Development and implementation of a resiliency plan are imperative to reduce supply chain risk. Zimmer Biomet’s formal program looks at single- and sole-source supplier risk, business continuity risk and financial risk. Leaders of Zimmer Biomet’s program shared a high-level view of their process and the ways that they assess different areas of risk, and offered best practices for internal and external stakeholders working together to eliminate supply chain risk and disruptions.

2. Reducing Supplier Risk
Presented by John Manning and Jason Stone
Zimmer Biomet
Build Supply Chain Resilience – A Team Effort

3. Agenda
• Our Journey
• Risk Management Strategies
• Lessons Learned
• Next Steps for Zimmer Biomet
Build Supply Chain Resilience – A Team Effort

4. Zimmer Biomet started a Formal Supplier Risk
Management Program in Fall 2016
Initial Focus – Build the Foundation
1. Risk Management Team
2. Risk Policy and
Procedures Created
Our Journey

5. • Executive Sponsorship
• Risk Management Consultant Hired
• Program Manager Identified
• Category Team Members
#1 Building the Team

6. Developed in an Effort to:
• Promote Risk Awareness and Supply Risk Management
• Establish Key Responsibilities and Methods for
Managing Risk
• Maintain Continuity of Supply / Revenue Risk
• Protect Global Business Operations
• Provide Structure for the Risk Team – Follow a Process
#2 Global Supply Risk Management
Policy/ Procedure

7. Global Procedure Process Flow

8. Executive Sponsorship
- Essential Element for Success
- Resources
- Cross Functional Support
Company Culture
- Embrace Change
Risk Management Policy/Procedures
- Structure/Cadence
Foundation Building Lessons Learned

9. Our Journey
Risk Reduction Utilizing Three Strategies –
Internal/External Engagement Required
1. Single/Sole Sources of Supply
2. Supplier Business Continuity Planning
3. Supplier Financial Health

10. Strategy #1
Single/Sole Source Risk Database
Documenting and Identifying Risk
What information is needed?
Where does it come from?

11. Risk Assessment
Essential Step in Classifying the Most
Significant Sources of Threats and Risk
Drivers Including Revenue Impact
Probability of Occurrence
9 High
*An event that happened in the past/is likely to reoccur
*Happened in the last 7 years
*Negative Information about the supplier has been
located and issues continue to surface
3 Medium
*Happened elsewhere in the same/different context
* An event that is likely to occur given current
information/knowledge via due diligence
1 Low
*An event that is highly unlikely to occur
*No information existing about a similar event and no
negative information has been received via due
diligence
Severity of Occurrence
9 Devastating
*Product is delayed with over a 6 month remedy
* There is not an additional source currently qualified or
second source qualification will take longer than 6
months
3 Critical
*Product is delayed with a 1-5 month remedy;
* Alternative source identified and can be qualified
1 Controllable
* Product supply is late occasionally, resolvable within
the next 30 days;
*VMI or ZB inventory is in place
* Second Source is approved

12. Risk Mitigation
• Most Efficient and Cost-Effective Mitigation
Plan Implemented
• Resources/Budget to Support Mitigation
Must Be Vetted and Approved
• Revenue Impact and Overall Risk Score
Jointly Considered
• Mitigation Approaches Can Be Classified into Four
Categories:

13. Risk Reduction Strategies
May Include one or more of the Following:
• Dual Sourcing (Current Supplier or 2nd Source)
• Vendor Managed Inventory
• Company Held Inventory
• Contractual Agreement – Most Favored Customer
• Demonstrated Business Continuity Plan
• Creative Strategies

14. Risk Monitoring
High Risk Projects (Overall Risk Score of 27 or greater)
have a Prioritized mitigation plan – Monthly Review
Medium Risk Projects (Overall Risk Score of 9 points)
have an Active mitigation plan – Quarterly Review
Low Risk Projects (Overall Risk Score of 3 or below)
have an Identified mitigation plan – Periodic Review
Risk Projects that have been completed and mitigation
is contained are classified as Complete

15. Risk Projects Lessons Learned
Document Everything
• Easiest Way to Remember
• Team Member Changes
Discipline of Information/Updates
• Structure/Cadence to process

16. Risk Projects Lessons Learned
Cross Functional Projects
• Support and Resource Requests
• Approval
• No Surprises
• Teamwork! Internal and External
Mitigation Plans Can Vary Widely
• One Size Does Not Fit All

17. Strategy #2
Supplier Business Continuity Plans (BCP)
BCP Questionnaire
1. Gather Information on Suppliers’ Current Business
Continuity and Risk Management Capability
2. 38 Total Questions
Topics Include:
Overall Program IT/Systems Supply Chain
Communication Personnel Facilities
3. Suppliers with a BCP - Table of Contents is Requested

18. Supplier BCP Lessons Learned
Expect a Wide Variety of Responses
Need Supplier Participation
No Two Suppliers Are Exactly The Same
Table of Contents is Important
Tiered Approach

19. Strategy #3
Financial Risk Assessment
Avoid Surprise Closures
Assess Public and Private Companies
Actual Financial Data
Easy to Use
Easy to Interpret

20. Supplier Financial Risk Report
Partnered with a Company to Conduct
Financial Assessments
Financial Assessment Reports:
1. 5 Risk Levels Allow an Efficient Review of a Large
Number of Companies / Probability of Default
2. Focus is on Very High Risk and High Risk Categories
3. Provide Financial Dialogue Reports to Facilitate
Mitigation Conversation

21. Financial Health Lessons Learned
Expect (some) Private Supplier Resistance
Global Team Message Should Be Consistent
Supplier Participation is Important and Expected
Partnership

22. Supplier Risk Management Program

23. Future State
Increasing Depth and Breadth of 3 Strategies
Risk Management Component in Supply Contracts
Increased Technology Use – Event Monitoring
Drive Supplier Risk Reduction throughout Supply Chain
Tiered Approach
War Room for Catastrophic Event Management

24. Overall Lessons Learned
Who is responsible for
Risk Management?
Everyone needs to be Proactive and Aware
Risk Awareness is a part of your Regular Responsibilities
Risk Management must be Systematic and Continuous
Internal and External Team Member Commitment
Executive
Sponsorship!

25. Risk Management Program Goal
Fully Resilient Supply Chain
That Minimizes or
Eliminates Disruptive
Events to the Business
THANK YOU!

26. OMTEc· 2019
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