionPlanning & Scheduling

Outsourced Workorder

Process

Subass’y & ComponentInventory

Optimization

Outsourced Workorder

Process

Plan/Source to Demand Signal

Plan/Sourceto Forecast

Collaborative Procure to Forecast

Supplier Managed Inventory

Collaborative Procure to Forecast

Supplier Managed Inventory

Production Planning & Execution

Manufacturing Network Planning

Material Supply & Replenishment

Proactive approach to supplier and economic shocks

Supplier & Industry

Indicators

SAPBenchmarks Credit Scores

IndustryBenchmarks

IndustryTrends

Others

Economic

IndicatorsMarkets Economic

DataBLS Others

Typic

al S

up

ply

Ch

ain

Flo

wS

mart

er

Supp

ly C

hain

Flo

w

© SAP 2008 / Page 20

Managing the Supplier Network

Current Situation

Manufacturers have made their supply chains leaner

Manufacturers have achieved lower inventory levels and rationalized their supplier lists,

BUT they have made their supply networks much more susceptible to risks

The current financial crisis has highlighted these risks to manufacturers, resulting in

potential delays to production and inability to meet customer commitment

In addition to financial crises, political, economic, and national security crises could create

the same disruptions to manufacturers’ supply chains

SAP helps manufacturers to manage risks in the supply network

Benchmarking and best practices to optimize the supply network

Instrumentation to proactively monitor suppliers by type, size, geography, segment, etc.

Systems to act on insight, plan for, and manage the risks to the supply network

© SAP 2007 / Page 21

Industry Value Accelerator to Compress

your Time to Value

• Virtual Source Table Structures• Mapping Rules• Virtual Target Schemas• Schema Definitions• XML Interface Files for SAP

• Business Objects Universe• Web Intelligence Reports• Xcelsius Dashboards

• Relational Schema (DDL Scripts)• Stored Procedures• Working Sample Database

• Data Dictionary• Deployment Planning Guide• Data Mapping Guide

• Workflow Guide• KPI/Metric Definitions• Deployment Considerations

• Data Model• Administration Guide• Deployment Planning Guide

Technical Content

Documentation

Establish risk assessment process and risk

mitigation options

Risk

management

process

Align risk exposure with

risk indicators and

corporate strategy

Establish [Define] risk

mitigation options, identify

balance between cost of

risk avoidance and

opportunity

Establish prioritization for

response investment

Balance cost savings and risk while acting on

the risk mitigation option

Balance risk with

cost savings

Evaluate chosen risk

mitigation option with spend

and supply metrics to

determine sourcing strategy

Review alternate suppliers’

history of operational and

financial health factors

Launch action to establish

alternate supply source or

plan for supplier

development processes

Leverages Powerful Capabilities from the

SAP BusinessObjects Portfolio

ANY SOURCE, ANY APPLICATION

– Designed to fully leverage the performance and functionality

of key SAP applications including SAP BusinessObjects

Spend Performance Management, SAP BusinessObjects

Risk Management and SAP ERP

– Flexibility to leverage data from other corporate applications

and data sources to build a comprehensive picture of your

firm's product specific exposure to Supplier Risk

– Easily extract critical information from your ERP or other 3rd

party on-demand reporting environments and data sources

ALL EMPLOYEES

– Role based view of key KPIs and metrics to

better manage your business

– Ability to embed within SAP ERP or other environments

ALL VIEWS ON INFORMATION

– Access your Supplier and Risk Management analytics

comprehensively

– Drill down to specific customers, orders lines, etc.

All Employees

All Views on Information

Data Accuracy and Consistency

Any Source

Scaleable Information Delivery

SAP BusinessObjects Spend Performance Management

Pre-packaged application

Data Connectivity SAP Extractors for FI, CO, MM, SRM, BW; Data

integrator for non-SAP

Supplier normalization and data enrichment;

Spend classification

Visualization & Semantics 7 supplier risk attributes, 5 supplier financial

health attributes

Supplier dependency sliced by 14 dimensions

Out-of-the box content 60+ out of the box metrics

Over 100 reports and dashboards out of the box

Supporting technical delivery Pre-packaged analytics and ad-hoc analytics

Set goals and performance thresholds

Collaboration tools including briefing book, pdf,

email

For more information: www.sap.com/spend-analytics

SAP COMMUNITY NETWORK SDN - sdn.sap.com | BPX - bpx.sap.com | BOC - boc.sap.com

© 2009 SAP AG

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