Managing supply chain risks to ensure business continuity

1. Managing supply chain risks to ensure business continuity
DHL Resilience360

2. Resilience360 | DHL DHL | Page 2
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

3. Resilience360 | DHL DHL | Page 3
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

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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

5. Resilience360 | DHL DHL | Page 5
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 MonitoringRisk Assessment
Input from …
…to create one joint platform for
Supply Chain Risk Management
Source: DHL Supply Chain Risk Management
DHL
I1 I2
• 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

6. Resilience360 | DHL DHL | Page 6
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
TsunamiFlood
VolcanoEarthquake
Tornado
Hail
Ice Storm
Drought
Law Enforcement War
Terrorism Corruption
Corporate Social Responsibility
Civil Unrest
Outbreak of Disease
Public HealthExternal Intervention
Public Holidays
Supplier Financial Stress
Industrial Fire
Utility FailureRegulatory
Telecom Outage
Gas Leaks
Illicit Trade
Illegal Cargo Introduction
Customs Efficiency
Cargo Theft
Power Outage
NOT EXHAUSTIVE

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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
Source: DHL Supply Chain Risk Management
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

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Supply Chain Mapping

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EarthquakeTornado
Exposure Risk Mapping - Overview

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Exposure Risk Mapping - Details

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Risk Assessment Site Report

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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 MonitoringRisk Assessment
Input from …
…to create one joint platform for
Supply Chain Risk Management
Source: DHL Supply Chain Risk Management
DHL
I1 I2
• 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

13. Resilience360 | DHL DHL | Page 13
Incident Monitoring Overview

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Incident Monitoring Details

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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
Source: DHL Supply Chain Risk Management
Alert message for site
3

16. Resilience360 | DHL DHL | Page 16
Incident Monitoring Integration

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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

18. Resilience360 | DHL DHL | Page 18
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

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DuPont Case Study
“In my EMEA distribution, my
biggest concern is the
consequences of losing one of
my 11 regional DCs.”
- An D-Haenens

20. Resilience360 | DHL DHL | Page 20
Risk Assessment
Scope & map
risk
assessment
1
Assess risks &
aggregate
scores
2
Check
alternatives &
resiliency
3
Identify hot
spots & blind
spots
4
Source: DHL Supply Chain Risk Management

21. Resilience360 | DHL DHL | Page 21
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
HailstormIT Failure Risk
Supplier Failure
Strike
Financial
Stress
Power Outage
Telecommunication
Industrial Fire
Terrorism
In scope
Source: DHL Supply Chain Risk Management

22. Resilience360 | DHL DHL | Page 22
Risk Assessment
Scope & map
risk
assessment
1
Assess risks &
aggregate
scores
2
Check
alternatives &
resiliency
3
Identify hot
spots & blind
spots
4
Source: DHL Supply Chain Risk Management

23. Resilience360 | DHL DHL | Page 23
Risk Assessment
Source: DHL Supply Chain Risk Management
Scope & Map
Risk
Assessment
1
Check
Alternatives &
Resiliency
3
Identify Hot
Spots & Blind
Spots
4
Assess Risks
& Aggregate
Scores
2

24. Resilience360 | DHL DHL | Page 24
Scope & Map
Risk
Assessment
1
Check
Alternatives &
Resiliency
3
Identify Hot
Spots & Blind
Spots
4
2
Risk Assessment
Source: DHL Supply Chain Risk Management
Currently assumed to have 0% alternative capacities; further
assessment of actual capacities necessary
AlternativesCapacities
0%
80%
100%
DC
BA
TTR (weeks)RTO
DC2
DC6a
No response from:
DC3
DC 7
DC4
DC10
DC1
DC6b
DC5
Resiliency Matrix
Assess Risks
& Aggregate
Scores

25. Resilience360 | DHL DHL | Page 25
Risk Assessment
Source: DHL Supply Chain Risk Management
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
ResiliencyCategory
Overall Risk Severity Score
1 2 3 4 5 6+
A
B
C
D
DC2
DC9&10 DC11
DCD6a
DC6b
DC8
DC4
DC1
DC7DC3
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

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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

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Thank You!
How resilient is your supply chain?
How do you ensure business continuity?
Jan Speich
Senior Manager Resilience360
DHL Customer Solutions & Innovation
jan.speich@dhl.com