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Resilient Supply Chains: How to Dynamically Manage Risk, Opportunity, and Business Continuity

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Supply chain disruptions are occurring at an alarming rate. An unrelenting barrage of man-made risk and natural disasters has made a profound and highly-visible impact on many global operations. Despite immediate attention on short term recovery, companies affected experience sustained, long-term impacts to share price, shareholder value, and operating performance.

Companies can no longer afford to be unprepared for the inevitability of disruption. As simple players within large, globally-integrated supply chains, they must become resilient to the volatile factors threatening sustained performance. And, resilience will only be achieved when companies master the ability to sense and respond to changes -- before they occur.

Join this 1-hour webcast where IHS experts will discuss supply chain risk and outline the importance of becoming resilient:

Who is at risk from supply chain disruption?
What does it mean to be resilient?
Where do traditional approaches to risk fail?
Why are leaders re-tooling their super-lean supply chains?
How can your organization sense and respond to change?

A recording of this presentation can be viewed here: http://www.slideshare.net/ihs_supplychain/resilient-supply-chains-how-to-dynamically-manage-risk-opportunity-and-business-continuity-25924392

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Resilient Supply Chains: How to Dynamically Manage Risk, Opportunity, and Business Continuity

  1. 1. Resilient Supply Chains: How to Dynamically Manage Risk, Opportunity, and Business Continuity July 11, 2013 Welcome to Today’s Webcast
  2. 2. Copyright © 2013 IHS Inc. All Rights Reserved. Before We Get Started • Ask questions any time • Type questions into the “Ask a Question” area, click ‘submit’ • The slides advance automatically throughout the event • Need help? Click the Help(?) icon below
  3. 3. Copyright © 2013 IHS Inc. All Rights Reserved. Live Tweet Today’s Webcast: #IHSWebcast Join the Conversation: Follow @IHS4SupplyChain on Twitter 3
  4. 4. Copyright © 2013 IHS Inc. All Rights Reserved. We Want Your Feedback on Today’s Topics 4 Everyone completing the entire survey at the conclusion of today’s live event will be entered into a drawing to win a
  5. 5. Copyright © 2013 IHS Inc. All Rights Reserved. Today’s Speakers 5 Mr. Gene Long Jr. Vice President, Supply Chain Consulting IHS Supply Chain Gene Long Jr. is Vice President, Supply Chain Consulting, at IHS where he focuses upon supply chain operations of private and public clients in the energy and chemicals, manufacturing and transportation industry sectors. Gene has extensive experience in improving performance of enterprises in the life sciences, consumer products, high technology and distribution markets. For most of his 40-year career, Long has served as an operations executive, including senior vice president of strategy and business development for Cardinal Health, founder and president of UPS Consulting, president and COO of SiteStuff and founder and president of BAX Global. He was DELL’s first director of worldwide logistics. Throughout his career, Gene has been actively engaged in supply chains operating around the world, in the Americas, Europe and Asia. Often sought as an advisor by organizations in both the private and public sectors, he is recognized as a thought leader in supply chain strategy and operations management.
  6. 6. Copyright © 2013 IHS Inc. All Rights Reserved. Today’s Speakers 6 Mr. Howard Rappaport Senior Director, Chemicals IHS Supply Chain Pricing & Purchasing Howard Rappaport serves as the Senior Director, Chemicals at IHS and is currently responsible for the chemicals and plastics content within the IHS Supply Chain Pricing & Purchasing service. He collaborates with the European, Latin American, Asian and Middle East offices to contribute to various multi-client reports and global studies, as well as various single client consulting projects for IHS Chemicals. With over 30 years of experience in the chemicals and plastics industry, Howard was instrumental in the development of CMAI’s Plastics Processors Conferences in 2004. These events are now slated as major annual IHS conferences in the U.S., Latin America and Europe. He spearheaded the commercial development of the Global Plastics & Polymers Report (GPPR) and the Global Engineering Resins Report (GERR). He is a sought after industry speaker, and has been quoted in various publications and media including: The Wall Street Journal, The New York Times, The Financial Times, Fortune Magazine, Forbes Magazine, Bloomberg, National Public Radio, The BBC as well as numerous other chemical & plastics industry publications.
  7. 7. Copyright © 2013 IHS Inc. All Rights Reserved. Today’s Speakers 7 Mr. Ryland Maltsbarger Principal Economist, Agriculture IHS Supply Chain Pricing & Purchasing Ryland Maltsbarger is a principal economist of the IHS Global Insight's Agriculture Service. He supervises the long-term Global Crops and Livestock Services along with the monthly update of the quarterly price forecast. Ryland is directly responsible for the global sugar and cotton forecasts. Other duties include the publication and forecast of the Global Crops Cost of Production Service. Ryland joined IHS Global Insight in 2008 as an economist. His service with the company has included the creation of the global sugar partial-equilibrium model along with the expansion of the global cotton model. He created the system behind the quarterly price forecast as well as the format for the publication. Other projects have included work on 2050 Global Crops service and expansion and reformatting of the Global Crops Cost of Production Service.
  8. 8. Copyright © 2013 IHS Inc. All Rights Reserved. Supplying the Future: Resilient Supply Chains Enabling Dynamic Risk, Opportunity, and Business Continuity Management Gene Long VP, Supply Chain Consulting IHS Supply Chain July 11, 2013
  9. 9. Copyright © 2013 IHS Inc. All Rights Reserved. Table of Contents • Managing the Supply Chain • Increasing Focus Upon Risk • Assuring Business Continuity • Enabling Resilient Supply Chains 9
  10. 10. Copyright © 2013 IHS Inc. All Rights Reserved. What are supply chains? • Method of collaborating horizontally • System-wide optimization • Interconnected decisions Managing the Supply Chain Efficient, Fragile… Responsive, Adaptive 10
  11. 11. Copyright © 2013 IHS Inc. All Rights Reserved. “Today, we live in the most complex, interdependent and interconnected era in human history. We are increasingly confronted with major adaptive challenges as well as profound transformational opportunities… This new leadership context requires successful organizations to master strategic agility and to build risk resilience.” World Economic Forum, 2013 Managing the Supply Chain 11
  12. 12. Copyright © 2013 IHS Inc. All Rights Reserved. Increasing Focus Upon Risk The Evolution of Business Continuity From Recovery to Continuity to Resilience Disaster Recovery Business Continuity Management OrganizationalFocusonRiskMitigation Tokyo Subway Attack Oklahoma Bombing The terrorist attacks of the early to mid 90s made firms realize that DR did not effectively mitigate risks. BC evolved as a result With the technology boom and roaring economy of the late 90s, BC, although a standard business practice, was given little attention 9/11 9/11 highlighted that risk mitigation plans had to protect against events previously considered unimaginable. Combined with a struggling economy, BC had to evolve Tower Group estimates that the North American Security Industry spend on Business Resiliency will increase to over $1 billion in 2003 from $633 million in 2001 Mid 90s Late 90s Mid 00sEarly 00s What’s Next? Resilient Supply Chains Late 00s Economic Collapse (2008, carries over to 2009), triggered by Lehman Bros’ Sept. 2008 bankruptcy, largest in history Fiscal Cliff (U.S.) Eurozone economic issues (Greece, Spain etc.) RoHS Recast (2011) caused 20% previously unexpected discontinued/ EOL component because demand was severed by RoHS regulations Natural Disasters: • Japan Tsunami (2011) • Volcanic Eruption of Grímsvötn (Iceland 2011) • Australia Floods • Thai Floods (2012 hard disk drives disruption) Early 10s Dodd-Frank Conflict Minerals (2010) SEC Final Rule on Conflict Minerals (2012) 12
  13. 13. Copyright © 2013 IHS Inc. All Rights Reserved. 13 Increasing Focus Upon Risk (Threat) x (Vulnerabilities) = Risk • Natural / Man-Made Disasters • Enterprise Operations • Local / Regional Infrastructure • Geopolitical Issues • Regulatory Requirements • Macroeconomics Today’s Risk Profiles Only Look Back – Static Snapshots of Current ConditionsShown: Thailand Flood 13
  14. 14. Copyright © 2013 IHS Inc. All Rights Reserved. 1414 Assuring Business Continuity People Operations Data Infra- structure Services and Facilities Business Partners Processes COST RISK IMPACT OPPORTUNITY External Parties Resiliency The Enterprise  Availability  Performance  Stability  Procedures  Policies  Alternate Paths  Capabilities  Training  Safety  Succession  Stability  Performance  Availability  Service  Network  Software  Communications  Recovery  Security  Physical Records  Availability  Performance  Security  Utilities  Transportation  Emergency Services  Communications A Holistic Approach to Risk Management 14
  15. 15. Copyright © 2013 IHS Inc. All Rights Reserved. 1515 Detect Deter Mitigate Respond Recover Threats Vulnerabilities Effects  People  Process  Technology  Infrastructure  Partners  Market  Economic Resiliency Planning  Prioritized Threat Ranking  Review of Existing Plans  Conduct Gap Analysis  Assess Vulnerabilities  Assess Procedures  Identify & Prioritize Mitigations / Controls  Develop & Test Resiliency Plans Assuring Business Continuity 15
  16. 16. Copyright © 2013 IHS Inc. All Rights Reserved. 1616 Vision Unprepared Disaster Recovery Plan Business Continuity Management Predictive Modeling Contingency Plan Resilience Hardening the enterprise against all foreseeable emergencies Continuous Operations Business Continuity Plan BusinessValueAssuring Business Continuity 16
  17. 17. Copyright © 2013 IHS Inc. All Rights Reserved. Assuring Business Continuity • “…build resiliency into supply network design, and implement a robust risk management strategy, including a "sense and respond" capability to recover quickly and profitably from disruptions. • Adopt complexity optimization strategies to eliminate features, services and network capacity that do not add sufficient value to customers. Use end-to-end supply chain segmentation to enable simplification. • Improve responsiveness to customer requirements using a globally architected, regionalized approach to supply chain network design.” • Supply Chain Top 25 for 2012 • Gartner 2012 17
  18. 18. Copyright © 2013 IHS Inc. All Rights Reserved. 18 Enabling Resilient Supply Chains Dynamic Risk Management = Resiliency • Supplier Viability • Supply of Critical Materials • Parts Management • Commodity Flows / Logistics • Insights and Forecasts • Risk Identification and Mitigation Tomorrow’s Risk Dashboards Look Ahead – Dynamically Monitoring the Supply Chain 18
  19. 19. Copyright © 2013 IHS Inc. All Rights Reserved. Knowing Early Pays Supplier Country Material Region Labor Trade Flow Industry “I’m multi-sourced, no problem.” 82.2%manage Supplier Risk 60.3%manage Material Risk 47.9%manage Country Risk Regulation Economy 81.4% say Supply Chain Risk is increasing 19
  20. 20. Copyright © 2013 IHS Inc. All Rights Reserved. What We Do • IHS Supply Chain • Helps supply chain, operations, and finance institutionalize resiliency • Enhance efficient but fragile supply chains to become responsive, adaptive • Enable understanding of economic, geopolitical, industrial interdependencies • Influences on markets, supply chains, competitive landscapes, and organizations • Protect growth, maintain efficiency, ensure business continuity, and control risk • Important initial considerations to corporate strategy design • Establishing a global system perspective • Identifying and evaluating risk • Enhancing resiliency • Implementing continuity of business strategies and plans Global IHS Supply Chain Solutions 20
  21. 21. Copyright © 2013 IHS Inc. All Rights Reserved.  Threat & Vulnerability Assessment  Risk Identification; Priority Assessment  Sourcing  Transportation  Inventory Management  Delivery  Origins & Destination Flows  Supply Chain Segmentation – Source to Delivery  Regulatory Environment  Geopolitical Influences Supply Chain Definition Global Supply Chain Flows Global Demand & Supply Risk Determination Security Strategies  Organizational Management and Investment Decisions  Create Performance Measurements Organizational & Customer Benefits • Decreased risk • Process Efficiencies  Cost Reduction  Customer responsiveness DHL and Supply Chain How We Do It: Step 1: Exhaustively Map Supply Chain with Strategy 21
  22. 22. Copyright © 2013 IHS Inc. All Rights Reserved. Threat and Vulnerabilities Risk Assessments Mitigate Monitoring Continuity of Business IHS Capabilities How We Do It: Step 2: Incorporate Global Information and Insight Chemicals Energy Transportation Electronics & Media Economics Country & Regional Infrastructure Markets & Supply Base Trade Flows Regulations & Sustainability Geo-Politics & Security Critical Commodities & Materials Minerals Raw Materials Supplier Labor Operation Mining Distributor Customer Policies Manufacturers Asset 3PL Operation Retail Regions Ports Parts Regulator Carrier Market Consumer ImporterExporters Telecom 22
  23. 23. Copyright © 2013 IHS Inc. All Rights Reserved. 23 Threat and Vulnerabilities Risk Assessments Mitigate Monitoring Continuity of Business IHS Capabilities How We Do It: Step 3: Enable Dynamic & Predictive Monitoring Chemicals Energy Transportation Electronics & Media Economics Country & Regional Infrastructure Markets & Supply Base Trade Flows Regulations & Sustainability Geo-Politics & Security Critical Commodities & Materials Assess: Value Chain Map Monitor Manage & Predict Model: Outlooks & Scenarios Interpret : Expert Advisory Act: Execute & Optimize IHS Predictive Analytics 23
  24. 24. Copyright © 2013 IHS Inc. All Rights Reserved. 24 Example Dashboard: A Look Into Recent Global Scenarios Supply Base Critical CommoditiesLabor & WageCountries Continuity Threats Chemical Supply Disruption Political Unrest Food Supply Instability Fuel Price Spike 24
  25. 25. Copyright © 2013 IHS Inc. All Rights Reserved. Chemical Supply A Look At Chemical Supply Chain Scenarios & Implications Howard Rappaport Senior Director, Chemicals IHS Pricing & Purchasing July 11, 2013
  26. 26. Copyright © 2013 IHS Inc. All Rights Reserved. Chemicals & Plastics Value-Chain Consumers Retail Finished Goods Energy Derivatives Petrochemicals 26
  27. 27. Copyright © 2013 IHS Inc. All Rights Reserved. Any of these factors can, and will influence prices… Costs / Feedstocks • Raw Material Prices (crude oil & natural gas) • Operating Costs Supply/Demand & Trade • Plant Utilization Rates • Loss of Available Capacity (outages) • Inventory Trends • Exports / Imports Other Dynamics • Anticipation of New Capacity in the Market • Desire to Increase Market Share • Prices of Competitive Materials • Market Momentum • Natural Disasters, Weather Events • Political Turmoil What Influences Chemical & Plastics Prices? 27
  28. 28. Copyright © 2013 IHS Inc. All Rights Reserved. Example: Recent Plant Explosion at Williams Geismar, LA Impacted Capacity: Ethylene capacity is 646,000 tons, which represents 2.4 percent of the 27.05 million tons of ethylene capacity in the U.S. There is a propylene splitter at the site with a capacity of 270,000 tons, which represents roughly 1.4 percent of U.S. propylene capacity. Additionally, there is propylene capacity of 43,000 tons as byproduct from the steam cracker. Louisiana Industry Impact: Louisiana is roughly 2.07 million tons short ethylene, which is filled by ethylene moved via pipeline from Texas. There are a multitude of pipelines running from Texas to Louisiana so any possible pipeline impact at Geismar may be muted. Additionally, Williams operates a storage well in Geismar which has roughly 450,000 tons of ethylene capacity. Q1 2013 inventory estimates for the U.S. showed about 442,000 tons of ethylene inventory. Inventory levels have grown over the past three quarters, up roughly 150,000 tons from Q2 2012. Industry Share Regional Impact 28
  29. 29. Copyright © 2013 IHS Inc. All Rights Reserved. Associated Derivatives: There are several derivative units in the area, among them styrene, ethylene dichloride, ethylene oxide, and alpha olefins, all of which could theoretically receive merchant ethylene from Williams to feed their units. While there is no polyethylene capacity in Geismar, roughly 18 percent of U.S. PE capacity is located within the state in Baton Rouge, Lake Charles, and Plaquemine. Expansion Plans: Williams is in the process of expanding the ethylene capacity at Geismar, with a final capacity of 926,000 tons at the end of this year. The cracker was slated to undergo a maintenance turnaround this fall, running six weeks from mid-August through the end of October. Price Impact: Ethylene spot prices had been trading at 52.0 cents per pound for June delivery, and 51.0 cents per pound for July delivery. The bid-ask spread for spot ethylene was 57.0-65.0 cents per pound. Propylene spot was trading at 62.0 cents per pound and was bid at 60.0 cents against no offer. The April and May ethylene contract prices remained unsettled at the time of the event. Recent Plant Explosion at Williams Downstream Derivatives Affected Company Information Market Price Movements 29
  30. 30. Copyright © 2013 IHS Inc. All Rights Reserved. U.S. Gulf Coast Operations & Hurricane Season (June – November) Potential Path of US Gulf Hurricanes… 30
  31. 31. Copyright © 2013 IHS Inc. All Rights Reserved. Political Unrest In Egypt = Higher Oil prices 31 Oil jumps $2 on Egyptian unrest, biggest weekly gain in a year…
  32. 32. Copyright © 2013 IHS Inc. All Rights Reserved. Natural Gas Gas Separation Unit RefineryCrude Oil Reformer Reformate BTX Extraction Steam Cracker Butane Hydrogen Propylene Pygas BTX Raffinate Ethylene EO/EG POLYETHYLENE ETHYLENE DICHLORIDE / PVC EP RUBBER ETHANOL Naphtha Gas Oil Ethane Propane Butane TOLUENE m-XYLENE p-XYLENE BENZENE o-XYLENE XYLENES PTA/DMT PET PIA PAN/DOP/Plasticizers POLYPROPYLENE Butadiene Methanol SBR / PBR ETHYLBENZENE/ STYRENE How Will This Move In Oil Impact The Chemical Industry? 32
  33. 33. Copyright © 2013 IHS Inc. All Rights Reserved. Summary: Chemicals & Plastics • Value of Critical, Factual, Timely Information… • Indications: • Know as much as possible about your supply chain • Global or regional events can, and will impact your business • What are the weakest links in my supply chain? • How do I factor in unpredictable events like weather, politics, natural disasters? • Always have a “back up” plan, source of supply • Have a reliable “source” of data & information 33
  34. 34. Copyright © 2013 IHS Inc. All Rights Reserved. Food Supply A Look At Food Supply & Weather Volatility Implications Ryland Maltsbarger Principal Economist, Agriculture IHS Agricultural Service July 11, 2013
  35. 35. Copyright © 2013 IHS Inc. All Rights Reserved. Agriculture & Food Value-Chain Consumers Retail Grain Elevator Farmer Meat Producer Finished Goods Food Processor 35
  36. 36. Copyright © 2013 IHS Inc. All Rights Reserved. 0 50 100 150 200 250 0 100 200 300 400 500 600 700 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 UScentsperpound US$permetricton US - #2 Yellow Corn FOB, Gulf Ports US - #1 Hard Red Winter Wheat FOB, Texas Gulf US - #1 Yellow Chicago Soybean Spot A-Index Cotton (right scale) Price Volatility in Agriculture Low Global Rice and Wheat Supplies Crude Oil and Corn Price Spikes Poor Wheat Production Russia, EU, Canada US Historic Level Drought Low Global Cotton Supplies 36
  37. 37. Copyright © 2013 IHS Inc. All Rights Reserved. Any of these factors can, and will influence prices… Processing/Retail • Raw Material Prices • Operating Costs • Branding • Transportation Supply/Demand & Trade • Seasonal Global Production Cycles • Governmental Policies (trade, biofuels, subsidies) • Exports / Imports Other Dynamics • Commodity Market Speculation • Natural Disasters • Weather Events/Cycles (El Nino, La Nina) • Political Turmoil What Influences Food Prices? 37
  38. 38. Copyright © 2013 IHS Inc. All Rights Reserved. Implications Direct • Year-to-Year Price Variations • Increased market risk premiums • Change in Farmer Decisions • Land planted, use of inputs, capital purchases • Need for increased revenue protection • Increased Need for Transportation Capacity • Barge capacity, ocean freight, trucking • Decreased Biofuel Adoption • Increased Food Cost/Inflation • Tighter Supply Chain Margins Indirect • Political Destabilization in Developing Economies • Change in Governmental Policies • protectionism, food security, food subsidies • Port Capacities/Logistic Limitations • Trade Negotiations • Rate of Technology Adoption • Increased R&D for Mitigation 38
  39. 39. Copyright © 2013 IHS Inc. All Rights Reserved. Join IHS in an Upcoming Multi-Client Study • Long-term Increased Variability Weather Impact Study • Increase frequency of yield variability across major producers & importers • El Nino & La Nina patterns on Australia/Oceania & South America • Increased rainfall shortages in North America, EU, CIS • Decreased Monsoon in India • Study to Be Completed this 4th Quarter • Participants • Agricultural Input Industries – chemicals, fertilizer, machinery, irrigation • Food Chain Participants – grain handlers, processors, retailers and restaurant chains • Transportation Industry Players • Banking & Investment – global potential risks of capital investments • All Companies – global risks surrounding change in indirect costs 39
  40. 40. Copyright © 2013 IHS Inc. All Rights Reserved. Summary: Agriculture & Food Resiliency • Are you sourcing metals from food insecure regions? • Is your next growth region sensitive to food prices or where household food expenditures take up over half the income? • Do you plan budgets for employee compensation where domestic food prices could triple? • Are you sourcing cotton uniforms from countries where “price volatility” reducing government policies will cause shifts to new regions? • Would high food prices cause political unrest in countries you may source chemical based good from? • High food prices would increase land use for global food products and put pressure on area for construction goods like timber. • High food prices would also increase agricultural water needs that would increase overall water price throughout other industries. 40
  41. 41. Copyright © 2013 IHS Inc. All Rights Reserved. Thank You! Questions?
  42. 42. Copyright © 2013 IHS Inc. All Rights Reserved. 42 We Want Your Feedback on Today’s Topics Everyone completing the entire survey at the conclusion of today’s live event will be entered into a drawing to win a
  43. 43. Copyright © 2013 IHS Inc. All Rights Reserved. 43 Consider these IHS opportunities… *Offer limited to qualified entities until July 31st , 2013. How to Participate? Recommended for all attendees…
  44. 44. Copyright © 2013 IHS Inc. All Rights Reserved. For More Information Send questions and requests for information to: Webcasts@ihs.com Visit IHS.com/PricingPurchasing for more information 44

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