David Mellon, Group Category Manager - Fleet, Logistics and Fuel at Coca-Cola & Steve Pospisil, Vice President Global Supply Chain Outsourcing at DHL speak on 'Supply Chain Risk and Third-Party Logistics in a Time of Crisis' at the 7th European 3PL Summit in Brussels, November 25th 2009. To download all of the slides from the conference for free visit www.3PLsummit.com/eu_2009ppts

1. Supply chain risk and third-party logistics in a time of
crisis
Dave Mellon and Steve Pospisil
Brussels, 24th November, 2009

2. The views expressed here are
entirely our own and are not
necessarily those of DHL nor of
Coca-Cola
Steve Pospisil and Dave Mellon| Brussels | 24th November 2009 Page 2

3. Prologue - forecasting
“Prediction is very
difficult, especially about
the future.”
Niels Bohr
Steve Pospisil and Dave Mellon| Brussels | 24th November 2009 Page 3

4. Our two companies
‘800-pound gorilla’ GB, France, Benelux
Divisions: FINISHED GOODS
Supply Chain
Global Forwarding & Freight
Express 2,000+ FTLs per day
Mail
EQUIPMENT
600,000 Cold Drinks
Vendors and Coolers
Steve Pospisil and Dave Mellon| Brussels | 24th November 2009 Page 4

5. Third party logistics providers’ attitude to risk
3PLs are risk averse
• Margins are low
• Often providing a commodity service
• Barriers to entry or change are often low
– 3PLs try hard to differentiate themselves from the competition through, for
example, IT
Low risk High risk
Contract logistics Hauliers Freight Infrastructure
forwarders networks
In-house logistics people are somewhat risk averse, too!
Steve Pospisil and Dave Mellon| Brussels | 24th November 2009 Page 5

6. What risks are we talking about?
• Business risk
– Particularly around volumes
– Changing supply chain requirement
– ‘Consequential loss’
– Means different things to different people
– Liability disproportionate to remuneration
• Pricing or cost risk
• Operational risk
– Security
– Product liability
• Financial risk
– Risk of default
Steve Pospisil and Dave Mellon| Brussels | 24th November 2009 Page 6

7. Open book versus closed book
High Shared use, Dedicated,
open-book open-book
Specificity
of equipment
or service
Low Shared use, Dedicated,
closed book closed book
Small Size Large
Steve Pospisil and Dave Mellon| Brussels | 24th November 2009 Page 7

8. The current environment
What has changed? What hasn’t changed?
• More uncertainty • Major retailers!
• Higher risk of default • Long-term view
• Reducing demand while capacity • Need to change and drive
changes much more slowly inefficiencies out of the supply chain
– Margin pressure – Accelerating
• Logistics lags behind manufacturing
Steve Pospisil and Dave Mellon| Brussels | 24th November 2009 Page 8

9. Video here
Steve Pospisil and Dave Mellon| Brussels | 24th November 2009 Page 9

10. Conclusions – in the real world
• If we could predict the future we would be millionaires, not working in
logistics
• Third-party logistics providers are risk-averse
• Requirement is for ability to deploy (and absorb) resources at short
notice
• Flexibility comes at a cost
• Biggest is best isn’t necessarily true but selection is vital
Steve Pospisil and Dave Mellon| Brussels | 24th November 2009 Page 10

11. Postscript - forecasting
“The only function of
economic forecasting is to
make astrology look
respectable.”
J K Galbraith
Steve Pospisil and Dave Mellon| Brussels | 24th November 2009 Page 11

12. Questions
Any questions?
Steve Pospisil and Dave Mellon| Brussels | 24th November 2009 Page 12