SCAIR® Case Study

How a complex biotech company with thousands of suppliers pinpointed its most critical partners.

The Requirement

A biotech company wanted to focus its risk management efforts on its most vulnerable suppliers. However, with over 1,000 individual suppliers and multiple materials sourced from each, developing a robust critical list was a complex task.

The Solution

Before an analysis could begin, it was important to narrow the definition of ‘critical’ to those that were unique or difficult to replace. This required a criticality ranking methodology that could be applied quickly across materials and their suppliers.

Two initial filtering methods helped to create a more manageable list of critical materials that could be extracted from the materials management system (MMS).

1) The company’s procurement team was organised in a category-management-based structure. This had advantages from the filtering perspective e.g. non-critical categories could be excluded from the outset.

2) One of the fundamental principles of SCAIR® is to follow the brands/products with the highest revenues. Therefore, the study was limited to critical supplier materials for all brands over the organisation’s materiality threshold.

The filtered export from the MMS was presented in an Excel format which included:

  • material details
  • supplier details including the manufacturing location, where available. (If it was not clear whether a manufacturer or agent had been included, this issue was verified later once the scoring had been applied)

This Excel spreadsheet was imported into SCAIR®, which then started the heavy lifting as follows:

  • Grouping the materials at an individual supplier sites level
  • Classifying materials by Categories/Subcategories, to further speed up the review process
  • Scoring supplier sites according to material criticality criteria (organisations can define this criteria so it focuses on characteristics that determine the ease of replacement)

Only suppliers that scored above an agreed level were passed through for individual supplier Gross Profit (GP) exposure estimation. To further speed up the exposure estimation step, typical recovery times were agreed based on Material Types in order to generate some ‘first pass’ loss estimates for further investigation.

5 step process

The Results

The company developed a targeted hit list for investment/mitigation based on vulnerability and GP exposure  – rather than the traditional procurement approach of measuring risk by how much is spent with a supplier.

It could also put a financial loss against each supplier site, which facilitated the cost-benefit discussions for mitigation.

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