Sap Supplier Risk Performance 2011

Performance & Risk
prepared for Analyst Briefing

Henner Schliebs, 2011

Agenda

1.  Performance Management: The SAP portfolio

2.  Managing Risk – The Virtuous Cycle
a. Identifying & Analyzing Supplier Risk
b. Measuring Impact To The Enterprise
c. Assessing, Responding and Monitoring Risk

3.  Taking Risk Response Actions
a. Collaboration
b. Evaluating Suppliers
c. Managing Supplier Performance

4. More Information
©  2011 SAP AG. All rights reserved. 2
© SAP 2010 /
2

Agenda



a. Collaboration

4. Wrap-Up
© SAP 2010 /
3

Barrier to Increased Performance
Lack of visibility through entire cycle

Strategy Strategic Alignment

Predictable Performance

Confident Decisions

Risks Opportunities

Execution

Overview of SAP’s Portfolio To Support Risk &
Performance across all LoB

Data Sources/Warehouses Analytic Capabilities Access

Services and Best Practices

Industry & LOB
Analytic Applications
SAP
Mobile
Enterprise
Performance Management
Other Application/
Browsers
Data Sources Governance Risk and
Risk Compliance
and Compliance
Social Media Management
On Demand
Content Business Intelligence Services

Unstructured Business Intelligence
Enterprise
Content Dashboard/
Information Management MS Office
Report
OLAP Servers, Data Data Foundation
Data Warehouse Management
Warehouses & Marts
Enterprise
Portals


Included Solutions….

Ø SAP Sourcing Ø SAP BusinessObjects
Data Sources/Warehouses Analytic Capabilities Access
Ø SAP SRM Spend Performance
Ø SAP Business Suite Management
Ø SAP BusinessObjects
Services and Best Practices
Ø Supply Chain Performance
Industry & LOB Management
Analytic Applications
SAP Ø SAPBusinessObjects
Mobile
Data Enrichment and Enterprise
Classification Performance Management
Other Application/
Browsers
Data Sources Governance Risk and
Risk Compliance
and Compliance
Social Media Management
On Demand
Content Business Intelligence Services
Ø SAP
BusinessObjects Risk
Management
Unstructured Business Intelligence
Enterprise
Content Dashboard/
Information Management MS Office
Report
OLAP Servers, Data Data Foundation
Data Warehouse Management
Warehouses & Marts
Enterprise
Portals


Supplier Risks Trigger Risks & Performance Impact Across The
Enterprise

As global supply lines stretch, companies are increasingly vulnerable to
high-impact/low-probability events (e.g., port strikes, terrorism, geo-
political imbalance, trade embargos, natural disasters, weather, etc).

n  Lack of visibility beyond the four walls
n  Rising energy costs and increased regulations
n  Fear of poor customer service


Chief Procurement Officer
What Keeps Them Up at Night?

Supplier Risk
Strategic Sourcing
Management

How do I identify single How do I establish the How do I assess
source supply risk? right sources of supplier risk and
supply? analyze the mitigation
options?

Global Trade Cost & Supplier
Compliance Performance

How do I provide How do I evaluate
embargo checks & supplier performance
trade cost inputs into and ongoing
source of supply development
selection?


©
SAP

Agenda



a. Collaboration

4. Wrap-Up
© SAP 2010 /
9

Managing Supplier Risks
Process automation for the virtuous cycle

Establish Collaborate and
risk appetite aggregate supplier
and thresholds for risks across
future embedded risk enterprise
management

Actionable,
role-based Derive short term
dashboards mitigation plan, act
and alerts include accordingly and set up
operational procurement response action on
risk factors corporate level

1. Avoid Surprises
Increase visibility and prioritization of key risks

Identify and Manage Risk Status in Your Business Context

n  Automated risk
assessment and
surveys
n  Build, complete
and consolidate
risk assessment
results

Quantitative and Qualitative Risk
Prioritization Using Risk Heat Map
Analysis Options

n  Point and scenario analyses
n  Prioritization for response investment
n  Survey functionality and guided activities
n  Identifying shifting in risk profile
n  Workflow reminders for updates


Identify & Analyze Supplier Risk
Solution: SAP BusinessObjects Spend Performance Management

SAP Solution

1. Identify n 
n 
Know your at risk suppliers
Identify supplier concentration
Root Cause Analysis
and sole sourced risk factors

2. Appraise
n  Assess impact to your spend
n  Find and act on qualified alternate
Impact Analysis supplier sources

3. Act
Devise Mitigation Strategy
SAP Differentiators
Internal Supplier Data: Incorporate internal supplier performance indicators to analyze risk trends for early
risk detection (e.g. SAP Sourcing, SAP Supplier Risk Management, SAP Business Suite)

External And Market Data: Combine external and market data on suppliers to determine supplier viability
(e.g. Lexis Nexis, Bureau VanDijk, Directory of Corporate Affiliations, Kompass International, US Government
Central Contracts - Diversity, US Treasury Department - OFAC, US Census Bureau- Congressional, World Bank
- Debarred entities, UK Post, Numerous state agencies)

Assess Impact of Supplier Failure: Quantify impact on your business, spend volume and locations to
help prioritize and establish alternate suppliers


Out Of The Box Supplier Risk Hierarchy*
* Can be customized or extended


Example
Screenshots from Supplier Risk Demo

identify risk

Track and monitor the
suppliers risk and
performance
Ÿ  overview over the supplier risk
information
Ÿ  Analysis of different risk
indicators
Ÿ  Top high risk supplier analysis

Figure out the high risk
suppliers from this
overview dashboard


analyze risk

What impact has supplier
with high risk on the
company
Ÿ  Detail with third party data
shows e.g. on time delivery
declining
Ÿ  Maybe looking for a short term Search risk attributes
alternative and…
Ÿ  Establish a mitigation plan
longer plan
Ÿ  Can now negotiate better
pricing with alternate vendor
due to higher volume

..find alternate supplier for
that item


take action

longer term mitigation
Ÿ  Strategic sourcing project with
SAP Sourcing directly out of
SPM
Ÿ  Include all relevant data to
negotiate prices

Take immediate action and
start sourcing initiative


Agenda



a. Collaboration

4. Wrap-Up
© SAP 2010 /
18

Assessing Impact To Enterprise In A Manufacturing
Company: Supplier Risk Scorecard


‘cost of risk’ and the impact to overall Performance


Why SAP for Supplier Risk Identification & Analysis?

Compare supplier risk attributes to quickly asses the risk impact and take
action to minimize risk exposure for fulfillment of a critical item:

1.  IDENTIFY potential at RISK suppliers

2.  ANALYZE the RISK and the potential effects on your business including
potential alternate supplier analysis

3.  TAKE immediate ACTION on short term and derive a mitigation plan for
longer term.

HOLISTIC VIEW OF YOUR SUPPLIERS including your company's spend
pattern


Agenda



a. Collaboration

4. Wrap-Up
© SAP 2010 /
22

2. Respond Intelligently
Make more informed, risk-intelligent decisions

View Aggregate Risks by Process and Category

Finance

Supply
Sales

....
IT

Mitigate Risks Across Multiple
Track Mitigation Response Status
Processes and Risk Categories

Top Industry Risks
Mismatch of Demand with Supply
Employee health and safety
Non-compliance with emissions
Production disruptions
Supplier disruptions
n  Response status monitoring
Non-compliance with RoHS/WEEE
n  Response cost tracking
Non-compliance to regulatory requirements
n  Analysis done before and after responses


3. Stay Informed
Increase transparency by automated monitoring

Align Risks with Corporate
Strategy

n  Ensure risk management methodology
is aligned with organizational goals
n  Execute strategy with increased visibility
and understanding of risk
n  Increase effectiveness of strategies and
initiatives by clearly understanding the
risk exposure

Automatically
Capture Incidents
Monitor Risks
and Losses

n  Embedded into key
business processes n  Create risk
knowledgebase to learn
n  Controls monitoring based from previous
upon the level or risk experiences
associated with each
business process n  Incorporate and
document workflow
n  Workflow delivers capabilities into response
assessments to experts playbook
User receives email alert – data
updated in SAP BusinessObjects
Risk Management


4. Plan For Future
Develop and execute a proactive risk strategy

Model and Align Risks to
Organization Structure

n  Data models aligning
organizational units,
process activities, risk
categories and indicators
n  Consolidated view of risk
information supporting
information needs

Create Risk and Activity Catalogs Document Risk Appetite

n  What types of risks do we want
to track? n  Proposed risks
based on business
n  Align risks to corporate goals process
n  Customizable, pre-delivered n  Define appropriate
content risk categories and
thresholds

Risk Catalog Organization Unit


Manage Supplier Risk
Solution: SAP BusinessObjects Risk Management

SAP Solution

1. Assess n 
n 
Know your enterprise risk
Increase visibility into the impact
Root Cause Analysis
of risk against performance

2. Reponse
n  Reduce risk and cost across
strategic initiatives
Impact Analysis n  Increase Strategic Effectiveness
through Automated Monitoring of
3. Monitor Risks
Risk and Strategy
SAP Differentiators
Framework:
§  provides a best-practice framework so we can identify, analyze, respond to, and monitor obstacles to reaching out firm’s
growth objectives.
Efficiency:
§  Automate key risk management processes and controls
§  Repeatable framework for risk-based analysis
§  Minimized audit time and audit-related costs
Assess Impact of Failure:
§  Continuous monitoring of compliance and risks
§  More reliable and trustworthy risk and compliance data
§  Optimized management of risk initiatives


Enterprise Risk Management

Operational Supplier Risk is pushed to Enterprise Risk Management


assess risk

Assess Risk
Ÿ  Heat map shows effect and
probability
Ÿ  Overview of cost related to the
risk
–  Inherent and
–  Residual total loss

Supplier risk might roll up
into Logistics disruption,
valued at $55m loss


create risk response

Ÿ  Take risk into enterprise consideration Ÿ  Assign control proposal
Ÿ  Create risk response Ÿ  Assign regulation policy
Ÿ  Estimate total loss reduction Ÿ  Assign to Risk Management process

New controls
established to
monitor new
supplier…

Possible responses to supplier risk
on enterprise level include increase
of lead time or sourcing initiative …by including non-preferred vendors


setup risk monitoring

Ÿ  Set up Monitoring Ÿ  View result in Enterprise scorecard
Ÿ  Assign to controls Ÿ  Supplier risk has been rolled up to
Ÿ  Set up rules enterprise risks
Ÿ  Assign monitoring frequencies

Controls are assigned to purchases …and will be included in the alerting
from non-preferred vendors… scorecard


Why SAP Risk Management

Take supplier risk into enterprise consideration to quickly asses the risk
impact and create risk responses to minimize potential losses and violate
regulations:

1.  ASSESS potential RISK for the enterprise

2.  CREATE the RISK REPONSE and take risk into controlled environment

3.  MONITOR your RISK and include it into enterprise risk monitoring

HOLISTIC VIEW OF YOUR ENTERPRISE RISK including operational supplier
risk


Agenda



a. Collaboration

4. Wrap-Up
© SAP 2010 /
32

Supplier Risk Assessment Project


Supplier Risk Assessment Project - Link to StreamWork
for Collaboration


StreamWork Collaboration Activity


StreamWork Activity


Supplier Scorecard Report


Supplier Score Trend Report


Supplier Scorecard Dashboard – Single Supplier


Supplier Scorecard Dashboard – Comparison of Two
Suppliers


Supplier Development Action Items


Wrap Up: Delays In Supplier Drop Shipments
Respond to Missed Customer Commits

Business Process Key Performance Indicators
Supply Lead Time
Inbound Shipments & Receipt Confirmation Order Fulfillment Cycle Time

Drivers Key Risk Indicators Risk Event Business Impact

Supplier drop shipments Delayed Lead Time Delayed Production

Improper or Inaccurate Missed
% of blocked imports Customer dissatisfaction
Shipping Documentation customer
commitments
Inspection failures High Defect Rates Financial - Lost sales revenue

Preventive Recovery
responses reduce responses reduce
probability of event impact of event
Responses

Reduce Avoid Support Replace Controls
n  Quality checks n  Cancel Shipment n  Provide alternate n  Change to new n  Establish or tighten contract
and Re-Source shipping source supplier SLAs
Planned functionality – subject to change


SAP’s Differentiator
Risk-adjusted enterprise performance management

Directors &
Executives n  Risk in context of corporate
strategy and performance
n  Understand true exposure of risk to
performance
n  Achieve proactive transparency

n  Embedded in existing n  Automatic risk
processes monitoring
n  Reapply best practice n  End-to-end risk
mitigations processes across
the value chain
n  Enable performance
(and risk) innovation n  Become a driver of
Lines of Risk business change
Business Managers


Thank You!

Contact information:
Henner Schliebs
henner.schliebs@sap.com
#hschliebs

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