Proactive Risk Assessment: Commodity Risk Follow

Supply Risk Navigator is an Insights-to-Action component in the LevaData platform which enables a Business Continuity Manager to protect margins and revenue by facilitating both proactive and reactive risk monitoring, risk impact assessment, and risk mitigation and response. We refer to proactive monitoring as it pertains to the evaluation of structural risks in the supply chain, while reactive monitoring and evaluation facilitates assessment and response in the event of a crisis. The Proactive Risk Assessment module of Supply Risk Navigator handles both of these functions.

Commodity Risk

When a user selects Proactive Risk Assessment on the left-hand navigation menu, they land on the first tab of the Proactive Risk Assessment module which is Portfolio Risk and the first sub-tab which is Product Risk. From here, the user should select the second sub-tab for Commodity Risk, which this article is focused on. This area of the platform seeks to provide the Global Commodity Manager (GCM) everything needed to address portfolio risk analysis and risk mitigation actions associated with the commodities they manage.

To better understand the navigation and rules of Portfolio Risk, please see:

• Proactive Risk Assessment: Portfolio Risk

Commodity Risk Dashboards

Commodity and Sub-Commodity Risks

The first set of dashboards for Commodity contains a Risk Profile, Spend Level, and Detailed Risk Table for all of your organization's mapped commodities. The filtered spend and product sales impact will inform the user what degree of cost and revenue impact the risks have towards the commodities they manage.

If your data is loaded with subcommodity mapping, then drilling down to that level is possible with the filtering controls. For example, if you are a GCM who manages buying electromechanical parts, you may want to look into parts at risk in those subcommodities and find out what areas of improvement are possible in your sourcing strategy.

Expanding the Top Risks: SubCommodity table we see several at Very Low Risk, but after (1) clicking on Filtered Spend and sorting in descending order to identify our highest spend sub commodities, we can (2) examine commodity: electromechanical / sub commodity: connector_circular and see in the reasoning column that there are Single Source (SS) and Vendor Managed Inventory (VMI) risks with a high quantity of CPNs at risk and a high amount of spend on at risk CPNs. A prudent GCM will want to review the CPNs in this category and look for risk mitigation actions to take.

Note: If for some reason you see a lot of zeroes in "Product Sales Impact" that means either you have no product data (product price is zero or null) or the forecast values of products for those CPNs are zeroes.

Filtered Spend is derived from the multiplication of Part Forecast and Part Cost over the current + next three quarters, so both values need to be populated in order to produce data there.

Customer Part Number (CPN) Risks

Moving down to the next dashboard, if we retain the filter for electromechanical commodity and add a subcommodity filter for connector_circular (or alternatively click into the electromechanical : connector_circular row in the previous table), we are able to examine these specific at-risk parts. In the CPN Risk Profile we get a distribution of the risk calculation of the parts, the spend on the parts, and a detailed table of these at risk parts.

Expanding the table for Top Risks: CPN, we can see the 8 at risk parts and the 1 medium risk part (by default the table is sorted by risk calculation) and in this scenario the sourcing strategy risk is low, even though the aggregated MPN risk is very high. The example indicates many single-source CPNs with limited inventory (High Aggregated MPN Risk) but that can be easily requalified (Low Sourcing Strategy Risk) and Aggregated Risk is being marked as High. Users may want to sort descending on Filtered Spend or Product Sales Impact to determine parts with the highest financial implications.

CPN Risk Calculation and Aggregation

Risk is a function of overall Aggregated MPN Risk combined with Sourcing Strategy Risk.

Aggregated MPN Risk indicates the total risk for the currently qualified MPNs and effectively reflects the health/risk of the aggregated MPN pool associated with the CPN.

• Aggregated MPN risk aggregates individual MPN EOL, Lead Time, and Manufacturer.
• e.g. if there are two MPNs associated with a CPN/Manufacturer and one MPN is near EOL, while the second (replacement) MPN has extended life (long EOL), the "Aggregated MPN" risk conferred from EOL will remain low.
• Users can drill into the individual MPN details by selecting the CPN, then viewing the MPN table below:

  

Sourcing Strategy Risk is a function of the number of (manufacturer) sources for a given CPN, the Inventory Strategy, and the time-to-requalify a new/replacement part.

Individual "raw" CPN risk factors include # of Sources for the CPN, Time to Requalify, Strategic Inventory (Vendor Managed Inventory), as well as the Filtered Spend and Product Sales Impact.

Manufacturer Part Number (MPN) Risks

MPN Risk Factors will allow you to view a table of all at risk MPNs but is also very valuable when clicking into any of the elements in preceding dashboards and drilling down to review specific MPNs that meet certain at-risk criteria, like the example directly above.

This table will present both MPN Risk and CPN Supply Risk adjacent to one another. If the MPN Risk is very high but the CPN Supply Risk is relatively lower, that often indicates an available substitute part.

Impacted Sites

The MPN Risk Factors Table indicates if the manufacturing sites for the MPN are potentially impacted by a negative event.

• The indicator is "Yes" if any of the possible manufacturing sites are potentially impacted.
• The indicator is "No" if none of the possible manufacturing sites are potentially impacted.
• The indicator is left blank if there is no information about Country of Origin (COO) or MPN manufacturing site for the MPN.

Note: If Part-Site maps are not available, COO is used as a proxy and all known manufacturer sites in that country are used as potential manufacturing sites.

Manufacturer Risks

This section provides detail on the manufacturer which feeds the MPN by understanding risk level, financial rating, and internal information (if provided) on delivery and quality. The user can review the manufacturer's status on additional risk factors like the quantity of single source spend and single source parts, with filtered spend and product sales impact.

Manufacturer Score Card

Users can review an individual manufacturer in detailed by left clicking into their name or any element on their data row and then right clicking the "MFR Score Card" prompt. Let's take Future Electronics for example.

After selecting the prompt, the full Manufacturer Score Card will load, indicating metrics for Financial Health, Performance Rating, Spend & Savings Trends, and Insights for future negotiations with that manufacturer.

For more information on Partner Score Cards for Manufacturers and Suppliers, please see:

• Market Intelligence - Partner Score Card

This concludes the overview on the Commodity Risk dashboards in Proactive Risk Assessment.

For the articles on the other Risk sub-tabs, please see:

• Proactive Risk Assessment: Product Risk
• Proactive Risk Assessment: Manufacturer Risk
• Proactive Risk Assessment: Geographic Concentration Risk