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Dual Supply Channel Disruption and Supply Chain Design

Daniel Dumke — Mon, 19 Dec 2011 16:35:00 +0000

This is the continuation of the Greece week and today I am going to have a look at a mathematical model to capture the effects of dual disruptions in a news-vendor model.

This time the three authors (Xanthopoulos, Vlachos and Iakovou) come from the Aristotle University of Thessaloniki.

Method

The authors developed a model where a retailer is able to order from two different supply channels. Figure 1 shows the supply chain schematic.
Three different types of the model are modeled separately:

unconstrained model,
fill rate constrained model,
Type I service level constraint,

The decision variables are the order quantities from channel one and two.

Figure 1: Schematics of the Supply Chain Model (Xanthopoulos et al., 2012)

Analysis and managerial insights

The models are analyzed using a numeric analysis with the parameters given in figure 2. Different values for the purchasing cost c_i, disruption probabilities for the supply channels one and two (p_i). The impact of the disruption is denoted by y_i.

Figure 2: Experimentation Data (Xanthopoulos et al., 2012)

144 parameter combinations are analyzed. Figure 2 shows the iso-profit lines for the order quantities Q₁ and Q₂ for different impact levels in the first supply channel (y₁: a) 0.9, b) 0.6, c) 0.1)

Figure 3: Effect of different Disruption Impacts on Supplier 1 (Xanthopoulos et al., 2012)

The authors conclude

It is also observed that as the impact of a disruption on the first channel increases, the optimal solution moves from a solution that mainly utilizes the first supply chain to a solution that mainly utilizes the second one.

Depending on the values of the purchase costs (c_i), the disruption probabilities (p_i), and the effect of a disruption (y_i), one of the suppliers may dominate over the other one, leading to a single supply source.

Nevertheless, for both the uncapacitated and capacitated problems for certain combinations of the values of c_i, p_i, and y_i, a dual-sourcing policy outperforms a single-sourcing one. In such cases, it is optimal to place the larger part of the total order to the dominant channel and its lesser part to the second one, so as to hedge/mitigate the disruption risks.

Moreover, for very high service levels (near 100%), large orders should be placed to both suppliers.

[In] the case in which the first supplier is the dominant supplier as well as the more reliable from the two. In such a case, no matter how high the fill rate will be, orders should be placed only to the first supplier and the second one should not be activated at all.

Conclusion

This article provides some insights into a dual supply channel disruption case. From the title and abstract of the article, I was however expecting more discussion of the results, perhaps the impact of other driving factors beside the impact, probability and ordering cost.

Reference:

Xanthopoulos, A., Vlachos, D., & Iakovou, E. (2012). Optimal newsvendor policies for dual-sourcing supply chains: A disruption risk management framework Computers & Operations Research, 39 (2), 350-357

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Supply Chains and Finance

Daniel Dumke — Mon, 05 Dec 2011 15:55:00 +0000

This article covers aspects of supply chain and risk management which are related to corporate financing.

All business activities somehow find their way into the balance sheet and profit and loss statement of a company. The current assets (be it material or immaterial) and future profit expectations, lead to a company specific financing volume and a corresponding financing rate/cost. Of course, supply chain management is no exception. The paper I review here (“Supply chain finance: applying finance theory to supply chain management to enhance finance in supply chains”) by Gomm (2010), explains the links between supply chain management and finance and highlights some implications to financing within the supply chain.

Method

The proposed model is based on a review from literature in supply chain and finance.
Several papers already link supply chain with financial side and “studies showed that inefficiencies in the supply chain can waste up to 25% of the operating costs and that leading companies enjoy a 45% supply chain cost advantage over their median competitors.”

Figure 1: Integrating Finance and the Logistics Aspects of SCM (Gomm, 2010)

Links between SCM and Finance

There are several connection, which link supply chain management and finance.

Potential fields of financial supply chain co-operation include financing mobile and immobile assets within the supply chain, the (shared) financing of working capital in order to leverage the best cost of capital rate within the chain, the optimisation of financial processes using standards and IT systems, cash management in order to optimise the cash-to-cash cycle, and so forth.

Figure 1 summarizes the transition between logistical and finance aspects in supply chain management.

According to the author the goal should be to use supply chain finance (SCF) to “bridge the customer-oriented demands concerning time, cost, and quality (which are mainly driven by logistics management) with future-, risk-, and market- oriented demands of the providers of capital.”

From the literature analysis the levers of SCF are deduced: duration (time), volume (monetary value), in addition (well, multiplication) of the capital cost rate results in the total cost of capital (figure 2).

Figure 2: The Levers of the Cost of Capital in the Terms of SCM (Gomm, 2010)

Creating value

Cost of capital can be reduced internally by working with the mentioned levers. So figure 3 shows different approaches to improve the shareholder value overall from a single company perspective. The NOPAT refers to the “net operating profit after tax”.

Figure 3: Value Drivers and SC Measures (Gomm, 2010)

Moreover, value can be created by employing the whole supply chain and its members. Figure 4 shows the example of a four-tier supply chain with supplier, OEM, customer and end-customer and their links on the financial market.

Every company has to finance their activities in some way. In this case, both the supplier and the customer have a higher/better rating on the capital markets than the OEM, implying that their cost of capital should be lower as well. Thus financing the supplied products by either the supplier or the customer should lead to a lower overall cost of capital than if the OEM did all the financing.

Figure 4: Supply Chain with Financing Differential (Gomm, 2010)

Sample strategies

The following three sample strategies build on a given differential in financing cost, it revolves around three financing problems:

Financing inventories in a make-to-stock supply chain
Financing inventory in transit
Financing assets in a production supply chain

Figure 5 exhibits an overview.

Figure 5: Financing Needs in Inventory (1), in-transit goods (2) and fixed assets (3) (Gomm, 2010)

I will briefly describe the third strategy here and refer you to the paper for the others. The differential in the cost of capital between the supply chain partners can be used to finance assets within a company:

Instead of buying machines from their suppliers, they [the OEM] leave them as the property of the suppliers and just use them in their production processes. Instead of paying the purchase price of the equipment, they pay per unit that is produced using it. This principle has coined the term ‘pay-on-production’. The benefits for the user of the machines are evident.

Conclusion

A supply chain based reduction of the cost of capital is founded on the fact that the supply chain members can have different financing cost.

The author argues that this is indeed the case; he uses the microchip industry as an example, where manufacturers usually have much higher cost of capital than their customers (e.g. Cisco or Dell).
Supply chain financing strategies therefore might actually help to lower the overall cost of capital in the chain.
Since outside intermediaries, like the financial institutions, do not have all the necessary information (due to principal/agent asymmetries) to provide the same financing offerings. It might be an option to deploy suppliers and customers for financing needs. On the other hand, one should not neglect the additional cost which incur during the searching and negotiations with the potential financing partners (transaction costs) and therefore might significantly lower the potential profits for the lower financing rates.

Reference:

Gomm, M. L. (2010). Supply chain finance: applying finance theory to supply chain management to enhance finance in supply chains International Journal of Logistics Research and Applications, 13 (2), 133-142 DOI: 10.1080/13675560903555167

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Supply Chain Flexibility in an uncertain Environment: exploratory Findings from Five Case Studies

Daniel Dumke — Mon, 07 Nov 2011 12:47:00 +0000

This is another look at flexibility strategies to reduce uncertainty in supply chains. This time from the point of view of five Chinese companies in the apparel industry.

Method

The authors use a case study to “illustrate and examine the different flexibility strategies adopted by supply chain participants as a result of different environmental uncertainties.”
The five companies cover different parts of the apparel supply chain. A garment and a fabric manufacturer (companies A and E, respectively), two trading companies (C and D) and a brand company (B). This diverse sample should enable the authors to make more general deductions from the generated data.
Figure 1 shows some relevant background information for the companies.

Figure 1: Case Study Companies (Yi et al., 2011; click to enlarge)

Results

The first questions revolved around the perceived uncertainties experienced by the participants. All companies mentioned that emergent orders, uncertainties about material cost and the aggressiveness of the competition are perceived as major uncertainties (figure 2).

Figure 2: Perceived Uncertainties by the Companies (Yi et al., 2011; click to enlarge)

Several different supply chain strategies were employed, a summary is displayed in figure 3.

Figure 3: Flexibility Strategies employed (Yi et al., 2011; click to enlarge)

The authors especially wanted to highlight the influence of different environmental aspects on the chosen strategies. No pattern emerged when analyzing which flexibility strategies are used for which uncertainties.
So next the authors examined the impact of the general level of uncertainty experienced by the companies and compared it with the supply chain flexibility level chosen.
The authors came up with a matrix (figure 4). Where they contrast SC uncertainty and flexibility. Companies D and B find themselves in the conservative corner while E, C and A employ a high level of flexibility to combat the uncertainties. From the interviews the authors also deducted the future positions of the companies A and B, which are indicated as A’ and B’.

Figure 4: Supply Chain Flexibility vs. Uncertainty (Yi et al., 2011)

Next the authors discuss their findings and reach four conclusions:

A low level of uncertainty in the supply chain leads to the adoption of a conservative flexibility strategy.
A high level of uncertainty in the supply chain leads to the adoption of an agile flexibility strategy.
An aggressive flexibility strategy can be proactively adopted through restructuring a firm’s operating system to reduce environmental uncertainties.
An aggressive flexibility strategy can be proactively adopted through creating new opportunities to improve a firm’s supply chain flexibility.

Conclusion

I like case study research, since usually you can gain some really genuine and new insights, in this case: What are other companies doing to contain uncertainty and how are they employing flexibility for that?

In this case I liked the paper a lot as well… up to the matrix. I don’t like matrices where the axes are not independent, because that’s not how you generate a matrix. Take the Growth-Share-Matrix, where you have the axis market growth and market share. The one is dependent on the market and the other on one company’s share in it. Relation to one another: Independent.
Here we have uncertainty on one axis and a strategy to reduce uncertainty on the other. So of course most companies would lie somewhere in the middle. So there is not much to learn from it. Of course there is not a one-to-one relationship, but anyway.

I had several more points to complain (number of interviews also only five, conclusions drawn are directly linked to their flawed matrix-framework and no quantitative measures to assess the flexibility and uncertainty levels).
But I still think the strategies mentioned from the interviews are still worth considering when choosing your own strategies.

Reference:

Yi, C.Y., Ngai, E.W.T., & Moon, K.-L. (2011). Supply chain flexibility in an uncertain environment: exploratory findings from five case studies Supply Chain Management: An International Journal, 16 (4), 271-283

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Aerospace and Supplier Risks - This Week in Supply Chain Management (29 / 2011)

Daniel Dumke — Fri, 22 Jul 2011 10:57:00 +0000

The second week in Thailand, and I am spending the weekend in Chiang Mai in the north. I hope you had a great week, this is what I read this week.

News

Sony Ericsson has some nice insight on their huge SC problems after the earth quake. (WSJ, subscription needed)
I found this video quite informative, but only indirectly affecting supply chain and risk management: CNN video taped a discussion panel on “Disruption today: All about managing customers’ expectations”. (CNN)

Blog

Bob from AtRisk has a look at the financial health of suppliers with a slightly positive outlook. (AtRisk)
Stuart from Metalminer has some industry insights and possible risks within the aerospace industry. (Metalminer)
Lastly, Industry Week covers some hints on supply chain network planning. (Industry Week)

If you haven’t read my articles of this week, have a look at the following:

Monday: Important article on recurrent vs. disruption risks, highlighting the need to differentiate.
Wednesday, was all about the Combination of Product and Supply Chain Design

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Risk-based Classification of Supplier Relationships

Daniel Dumke — Wed, 08 Jun 2011 13:42:00 +0000

A large proportion of the efforts in supply chain risk management focus on the supply side, even though, using common definitions of supply chain management, the supply chain of course not only contains the suppliers but also the customers down to the end-customer.
Focussing on the supply side, Hallikas et al. 2005 studied the different classes of supplier relationships and what risk mitigation strategies might be effective with these classes. This classification can help both affected parties, in understanding the effects of risk on their relationship.

Methodology

The authors conducted a single-case study with a high-tech OEM from Finland. To analyze the company’s relationships with its first tier suppliers, 42 of them participated in a survey on relationship parameters and the risks involved.
The goal was to support or reject hypothesis regarding the collaborative learning (“H1: Collaborative learning in supplier relationships differs according to the type and extent of the risks involved.”) and risk management (“H2: Risk-management practices vary according to the type and extent of the risks involved in supplier relationships.”).

Risks and collaboration

The suppliers in the sample are described in figure 1. Most of the respondents were in CEO or Director positions.

Figure 1: Description of the Sample (Hallikas et al., 2005)

Four different generic, relationship risks were considered:

Hold-up risk
describes how specific the assets for this relationship are and if they could be used again outside of the relationship. Example: A computer would pose little hold-up risk, whereas a specific machine which only produces a product for a specific client would pose a high relationship risk.
Demand risk
is high, when demand fluctuations are rapid and significant.
Replaceability risk
is the chance of the OEM to being able to replace the supplier.
Value added
the importance of the supplier towards the end product.

Those risks were evaluated by the survey participants, if they are important for the specific relationship (see figure 2).

Further on the participants were asked about their collaboration efforts in the following categories:

Operational single-loop learning (SLL Operational)
refers to collaboration with the goal of small, incremental improvements.
Strategic double-loop learning (DLL Strategic)
aims at long term efforts with mutual investments to improve the capabilities.
Operational double-loop learning (DLL Operational)
refers to drastic operational improvements, which require close collaboration.

Six risk management measures have been part of the survey as well. Starting with measures which do not require intensive collaboration like “Measurement” of the relationship’s output, and “Fault management”. Further risk management measures are “Innovativeness”, “Prioritization”, “Protection of relationship related knowledge” and the amount of formal and informal “Communication”.

Figure 2 shows the results to the questions in each of the above mentioned categories and if they apply to the relationship at hand.

Figure 2: Survey Results (click to enlarge; Hallikas et al., 2005)

Findings

Cluster analysis shows that three groups can be distinguished. Relationships can be:

Non-strategic, where replaceablity is high and for both partners the hold up risk is relatively low.
Strategic, where both partners depend on each other.
Asymmetric, i.e. one of the of the partner’s is dependent on the other but not vice-versa.

Figure 3 shows the possible combinations and the clustering framework suggested by the authors.

Figure 3: Framework for the Classification of Supplier Relationships (Hallikas et al., 2005)

Figure 4 shows the results of the survey, when clustered.

Figure 4: Clustered Results (click to enlarge; Hallikas et al., 2005)

The authors conclude:

DLL Strategic (strategic double-loop learning) showed a significant difference across the clusters [and is highest with in the Strategic cluster]

Both the protection of relationship-related knowledge (RM 5) and the amount of communication (RM 6) were exploited most in the strategic relationships

[RM 1 and 3] (see figure 2) were widely used in strategic relationships and only moderately used in asymmetric and non-strategic relationships.

Our study indicates that the risks and risk-management activities that suppliers perceive in their relationships are predominantly mutual with the customer.

It could be concluded that the level of risk and dependency in supplier relationship has an effect on the exploitation of risk-management means.

Conclusion

To evaluate this paper one first has to analyze the methodology used. In this case a case study seems to be adequate for a topic where no further research exists, a reader of this article still has to keep in mind that the results are not representative for a population and, since only about 60% of the supplier’s of the OEM took part in the survey, the results may not even be representative for this company.

Furthermore I found there was too little overlap between the literature review and the survey. E.g. the risks discussed in the review were only partially reflected in the survey section.

On the other hand I think the framework can be used to distinguish and describe a large proportion of relationships and the findings above can be used as a guideline how to prioritize risk management efforts within each of these categories.

Reference:

Hallikas, J., Puumalainen, K., Vesterinen, T., & Virolainen, V. (2005). Risk-based classification of supplier relationships Journal of Purchasing and Supply Management, 11 (2-3), 72-82 DOI: 10.1016/j.pursup.2005.10.005

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Securing the Upstream Supply Chain

Daniel Dumke — Wed, 23 Mar 2011 05:38:00 +0000

In this article the authors, Giunipero and Eltantawy (2004) explore situational factors which contribute to the company’s level of investment into risk management activities. These factors are:

degree of product technology

need for security

importance of the supplier

the purchasers’ prior experience

Risk Management Steps (Giunipero and Eltantawy, 2004)

Risk Buffering and Risk Management

The authors argue that in literature and practice alike risk buffering activities are used too often instead of strategic risk management activities (see figure 1). Buffering strategies are those which are activated after the risk materializes. Examples are extra inventory or multiple suppliers.

But ultimately, long term stability can only be achieved by driving performance. So the goal should be to align risk management strategies and performance. Such could include purchasing practices as: industry consolidations, e-procurement, just in time deliveries.

Of course these strategies are likely to increase the risk of disruption at the same time.

Situational Risk Management

With this tradeoff in mind let’s think about what factors are important for the level of risk management? And how do these factors influence the level of investment?

From a literature study the authors concluded on the following propositions:

Product Technology: High-tech markets require more extensive risk management than other low-tech markets with slower pace of technological changes.

Security Needs: Those suppliers who provide items that have high security requirements require more extensive risk management than those providing items with relatively less security needs.

Relative importance of suppliers: Major suppliers of high volume, value and/or critical items require more extensive risk management than those who supply fewer or less critical items.

Purchasers’ prior experience: Suppliers with whom purchasers have less experience require more extensive risk management than those with whom there is a history of purchasing.

This propositions can be used for the rationalization of decisions on supply chain risk management, since

Supply professionals must have top management support. If a risk never materializes, it becomes very difficult to justify the time spent on risk assessments, contingency plans, and risk management

Conclusion

I think the last point is a very important one: Getting managements support for risk management investments. The propositions might seem to be only rule of thumb, but keep in mind that also any more sophisticated supply chain design method will be subject to scrutiny, and may lead to very similar results.

Reference:

Giunipero, L., & Eltantawy, R. (2004). Securing the upstream supply chain: a risk management approach International Journal of Physical Distribution & Logistics Management, 34 (9), 698-713 DOI: 10.1108/09600030410567478

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Purchasing's involvement in risk management

Daniel Dumke — Tue, 15 Mar 2011 09:02:00 +0000

I already reviewed one of the articles of Zsidisin (Perception of Supply Risk). Today I had a look at an article about how the purchasing organization is involved in the supply chain risk management activities.

Exploratory Study

Zsidisin et al. did an exploratory study with semi-structured interviews with purchasing professionals in nine companies from the manufacturing industry.

Semi-structured, open-ended interviews were employed to gain an understanding of how purchasing organizations conduct supply risk assessments and incorporate contingency plans.

Findings

The analysis show that the formalization of the risk management techniques used are quite different. The most commonly used method for risk mitigation is: multiple sourcing for strategic parts. But some of the respondents also had more elaborate approaches to reduce risk, like:

Closer relationships with suppliers
Taking suppliers responsible for risk mitigation
Common product platforms and industry standards

Furthermore buffer strategies are used, as of course holding safety stock, controlling stock within the whole SC or multi-sourcing strategies.
Risk management are seen as important functions, but most also stated that the priority is set very low.

Conclusion

It is interesting to see that similar patterns, like the divergence between the expressed need for risk management activities and the current state of those, arise also in talks I had with SC professionals in the last year. So compared to ten years ago not so much seems to have changed in this regard.

Reference:

Zsidisin, G., Panelli, A., & Upton, R. (2000). Purchasing organization involvement in risk assessments, contingency plans, and risk management: an exploratory study Supply Chain Management: An International Journal, 5 (4), 187-198 DOI: 10.1108/13598540010347307

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Bias in Supply Management Decisions

Daniel Dumke — Wed, 15 Dec 2010 19:55:00 +0000

… and what to do about it.

Decisions within a company are not made on pure rational grounds. Assuming that there is the will to make a rational decision, nevertheless limits in information gathering, computing capabilities and memory lead to irrational conclusions (bounded rationality).

So the goal must be to enhance rational decision making and for this end Kaufmann et al. (2009) developed a framework to combat irrationality.

Methodology

The authors use case studies to analyze companies behavior in decision making. In this case they interviewed several executives from 15 companies primarily from the automotive and mechanical engineering industries.

Framework

The other cause for biases in decision making (beside bounded rationality) is uncertainty of the environment. In this context it can be described as simple or complex (the number of factors taken into account) and static or dynamic (change over time).

Overall there are three strategies to reduce bias in decision making:

Expand the decision makers bound of rationality

This can be achieve by creating awareness, decomposing the decision task and facilitating rational evaluation

Reduce dynamic of decision-making environment

Reduce complexity of decision-making environment

Results

The case study produced several strategies which can be used to debias decision making within the above mentioned categories (extract).

Expand bound of rationality

Using cross-functional decision making

Use IT systems to support supplier performance assessment

Training of supply management evaluation and decision making skills

Reduce dynamism

Financial hedging

Stocking of sourced items

Establish presence at supplier site

Reduce complexity

Combine single sourcing items to modules

Deproliferating complex sourcing items

Standardizing sourcing items

Conclusion

The presentation of the article is very clean and can be easily understood. Furthermore, due to the business oriented research method, is should be quite easy to port these strategies back to practice and include them in a “decision making improvement initiative”.

Reference:

Kaufmann, L., Michel, A., & Carter, C.R. (2009). Debiasing Strategies in Supply Management Decision-Making Journal of Business Logistics, 30 (1), 85-106

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Organizational Risk Perception and Reduction

Daniel Dumke — Wed, 03 Nov 2010 09:55:00 +0000

Today I read a rather old article from 1995 about “Organizational Risk Perception and Reduction: A Literature Review” by Vincent-Wayne Mitchell, now at the Cass Business School in London. I present it here since I think most of the concepts and strategies are still valid.

Objective and Methodology

The objective of Mitchell was to show the status of current research on how risks are perceived in organizational buyer behavior and what can be done to reduce these risk. He therefore conducts a review of the current literature.

Figure 1: Factors affecting organizational buyers’ risk perception (click to enlarge; Mitchell 1995)

Risk Perception

In figure 1 Mitchel aggregated the factors which enhanced risk perception and how it could be reduced. In the following I focus on the available strategies for reducing risks:

Information gathering
This strategy is obviously used when perceived risks are high, it can be categorized by the amount of information sought and the nature of it.
Approved supplier lists
This has been a key strategy for a long time now, already in 1995 more than 63% used it.
Group decision making
There are still different results on wether this strategy can reduce risks, in any case this tool has to be carefully designed for the company using it.
Deliberation
Time spent on high risk purchasing decisions is usually significantly higher than on the low risk cases
Highly structured purchasing procedures
A highly structured purchase procedure acts as a defence mechanism, diffusing or precluding high levels of psychosocial risk
Quantitative Techniques
It can be argued that the implementation of expert systems will lead to less complex and political decision processes, which also might lead to less risk.
Multiple sourcing and split procurements
is a typical strategy to reduce risk of interruptions of one supplier
Partnering and Alliances
Long term relationships and the trust involved can lead to reduced risk, as long as dependence is not to high
Consider more suppliers
If the perceived risk increases the number of considered suppliers is increased
A leading company in the field
Buying from a “brand” company might reduce risks for industrial buyers as well.
Performance Guarantees and Penalty Clauses
For a supplier a performance guarantee is sometimes the best way to reduce perceived risks on the client side
Multiple incentive contracts This strategy can help to align the goals between supplier and buyer.
User participation
Involving users in the purchase decision can help to reduce risk in two ways. First, it can bring specialized knowledge to bear on a decision. Second, it gives users a stake in the decisions affecting them.
Source loyalty
Buying from known sources can reduce risks as well

Conclusion

Again, I am wondering why the title of the article has to be so misleading. Of course it is on organizational risk perception, but it focusses solely on buy side risks. But purchasing is also an important corporate function so it is surely no time wasted.
But I am also missing a clear differentiation between the terms “perceived risk” and “risk”. Here the discussion is completely lacking: There exists a theory, that all risk can always be only seen as perceived risk, since a measure for uncertainty can never be given with certainty, even for a dice you never know if it is a perfect one. The strategies also show this lack of discussion, there are some strategies concerned with reducing the actual supply side risk (like information gathering) and there are strategies which mainly deal with reducing the perceived risk of the buyer (like having a structured process to support the decision maker).
As a third critique I am missing some more categorization of the strategies as well, several strategies could be aggregated under the topic “if there is more risk, you have to invest more time for analysis” and “usage of trust to reduce risk”.

Reference:

Mitchell, V. (1995). Organizational Risk Perception and Reduction: A Literature Review British Journal of Management, 6 (2), 115-133 DOI: 10.1111/j.1467-8551.1995.tb00089.x

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CSCMP 2010 conference opening ceremony

Daniel Dumke — Tue, 28 Sep 2010 16:22:03 +0000

The second day has been a great day at the CSCMP conference.
I started with the Opening Ceremony moderated by Rick Blasgen, he and Bob Silverman and Donald Biggs (Learn, Network, Have fun) introduced this years theme (Learn, Lead, Succeed) and the keynote speakers.
Roger Woody did a nice introduction of the Distinguished Service Award Winner: Charles Taylor, Founder of Awake! Consulting, Speaking about the risks of rising oil prices and the possibilities of supply chain professionals in increasing efficiency to combat the effects. In the afternoon he was (for an American from Texas(!)) underlining his points stating that Supply Chain Professionals worldwide have to look into their planning for the after-peak-oil phase.

Then the key speaker, Carlos M. Gutierrez, former US secretary of trade, was talking about the importance of free trade for supply chain management and vis-versa. He issued a call for the revival of the concept of globalization and stressed current free trade obstacles.
He especially stressed the risks associated with having the wrong models for including currency fluctuations and tariffs into the decision making process (eg. international location decision).

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Supply of Rare Earth Elements might be shrinking up to 72%

Daniel Dumke — Wed, 08 Sep 2010 06:02:00 +0000

Recently there were numerous discussions and speculations on the shrinking supply of rare earth elements.

Those elements are used in many different applications from hard disks over cars to iPods. Supply for the world demand is curently dominated by China, which delivers about 97 percent.

The BVL (German Logistics and Supply Chain Association) just published in their recent news letter that China is reducing their exports by 72 percent to only about 8000 tons for the second half of 2010.

According to different sources (reports by the EU an UN) the rebuilding of sourcing alternatives can take up to 15 years.

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