Merck KGaA's presentation discusses a comprehensive program leveraging big data analytics to mitigate supply chain risks, structured around six core pillars. This program includes automated risk assessments for suppliers and materials, continuous monitoring of potential threats, and workflows for managing risk-related activities. The ultimate goal is to ensure a reliable supply of high-quality products to customers while effectively minimizing exposure to various supply risks.

1. Merck KGaA
Darmstadt, Germany
Eduard Bagan
Head of Supply Security CoE
Group Procurement
28 March 2019
MITIGATING SUPPLY
CHAIN RISKS USING BIG
DATA ANALYTICS

2. The life science business of
Merck KGaA, Darmstadt, Germany
operates as MilliporeSigma
in the U.S. and Canada.
Mitigating Supply Chain Risks Using Big Data Analytics | 28 March 20192

3. Mitigating Supply Chain Risks Using Big Data Analytics | 28 March 2019

4. Mitigating Supply Chain Risks Using Big Data Analytics | 28 March 2019

5. Merck KGaA
Darmstadt, Germany
AGENDA
2
3
4
5
Supply chain
Risk Management program
Using data analytics:
Defining scope
Using data analytics:
Determining risk
Q&A
AGENDA
1
Final considerations

6. RISK COMES FROM NOT KNOWING
WHAT YOU’RE DOING.
Warren Buffet

7. Merck KGaA
Darmstadt, Germany
AGENDA
Supply chain
Risk Management program
AGENDA
1

8. Mitigating Supply Chain Risks Using Big Data Analytics | 28 March 2019
SUPPLIER RISK
ASSESSMENT
MATERIAL RISK
ASSESSMENT
ALERTS SUPPLY CHAIN
MAPPING
RISK
INTELLIGENCE
RISK RESPONSE
TRACKER
✓ An automated system to
assess supplier risk using
29 risk titles and 5
different risk domains
(Financial, geo-political,
operational, compliance
and sustainability)
✓ A semi-automated system
to assess the risk of
materials used in
production, considering
both risk probability and
risk impact
✓ Suppliers are
continuously monitored
to capture potential
threats to supply security
✓ Supply chain mapping
allows to visualize and
monitor the suppliers of
our suppliers (our Tier-2
suppliers) and further
down in the supply chain
✓ A methodology to
capture and report
special events, broader
than standard, that may
impact multiple sectors
and categories (e.g.
Brexit)
✓ A platform to register,
track, and visualize
activities aimed to
mitigate risk
✓ System considers inputs
from both structured
databases as well as
unstructured data
✓ Methodology considers
risk score coming from
the supplier risk
assessment and combines
it with additional criteria
✓ These threats can impact
suppliers directly
(financial trouble,
corruption…) or indirectly
(natural disasters)
✓ Like for our Tier-1
suppliers, we can also
assess risk and monitor
these suppliers
continuously
✓ Specific task forces are
created for each event,
and obtained knowledge
is shared across the
company
✓ The platform uses
workflows to manage
activities (e.g., approvals,
notifications, …) and
ensure appropriate
governance
✓ System does not require
to answer surveys but
brings information
without the need to
contact suppliers
✓ It’s a fundamental part of
the BCP exercises
✓ Alerts are forwarded to
the relevant sourcing
responsible to determine
appropriate action
A comprehensive program based on 6 solid pillars
Mitigating Supply Chain Risks Using Big Data Analytics
8

9. Mitigating Supply Chain Risks Using Big Data Analytics | 28 March 2019
SUPPLIER RISK
ASSESSMENT
MATERIAL RISK
ASSESSMENT
ALERTS SUPPLY CHAIN
MAPPING
RISK
INTELLIGENCE
RISK RESPONSE
TRACKER
✓ An automated system to
assess supplier risk using
29 risk titles and 5
different risk domains
(Financial, geo-political,
operational, compliance
and sustainability)
✓ A semi-automated system
to assess the risk of
materials used in
production, considering
both risk probability and
risk impact
✓ Suppliers are
continuously monitored
to capture potential
threats to supply security
✓ Supply chain mapping
allows to visualize and
monitor the suppliers of
our suppliers (our Tier-2
suppliers) and further
down in the supply chain
✓ A methodology to
capture and report
special events, broader
than standard, that may
impact multiple sectors
and categories (e.g.
Brexit)
✓ A platform to register,
track, and visualize
activities aimed to
mitigate risk
✓ System considers inputs
from both structured
databases as well as
unstructured data
✓ Methodology considers
risk score coming from
the supplier risk
assessment and combines
it with additional criteria
✓ These threats can impact
suppliers directly
(financial trouble,
corruption…) or indirectly
(natural disasters)
✓ Like for our Tier-1
suppliers, we can also
assess risk and monitor
these suppliers
continuously
✓ Specific task forces are
created for each event,
and obtained knowledge
is shared across the
company
✓ The platform uses
workflows to manage
activities (e.g., approvals,
notifications, …) and
ensure appropriate
governance
✓ System does not require
to answer surveys but
brings information
without the need to
contact suppliers
✓ It’s a fundamental part of
the BCP exercises
✓ Alerts are forwarded to
the relevant sourcing
responsible to determine
appropriate action
A comprehensive program based on 6 solid pillars
Mitigating Supply Chain Risks Using Big Data Analytics
9

10. Mitigating Supply Chain Risks Using Big Data Analytics | 28 March 2019
SUPPLIER RISK
ASSESSMENT
MATERIAL RISK
ASSESSMENT
ALERTS SUPPLY CHAIN
MAPPING
RISK
INTELLIGENCE
RISK RESPONSE
TRACKER
✓ An automated system to
assess supplier risk using
29 risk titles and 5
different risk domains
(Financial, geo-political,
operational, compliance
and sustainability)
✓ A semi-automated system
to assess the risk of
materials used in
production, considering
both risk probability and
risk impact
✓ Suppliers are
continuously monitored
to capture potential
threats to supply security
✓ Supply chain mapping
allows to visualize and
monitor the suppliers of
our suppliers (our Tier-2
suppliers) and further
down in the supply chain
✓ A methodology to
capture and report
special events, broader
than standard, that may
impact multiple sectors
and categories (e.g.
Brexit)
✓ A platform to register,
track, and visualize
activities aimed to
mitigate risk
✓ System considers inputs
from both structured
databases as well as
unstructured data
✓ Methodology considers
risk score coming from
the supplier risk
assessment and combines
it with additional criteria
✓ These threats can impact
suppliers directly
(financial trouble,
corruption…) or indirectly
(natural disasters)
✓ Like for our Tier-1
suppliers, we can also
assess risk and monitor
these suppliers
continuously
✓ Specific task forces are
created for each event,
and obtained knowledge
is shared across the
company
✓ The platform uses
workflows to manage
activities (e.g., approvals,
notifications, …) and
ensure appropriate
governance
✓ System does not require
to answer surveys but
brings information
without the need to
contact suppliers
✓ It’s a fundamental part of
the BCP exercises
✓ Alerts are forwarded to
the relevant sourcing
responsible to determine
appropriate action
A comprehensive program based on 6 solid pillars
Mitigating Supply Chain Risks Using Big Data Analytics
10

11. Mitigating Supply Chain Risks Using Big Data Analytics | 28 March 2019
SUPPLIER RISK
ASSESSMENT
MATERIAL RISK
ASSESSMENT
ALERTS SUPPLY CHAIN
MAPPING
RISK
INTELLIGENCE
RISK RESPONSE
TRACKER
✓ An automated system to
assess supplier risk using
29 risk titles and 5
different risk domains
(Financial, geo-political,
operational, compliance
and sustainability)
✓ A semi-automated system
to assess the risk of
materials used in
production, considering
both risk probability and
risk impact
✓ Suppliers are
continuously monitored
to capture potential
threats to supply security
✓ Supply chain mapping
allows to visualize and
monitor the suppliers of
our suppliers (our Tier-2
suppliers) and further
down in the supply chain
✓ A methodology to
capture and report
special events, broader
than standard, that may
impact multiple sectors
and categories (e.g.
Brexit)
✓ A platform to register,
track, and visualize
activities aimed to
mitigate risk
✓ System considers inputs
from both structured
databases as well as
unstructured data
✓ Methodology considers
risk score coming from
the supplier risk
assessment and combines
it with additional criteria
✓ These threats can impact
suppliers directly
(financial trouble,
corruption…) or indirectly
(natural disasters)
✓ Like for our Tier-1
suppliers, we can also
assess risk and monitor
these suppliers
continuously
✓ Specific task forces are
created for each event,
and obtained knowledge
is shared across the
company
✓ The platform uses
workflows to manage
activities (e.g., approvals,
notifications, …) and
ensure appropriate
governance
✓ System does not require
to answer surveys but
brings information
without the need to
contact suppliers
✓ It’s a fundamental part of
the BCP exercises
✓ Alerts are forwarded to
the relevant sourcing
team to determine
appropriate actions
A comprehensive program based on 6 solid pillars
Mitigating Supply Chain Risks Using Big Data Analytics
11

12. Mitigating Supply Chain Risks Using Big Data Analytics | 28 March 2019
SUPPLIER RISK
ASSESSMENT
MATERIAL RISK
ASSESSMENT
ALERTS SUPPLY CHAIN
MAPPING
RISK
INTELLIGENCE
RISK RESPONSE
TRACKER
✓ An automated system to
assess supplier risk using
29 risk titles and 5
different risk domains
(Financial, geo-political,
operational, compliance
and sustainability)
✓ A semi-automated system
to assess the risk of
materials used in
production, considering
both risk probability and
risk impact
✓ Suppliers are
continuously monitored
to capture potential
threats to supply security
✓ Supply chain mapping
allows to visualize and
monitor the suppliers of
our suppliers (our Tier-2
suppliers) and further
down in the supply chain
✓ A methodology to
capture and report
special events, broader
than standard, that may
impact multiple sectors
and categories (e.g.
Brexit)
✓ A platform to register,
track, and visualize
activities aimed to
mitigate risk
✓ System considers inputs
from both structured
databases as well as
unstructured data
✓ Methodology considers
risk score coming from
the supplier risk
assessment and combines
it with additional criteria
✓ These threats can impact
suppliers directly
(financial trouble,
corruption…) or indirectly
(natural disasters)
✓ Like for our Tier-1
suppliers, we can also
assess risk and monitor
these suppliers
continuously
✓ Specific task forces are
created for each event,
and obtained knowledge
is shared across the
company
✓ The platform uses
workflows to manage
activities (e.g., approvals,
notifications, …) and
ensure appropriate
governance
✓ System does not require
to answer surveys but
brings information
without the need to
contact suppliers
✓ It’s a fundamental part of
the BCP exercises
✓ Alerts are forwarded to
the relevant sourcing
team to determine
appropriate actions
A comprehensive program based on 6 solid pillars
Mitigating Supply Chain Risks Using Big Data Analytics
12

13. Mitigating Supply Chain Risks Using Big Data Analytics | 28 March 2019
SUPPLIER RISK
ASSESSMENT
MATERIAL RISK
ASSESSMENT
ALERTS SUPPLY CHAIN
MAPPING
RISK
INTELLIGENCE
RISK RESPONSE
TRACKER
✓ An automated system to
assess supplier risk using
29 risk titles and 5
different risk domains
(Financial, geo-political,
operational, compliance
and sustainability)
✓ A semi-automated system
to assess the risk of
materials used in
production, considering
both risk probability and
risk impact
✓ Suppliers are
continuously monitored
to capture potential
threats to supply security
✓ Supply chain mapping
allows to visualize and
monitor the suppliers of
our suppliers (our Tier-2
suppliers) and further
down in the supply chain
✓ A methodology to
capture and report
special events, broader
than standard, that may
impact multiple sectors
and categories (e.g.
Brexit)
✓ A platform to register,
track, and visualize
activities aimed to
mitigate risk
✓ System considers inputs
from both structured
databases as well as
unstructured data
✓ Methodology considers
risk score coming from
the supplier risk
assessment and combines
it with additional criteria
✓ These threats can impact
suppliers directly
(financial trouble,
corruption…) or indirectly
(natural disasters)
✓ Like for our Tier-1
suppliers, we can also
assess risk and monitor
these suppliers
continuously
✓ Specific task forces are
created for each event,
and obtained knowledge
is shared across the
company
✓ The platform uses
workflows to manage
activities (e.g., approvals,
notifications, …) and
ensure appropriate
governance
✓ System does not require
to answer surveys but
brings information
without the need to
contact suppliers
✓ It’s a fundamental part of
the BCP exercises
✓ Alerts are forwarded to
the relevant sourcing
team to determine
appropriate actions
A comprehensive program based on 6 solid pillars
Mitigating Supply Chain Risks Using Big Data Analytics
13

14. Mitigating Supply Chain Risks Using Big Data Analytics | 28 March 2019
SUPPLIER RISK
ASSESSMENT
MATERIAL RISK
ASSESSMENT
ALERTS SUPPLY CHAIN
MAPPING
RISK
INTELLIGENCE
RISK RESPONSE
TRACKER
✓ An automated system to
assess supplier risk using
29 risk titles and 5
different risk domains
(Financial, geo-political,
operational, compliance
and sustainability)
✓ A semi-automated system
to assess the risk of
materials used in
production, considering
both risk probability and
risk impact
✓ Suppliers are
continuously monitored
to capture potential
threats to supply security
✓ Supply chain mapping
allows to visualize and
monitor the suppliers of
our suppliers (our Tier-2
suppliers) and further
down in the supply chain
✓ A methodology to
capture and report
special events, broader
than standard, that may
impact multiple sectors
and categories (e.g.
Brexit)
✓ A platform to register,
track, and visualize
activities aimed to
mitigate risk
✓ System considers inputs
from both structured
databases as well as
unstructured data
✓ Methodology considers
risk score coming from
the supplier risk
assessment and combines
it with additional criteria
✓ These threats can impact
suppliers directly
(financial trouble,
corruption…) or indirectly
(natural disasters)
✓ Like for our Tier-1
suppliers, we can also
assess risk and monitor
these suppliers
continuously
✓ Specific task forces are
created for each event,
and obtained knowledge
is shared across the
company
✓ The platform uses
workflows to manage
activities (e.g., approvals,
notifications, …) and
ensure appropriate
governance
✓ System does not require
to answer surveys but
brings information
without the need to
contact suppliers
✓ It’s a fundamental part of
the BCP exercises
✓ Alerts are forwarded to
the relevant sourcing
team to determine
appropriate actions
A comprehensive program based on 6 solid pillars
Mitigating Supply Chain Risks Using Big Data Analytics
14

15. Merck KGaA
Darmstadt, Germany
AGENDA
2
Supply Chain
Risk Management Program
Using data analytics:
Defining scope
AGENDA
1

16. Mitigating Supply Chain Risks Using Big Data Analytics | 28 March 2019
Ingest, interconnect, visualize data…and change paradigm
BOM – Bill of Materials
Supplier
Raw
Material
Finished
Product
Customer Sales
Mitigating Supply Chain Risks Using Big Data Analytics
16

17. Mitigating Supply Chain Risks Using Big Data Analytics | 28 March 2019
Simple, user-friendly interface, downloadable data
Mitigating Supply Chain Risks Using Big Data Analytics
17

18. Merck KGaA
Darmstadt, Germany
AGENDA
2
3
Supply Chain
Risk Management Program
Using data analytics:
Defining scope
Using data analytics:
Determining risk
AGENDA
1

19. Mitigating Supply Chain Risks Using Big Data Analytics | 28 March 2019
29 risk titles can only be assessed with a powerful data analytics engine
• Credit risk (C)
• Credit risk (S)
• Business decline (S)
• Financial insolvency (S)
• Financial capacity (S)
• Payments delay (S)
• Supply chain risk (C)
• Risk awareness (S)
• Operational capacity (S)
Operations
• Child labor (C)
• Human rights (C)
• Sustainability (S
• Environmental (S)
• Health & safety (S)
• Labor practices (S)
Sustainability
• Corruption / bribery (C)
• Corruption / bribery (S)
• PEP / SIP (S)
• Sanction list (S)
• Regulatory breaches (S)
• Fair business practices (S)
• IP rights (S)
Compliance
• Crime index (C)
• Doing business rating (C)
• Economic freedom (C)
• Geographical risk (C)
• Political risk (C)
• Regulatory quality (C)
• Social unrest (C)
Geo-political
STRUCTURED DATA
> 15 Standard sources
• S&P, FITCH, MOODY
RATINGS
• D&B
• WORLD BANK
• MARSH,(EIU)
• WGI
• INSTITUTE FOR
ECONOMICS &
PEACE
• FACTIVA
• CIPS RISK RATING
• MAPLECROFT
• BLOOMBERG
• UN
• …
UNSTRUCTURED DATA
• > 200 different keywords > 8.000 web pages screened daily
• > 300.000 daily checks
• REUTERS
• BLOOMBERG
• PLATTS
• ICIS
• PR NEWS WIRE
• FIRST POST
• NHC
• FIERCE PHARMA
• WORLD LII
• DAILY MAIL
• POLYMER UPDATE
• ...
> 50 Standard Sources / Subscriptions
Web Crawlers
(C) = Country (S) = Supplier
Financial
Mitigating Supply Chain Risks Using Big Data Analytics
19

20. Intuitive visualization, drill-down capabilities
Mitigating Supply Chain Risks Using Big Data Analytics | 28 March 2019
Mitigating Supply Chain Risks Using Big Data Analytics
20

21. Mitigating Supply Chain Risks Using Big Data Analytics | 28 March 2019
Intuitive visualization, drill-down capabilities
Mitigating Supply Chain Risks Using Big Data Analytics
21

22. Merck KGaA
Darmstadt, Germany
AGENDA
2
3
4
Supply Chain
Risk Management Program
Using data analytics:
Defining scope
Using data analytics:
Determining risk
AGENDA
1
Final considerations

23. PREDICTING RAIN DOESN’T COUNT.
BUILDING ARKS DOES.
Warren Buffet
23

24. Data analytics is fundamental for a robust risk program
When building a comprehensive risk management program, data analytics is the best way to
assess multiple suppliers along multiple dimensions and capture massive information
from the external world
Data analytics enables us to convert data into actionable information so mitigation
actions can be implemented and supply risk exposure can be minimized
1
2
3 Ultimately, the objective is to provide a reliable supply of high quality products to our
customers in the right place at the right time
Mitigating Supply Chain Risks Using Big Data Analytics
Mitigating Supply Chain Risks Using Big Data Analytics | 28 March 201924

25. Merck KGaA
Darmstadt, Germany
AGENDA
2
3
4
5
Supply Chain
Risk Management Program
Using data analytics:
Defining scope
Using data analytics:
Determining risk
Q&A
AGENDA
1
Final considerations

26. The vibrant M is a trademark of Merck KGaA, Darmstadt, Germany or its affiliates. All other trademarks are the property of their respective owners. Detailed
information on trademarks is available via publicly accessible resources.
© 2019 Merck KGaA, Darmstadt, Germany and/or its affiliates. All Rights Reserved.