pims feb. 2016 dhl resilience360

Managing supply chain risks to ensure business continuity

DHL Resilience360

Resilience360 | DHL DHL |

Source: Deutsche Post DHL; 1) Centre for Research on the Epidemiology of Disasters ; 2) Business Continuity Institute & Experton Group; 3) World Economic Forum Supply Chain and

Transport Risk Survey 2011; 4) Jeff Dobbs, Global Sector Chair, Diversified Industrials and a partner with KPMG in the U.S 5) Hendrick & Singhai, “The Effect of Supply Chain

Disruptions on Long-Term Shareholder Value, Profitability and Share Price Volatility,” 2011 6) McKinsey survey in Sep. 2006 (3,172 responses from executives across full range of

industries); 4) McKinsey survey in Sep. 2006 (3,172 responses from executives across full range of industries);

Key Facts about Risks in Global Supply Chains

NOT EXHAUSTIVE

Number of natural disasters has

increased by almost three times

over the last 30 years1)

81% of interviewed companies

experienced at least one SC

disruption in 20132)

Companies experienced on

average a 10% reduction in

shareholder value, after a supply

chain disruption5)

Only 9 % of American supply

chain executives said that they

could assess the impact of a

disruption within hours4)

Centre for Research on the

Epidemiology of Disasters

93% of the leaders of the

worlds top companies in the

CEO summit in 2012 said they

were unprepared for supply

chain disruptions3)

Only 9% of companies claimed

high confidence in mitigating

their key supply chain risks and

only 15% have detailed

assessment models6)

Global supply chain risks and respective disruption management are

becoming a prevailing topic

http://www.clresearch.com/home


Source: Desk Research: News Agencies (PwC Industry Analysis - Pharmaceuticals ; Hurricane Sandy flooding wipes out years of drug research at NYU lab, Analyst Says, Reuters -

Thieves grab up to $75 million in Eli Lilly drugs Rheinische Post - BMW stoppt Produktion in drei Werken, Der Spiegel

BMW halted production, losing

7,000 vehicles in a week after

a volcanic ash cloud delayed

delivery of vital electronic

components

Western Digital production of

hard drives was completely

stopped due to flooding in

Thailand 2011, causing a total

cost of ~USD 250mn

In June 2011 ~50% of the

drugs on stock were stolen

from a warehouse in Neuss

(Germany), assumed to be

used for counterfeiting

Eli Lilly & Co lost drugs worth

$75 million in 2010 in a single

theft from a Connecticut

warehouse over a weekend in

2010

Supply Chain Disruption Examples

Disruptions have a significant bottom-line impact –

Supply chain risk management as opportunity for significant savings

10 years of work on a wide

range of studies involving

cancer, epigenetics, mental

ailments and cardiovascular

conditions in NYU was wiped

out by Hurricane Sandy

Porsche befell a production

loss of 450 cars per day, due

to a flood in Slovakia which

blocked car bodies from being

transported to the assembly

factory in Germany


The Life Sciences and Healthcare industries are continuing to undergo

intense Transformation

An industry sensitive to Supply Chain Disruptions

DRUGS WILL REQUIRE

TEMPERATURE CONTROL

STORAGE 2150 IT WILL BE 1 IN 6

Source:IMS Institute for Healthcare Informatics & Evaluate Pharma


Customer

Network data

Site contacts

Volumes & priorities

Supply Chain expertise

Best Practices in

Contingency Management

People on the ground to

take actions worldwide

Partners

Real time incident feeds

Statistical risk evaluations

Competences for risk-

specific deep-dives

Incident Monitoring Risk Assessment

Input from … …to create one joint platform for

Supply Chain Risk Management

Source: DHL Supply Chain Risk Management

DHL

I 1 I 2

• Multi-tiered visualization of

your global and end-to-end

supply chain

• Create transparency on

exposure and vulnerability

in over 20 global risk

categories

• Rate resiliency and ensure

coverage of backup plans

• Identify risk hotspots and

recommend suitable

mitigations & alternatives

• Near real-time 24/7

alerts on supply chain

relevant incidents and

risk warnings

• Filtering options to alert,

based on specific

categorization of risk and

its severity level

• Trigger follow-up actions

immediately

DHL Resilience360


What are supply chain risks?

Supply Chain Risks in Scope

Port Infrastructure

Port Congestion

Airport Closure

Train Derailment

Road Infrastructure

Piracy

Runway Maintenance

Inclement Weather

Weather

Tropical Cyclone

Wildfire

Lightning

Tsunami Flood

Volcano Earthquake

Tornado

Hail

Ice Storm

Drought

Law Enforcement War

Terrorism Corruption

Corporate Social Responsibility

Civil Unrest

Outbreak of Disease

Public Health External Intervention

Public Holidays

Supplier Financial Stress

Industrial Fire

Utility Failure Regulatory

Telecom Outage

Gas Leaks

Illicit Trade

Illegal Cargo Introduction

Customs Efficiency

Cargo Theft

Power Outage

NOT EXHAUSTIVE


Hotspot Analysis

Hotspot selection based

on risk score and resiliency

rating and importance

• Prioritization of critical

SC entities

• Plausibility check of

results

• Recommendation

on next steps

• Reports per risk and per

site

Resiliency

Rating Severity Score

Scoping &

SC Mapping

Node assessment

as part of network

Node redundancy in

network

• Resiliency rating based

on alternative capacities

and time-to-recover

• Assessment through

expert dialogues from

logistics and

procurement

Node assessment as

stand-alone entity

Node failure &

recovery

• Risk Exposure

scores based on

reliable databases

• Existing mitigation

measures and impact

scores captured through

customized survey

Scoping of network

to important entities

• Product Groups

• Key Suppliers

• Key Markets

• Value Chain

• Risks in scope

Mapping of supply chain

with all entities and flows

Data preparation for risk

assessment tool


Which sites are

important?

Which sites are

endangered?

Which sites are

not replaceable?

Which sites need

to work on their

resiliency?

After the 4 steps of analysis the you will know on which sites you

need to focus to increase your supply chain’s resiliency

Risk Assessment - Methodology


Supply Chain Mapping


Earthquake Tornado

Exposure Risk Mapping - Overview


Exposure Risk Mapping - Details


Risk Assessment Site Report


Customer

Network data

Site contacts

Volumes & priorities

Supply Chain expertise

Best Practices in

Contingency Management

People on the ground to

take actions worldwide

Partners

Real time incident feeds

Statistical risk evaluations

Competences for risk-

specific deep-dives

Incident Monitoring Risk Assessment

Input from … …to create one joint platform for

Supply Chain Risk Management


DHL

I 1 I 2

• Multi-tiered visualization of

your global and end-to-end

supply chain

• Create transparency on

exposure and vulnerability

in over 20 global risk

categories

• Rate resiliency and ensure

coverage of backup plans

• Identify risk hotspots and

recommend suitable

mitigations & alternatives

• Near real-time 24/7

alerts on supply chain

relevant incidents and

risk warnings

• Filtering options to alert,

based on specific

categorization of risk and

its severity level

• Trigger follow-up actions

immediately

DHL Resilience360


Incident Monitoring Overview


Incident Monitoring Details


Dashboard overview tracking new incidents & node status

New incident 1

Feedback on status &

actions

Status: Disrupted

Comments:

• Shipments delayed for 2

days

• Future disruptions

expected

4

Updated status 5

Alert Profiles (Filter) 2

Capability to trigger stored

emergency plans & inform

up- & downstream sites

6

Incident Monitoring– Schiphol Airport Flight Delay Example


Alert message for site 3


Incident Monitoring Integration


Incident Monitoring – Supply Chain Relevant Incidents

3,000 tons of highly

hazardous

chemicals explode

in Tianjin in 08/2015

Power loss,

cancelled flights &

closed roads, due

to extreme weather

in 02/2015

1,250 cargo trucks

& 800 containers

suspended due to

political tensions in

11/2015

Losses of $184m to

pork & poultry

industry due to

labour strikes in

02/2015

Losses of $100m to

the private sector

due to customs

stoppages in

05/2015

Evacuations, air-

ports & transport

hubs closure due to

a hurricane in

10/2015

Delays of up to 10

day for sea freight

due to canal

congestion in

10/2015 Vast cargo backlogs

and congesting

road routes due to

labour strikes in

03/2015

Multiple industries

disrupted due to a

labour strike of

5,000 workers in

06/2015

Plant operations

stopped & $1bill. of

overall damages

due water floods in

11/2015


Risk Assessment & Incident Monitoring - Benefits

Risk Assessment and Incident Monitoring will make the supply chain more

reliable with flexibility to react in case of unforeseen events.

Avoid Customer Penalties

through maintaining service levels and

reducing customer attrition

Cargo/Inventory Loss

Prevention

Optimize the ROI for loss

prevention investments

Avoid Lost Sales

through timely production re-

sourcing, re-planning and

alternative sequencing

Procure Fewer Expedited

Shipments

by securing scarce material and

transport in advance

Minimize Reputational Impact

by demonstrating proactiveness during

crises

Adhere To Compliance &

Regulatory Measures

through transparency on

operational needs and readiness


DuPont Case Study

“In my EMEA distribution, my

biggest concern is the

consequences of losing one of

my 11 regional DCs.”

- An D-Haenens


Risk Assessment

Scope & map

risk

assessment 1

Assess risks &

aggregate

scores

2

Check

alternatives &

resiliency 3

Identify hot

spots & blind

spots

4



Risk Assessment

Scope & map

risk

assessment 1

Assess risks &

aggregate

scores

2

Check

alternatives &

resiliency 3

Identify hot

spots & blind

spots

4

Illegal Cargo

Introduction Counterfeiting*

Cargo Theft

Regulatory*

Law

Enforcement

Customs Efficiency

Strike

State Insecurity

External

Intervention

Corruption

Extra Tropical

Cyclone

Tropical Cyclone

Wildfire

Lightning

Tsunami

Utility Failure

Flood

Volcano Earthquake

Tornado

Hailstorm IT Failure Risk

Supplier Failure

Strike

Financial

Stress

Power Outage

Telecommunication

Industrial Fire

Terrorism

In scope



Risk Assessment

Scope & map

risk

assessment 1

Assess risks &

aggregate

scores

2

Check

alternatives &

resiliency 3

Identify hot

spots & blind

spots

4



Risk Assessment


Scope & Map

Risk

Assessment 1

Check

Alternatives &

Resiliency 3

Identify Hot

Spots & Blind

Spots

4

Assess Risks

& Aggregate

Scores 2


Scope & Map

Risk

Assessment 1

Check

Alternatives &

Resiliency 3

Identify Hot

Spots & Blind

Spots

4

2

Risk Assessment


Currently assumed to have 0% alternative capacities; further

assessment of actual capacities necessary

Alt

ern

ati

ve

s C

ap

ac

itie

s

0%

80%

100%

D C

B A

TTR (weeks) RTO

DC2

DC6a

No response from:

DC3

DC 7

DC4

DC10

DC1

DC6b

DC5

Resiliency Matrix

Assess Risks

& Aggregate

Scores


Risk Assessment


Hot Spot Identification Matrix

Hotspot identification is determined by the results of the risk and resiliency

assessment, as well as the relative importance of the DCs

Resili

en

cy C

ate

go

ry

Overall Risk Severity Score

1 2 3 4 5 6+

A

B

C

D DC2

DC9&10 DC11

DCD6a

DC6b

DC8

DC4

DC1

DC7 DC3

DC5

1st Degree Hotspot1) 2nd Degree Hotspot2) Other DCs

Scope & Map

Risk

Assessment 1

Check

Alternatives &

Resiliency 3

Identify Hot

Spots & Blind

Spots

4

2 Assess Risks

& Aggregate

Scores


Next steps in DuPont

• Analysis was an eye-opener to factually demonstrate the

risks. The visual map tool from DHL help to convey the

importance and urgency not to leave things AS IS.

• Now starting projects with the BU’s that have highest

risks (Crop Protection, Nutrition, Polymers) in order to

reduce those risks (fire, IT, supplier failure)

• These projects do not only address the risk, but also will

further optimise the physical distribution network


Thank You!

How resilient is your supply chain?

How do you ensure business continuity?

Jan Speich

Senior Manager Resilience360

DHL Customer Solutions & Innovation

[email protected]

pims feb. 2016 dhl resilience360

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