LFM and SDM Co-host Risk Management Conference

May 5, 2008

The MIT System Design and Management and Leaders for Manufacturing programs, along with co-hosts, the MIT Forum for Supply Chain Innovation and Industrial Liaison Program, brought speakers from academia and industry to MIT on March 11 -12, 2008 to discuss Risk Management: Strategies for Balancing Risks and Opportunities in Global Product Delivery.

David Schmittlein, Dean of the MIT Sloan School of Management, introduced the prevalent theme across the many leaders’ talks emphasizing that businesses can no longer be reactive in mitigating risk, but must be proactive in turning risks into opportunities.

Following is a summary of conference presentations:

Day 1: March 11, 2008

In a keynote presentation, Joan B. Cullinane, President of Velcro USA Inc., discussed Velcro’s specific initiatives to balance and manage risk. She highlighted how Velcro uses the Balanced Scorecard to organize each of the individual mission statements of the units within the entire corporation. The scorecard metric maps functions and strategies of the organization in order to align business goals and provide company-wide knowledge sharing of how to achieve them.

David Simchi-Levi, Professor of Civil and Environmental Engineering and Engineering Systems at MIT, analyzed recent examples of risk mitigation across several areas of the manufacturing industry. From these case studies he emphasized that the level of risk has increased in the last few years, but that product design flexibility and use of supply chain planning are critical for manufacturers to use in managing imminent risk.

Representing General Motors’ Research and Development Center, Dr. Jeffrey D. Tew provided insights into planning not only for the risks of business interruption but, as importantly, brand protection. He emphasized that because many crises cannot be predicted, communication systems must be top notch for optimal response action in preserving customer satisfaction and the brand.

Herrick Professor of Manufacturing at the University of Michigan, Wallace Hopp’s presentation, “Tactical and Strategic Risks from Disruption of Global Supply Chains”, also addressed risk in terms that relate directly to the consumer. He noted that understanding customer loyalty to specific products is extremely important for predicting and planning for both long and short term expected risk for any given crisis situation.

John O’Connor, Director of Supply Chain Risk Management provided an overview of Cisco Systems’ specific initiatives for managing risk. Cisco’s Risk Engine was described at length. The Risk Engine software was created to simulate thousands of risk scenarios and their effect on Cisco’s output, taking into account the likelihood, impact, and severity of each risk scenario. To assist with this presentation, MIT MLOG 2005 Alum Bindiya Vikal explained how this software was developed and implemented.

MIT’s Nancy Leveson, Professor of Aeronautics and Astronautics and Engineering Systems, discussed using a systems approach to manage safety. Leveson emphasized that safety cannot be regarded as a static technical problem, but rather a product of the organization’s ever-evolving management and culture. She explained how to use STAMP (System-Theoretic Accident Model and Process) to manage and control a set of safety constraints in system design and operations.

Mr. Alfred Ford, Deputy Director of Submarine Safety and Quality Assurance at Naval Sea Systems Command, concluded the first day of the conference presentations. He focused on a specific incident, the loss of the USS Thresher submarine and the lives of 473 men with it on April 10, 1963. This devastating loss could have been prevented if a system called SUBSAFE (created immediately after the accident) had already been in place. SUBSAFE certifies submarines before they are launched after a rigorous safety inspection process of design, construction, and maintenance. Since the creation of the SUBSAFE program, no certified submarine has been lost. The images of the men lost with the USS Thresher were a somber reminder to the group of how essential comprehensive safety certifications are for successful risk management.

Following the formal presentations there was a poster session where several graduate students in the LFM and SDM programs presented their research. They included:

• ∑Sam Wang, LFM’08 “Cycle Time Reduction through Wafer Starts Control”
• Leigh Hunnicutt, LFM’08 “Drug Product Analytical Characterization”
• Stephanie Tozer, LFM ’08 “Exjade Process Analytical Technology (PAT) Project”
• Brian Feller, LFM ’08 “Total Landed Cost Analysis Model”
• Tim Aykroyd, SDM ’07 “Value Assessment of New Product Innovation”
• Kamran Eftekhari Shahroudi, SDM ’06 “Robust Design Evolution and Impact of In-Cylinder Pressure Sensors to Combustion Control and Optimization: A Systems and Strategies Perspective”
• Sandro Catanzaro, SDM’ 04 “Quantitative Analysis of Multi-stakeholder Problems”
• Takahiro Endo, SDM’ 06 “A Diagnosis Framework for a Product Development Organization”
• Adrian Aguirre, SDM’06 “Design of Product Development Systems”.

Day 2 March 12, 2008:

As the second keynote speaker of the event, Nicholas Donofrio, Executive Vice President of Innovation and Technology at IBM Corporation, discussed risk management in a global enterprise. In order for companies to move forward he emphasized that they must be flexible and able to stimulate a culture of innovation. A globally integrated manufacturing network for systems would operate most successfully with common global practices that allow for flexibility and moving capabilities between plants, not relying exclusively on individual plants for specific functions. He advised that this type of system would require, “the alignment of information technology, business methods and organizational practices that influence productivity.”

Oliver de Weck, Associate Professor of Aeronautics and Astronautics and Engineering Systems at MIT, presented a critique of the classic S-Curve Model of understanding the impact of new technologies and proposed an alternative view of adopting the necessary new technologies to a system. He emphasized that the invasiveness and risk of new technologies are only fully understood when their integration into a parent system is analyzed and proposed using a _ DSM (Design Structure Matrix) for this purpose.

Vice President and Center Manager of the Xerox Research Center Webster, Stephen Hoover, concluded the conference with a presentation on innovating in a large company setting. His initial comments echoed those made earlier in the day by Donofrio in stressing that a culture of innovation is essential to long-term risk management. Hoover shared a layered approach research portfolio management system to understand the value creation and value capture of risk in product development.