Where should we produce?.................................................................
Three possible plants could produce the styrene: one in China, Romania, and
in the U.S. Whichever plant is chosen, Plastic Time needs assurance that it
can ramp up production very quickly and get the necessary supplies. The
planning team performs a quick analysis of the ramp-up scenarios and from
a pure cost standpoint, China seems to be the best choice. The general man-
ager assembles the management team to quickly convene and evaluate the
Chinese plant from a risk standpoint.
Considering China
At the meeting, the Chief Risk Officer shows the management team the GRC
Risk Management Dashboard. The dashboard shows how all the risks affect
each other and provide a complete picture of the risks the Chinese plant
faces. All the risks are linked to KRIs that the software automatically updates,
so the management team is viewing the latest risk information for the plant.
The CRO uses the assessment capability to see the impact of adding a job for
producing 2 million pounds of styrene in 30 days. She also sends out a survey
by e-mail to the key line managers to get their input on the risks involved in
giving this job to the Chinese plant. It appears that high-level risks such as
the global economy are under control for that timeframe. The survey results
indicate that the risks in the area of suppliers will require further assessment.
After all, suppliers are key to filling the order on time. The CRO asks her team
to conduct a fast assessment that includes suppliers, timeframes, deadlines,
and deliverables and all the risks related to these factors.
The additional assessment shows that increasing staffing and responsibility
will not be a problem for this plant. However, the results also show that the
Chinese plant is currently struggling with a key supplier, and shows a 58 per-
cent probability risk that the key supplier will not be able to meet this new
demand, which would incur a loss of $15.6 billion due to penalties and
unsaleable inventory if the decision were made to produce there.
The management team asks about alternative suppliers for the plant, but the
Chinese team has already started working with a new supplier, which is
currently ramping up production and is expecting to come online in about
four months — too late to help with the Apslcom deadline. Considering yet
another supplier would require getting import licenses, and given the time-
frame, that won’t work either. The CRO shows how GRC Global Trade Services
shows that the cost of an expedited effort in China makes China actually the
most expensive location for the job — the opposite of what the initial calcula-
tions showed. (For more on SAP GRC Global Trade Services, see Chapter 8.)
In addition, SAP GRC Risk Management shows that there’s a 50 percent
chance that the job wouldn’t get done on time, regardless of the cost.
62 Part I: Governance, Risk, and Compliance Demystified
