TURNING A POTENTIAL DISRUPTION INTO A COMPETITIVE ADVANTAGE

Transcription

1 DHL Customer Solutions & Innovation TURNING A POTENTIAL DISRUPTION INTO A COMPETITIVE ADVANTAGE AN INNOVATION JOURNEY Tobias Larsson Director DHL Resilience360 DHL Customer Solutions & Innovation

2 Why Should We Look Into Trends? The Frog s Dilemma Inability or unwillingness of people to react to significant changes that occur gradually 2

3 Worldwide Natural Disasters Costs Million USD Overall Losses (In 2014 Values) Insured Losses (In 2014 Value) Source: Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE As of October

4 Supply Chain Disruption Losses Around 2011 Produced 500,000 less vehicles Profit shrank by 75% Lost output 446,000 Earthquake costs ~USD 889mn Production stopped Total cost of ~USD 250mn Expected direct and other costs of ~USD 110mn Source: Desk Research: News Agencies (CNN - Toyota May Lose 500,000 Vehicles of Output Post-Earthquake, Analyst Says, Rheinische Post - BMW stoppt Produktion in drei Werken ICIS-Japan disaster: BDP international-flooding Forces Shutdown of Chemical Plants in Thailand; act #723: April 16, 2012 Japan's Earthquake and Tsunami Resulted in Major Losses for Japanese Automakers) 4

5 Supply Chain Risk a Prevailing Topic 81% 93% companies had at least one SC disruption in 2013 with average disruption costs of 3 million Dollars 1) of the leaders of the worlds top companies in the CEO summit in 2012 are unprepared for Supply Chain disruptions 2) 91% 10% of American Supply Chain executives cannot assess the impact of a disruption within hours 3) is the average of shareholder value reduction after a supply chain disruption 4) Source: 1) Business Continuity Institute & Experton Group; 2) World Economic Forum Supply Chain and Transport Risk Survey 2011; 3) Jeff Dobbs, Global Sector Chair, Diversified Industrials and a partner with KPMG in the U.S 4) Hendrick & Singhai, The Effect of Supply Chain Disruptions on Long-Term Shareholder Value, Profitability and Share Price Volatility 5

6 Key Supply Chain Trends Cost Of Capital Pace Of Business Just in time Less Trade Barriers Rising Cost Of Labor In China Close To Market Shift From Air To Ocean Freight Climate Change Lean Production +10 Tiers In Outsourced Supply Chains Outsourcing Low Cost Suppliers Increased Supplier Consolidation Growth In Emerging Markets Complex Supply Chains Industry Clustering Change As Constant Purchasing Power Increasing Complexity Of Environments Constantly Shifting Production 6

7 Regulatory Illicit Trade Utility Failure Cargo Theft Industrial Fire Gas Leaks Customs Efficiency Telecom Outage Earthquake Volcano Tornado Weather Tropical Cyclone Hail Lightning Illegal Cargo Introduction Supplier Financial Stress Wildfire Flood Ice Storm Tsunami Corruption Terrorism Outbreak of Disease Law Enforcement War Corporate Social Responsibility Public Health Public Holidays Source: Copyright by DPDHL Civil Unrest Delay due to Unrest Roadway Closure Train Derailment Port Congestion Piracy Infrastructure Delay in Berthing of Vessels Runway Maintenance Airport Closure Flight Delays 7

8 Taking a Holistic Approach to Risk Management 8

9 01 Case-Study: FMCG Company Case-Study: DuPont Case-Study: Deutsche Post DHL Further applications 9

10 FMCG Customer Monitoring Their Supply Chain CT Turkey 10

11 Scoping and Visualization of 11 Sub-Networks DATA COLLECTION VISUALIZATION Turkey Morocco Egypt Saudi Arabia Nigeria Kenya South Africa 484 suppliers & ports and 831 lanes geographically mapped giving a realistic view of the supply chain 11

12 Proactive Incident Management to Mitigate Disruptive Impact Netherland: Labor Actions Actions: Not use port until further notice & truck containers to nearby port Saudi Arabia: Customs Closed Actions: Communicate with plant & suppliers to get order confirmations from material planners in advance Lagos: Port Congestion Actions: Prioritize shipments at customs & ensure clearance of priority containers Pakistan: Indefinite Customs Strike Actions : Make alternative booking with other carriers or affected shipments India: Strike at Nhava Sheva Terminal Action: Request suppliers to change port 12

13 Key Achievements Continuous monitoring of ~500 locations Detection of incidents increased by more than 30% 408 hours of avoided shipment delay due to proactive incident alerting Risk Assessment based on historic data to reduce lead time by ~30% 13

14 Case-Study: FMCG Company 02 Case-Study: DuPont Case-Study: Deutsche Post DHL Further applications 14

15 11 Key Distribution Centers Mother Warehouses and Inbound/Outbound flows in Scope 11 Key Distribution Centers Scope & map risk assessment Grindsted: Assess risks & aggregate scores Rotterdam: Dordrecht: Venlo: Moscow: Check alternatives & resiliency Antwerp: Cernay: Genk: Contern: Dreieich: Istanbul: 15

16 Integrated Supply Chain Survey for Detailed Risk Assessment Scope & Map Risk Assessment Assess Risks & Aggregate Scores Check Alternatives & Resiliency 16

17 Assessing Alternatives for Each Location to Evaluate the Resiliency of the Network Scope & Map Risk Assessment Assess Risks & Aggregate Scores Resiliency Matrix Alternatives Capacities 0% C DC2 DC6b D Check Alternatives & Resiliency 80% 100% A DC1 Recovery Time Objective DC5 Total Time to Recovery (weeks) DC6a B 17

18 Key Achievments Analysis was an eye-opener to factually demonstrate the risks 3 DC hot spots detected: Fire, IT and financial supplier failure Starting projects with BUs that have highest risks: Crop Protection, Nutrition, Polymers This will enable the optimization of the physical distribution network 18

19 Case-Study: FMCG Company Case-Study: DuPont 03 Case-Study: Deutsche Post DHL Further applications 19

20 Visualization of DPDHL s Global Footprint 20

21 Proactive Monitoring and Assessment on Security Incidents that could Impact the DP DHL Network or Employees Peru: In Junin, the anti-drug police shot down a Bolivian-registered airplane that was allegedly carrying 288 kilogrammes of cocaine. Date: 2015/02/27 Severity: Extreme Mexico: 43 student protesters in Iguala city were kidnaped by police officers, who handed them over to the Guerreros Unidos criminal gang whose members confessed to killing the students. France: Attack on the Charlie Hebdo headquarters in Paris, 10 people were killed during the attack. Date: 2015/01/07 Severity: Severe Pakistan: Tehrik-e-Taliban Pakistan militants attacked the Army Public School in Peshawar, 130 students and 20 civilians were killed during the attack. Date: 2014/12/17 Severity: Extreme Date: 2014/09/26 Severity: Extreme Egypt: Government security assets and several international firms have been targets of bomb and IED attacks. Date: 2015/03/07 Severity: Moderate 21

22 Charlie Hebdo Case-Study 1. Attack January 7, :30 2. Suspects persecution January 9, :30-17:00 3. Protests against the attack January 7-9, 2015 Shooting reported at French magazine headquarters in Paris Date: 12:22 PM, Jan 7 Anti-terror raids reportedly underway in Reims in connection to Charlie Hedbo Date: 00:15 AM, Jan 9 Police operation taking place in industrial area in Dammartin-en-Goel Date: 10:18 AM, Jan 9 Charlie Hebdo attackers killed Date: 10:38 AM, Jan 9 Flight operations resume at CDG Airport Date: 10:45 AM, Jan 9 Over 10,000 people rally in Lyon over attacks on Charlie Hebdo HQ Date: 7:23 PM, Jan 7 Large crowds gather at Place de la Republique to protest attack in Paris Date: 5:58 PM, Jan 7 CONSEQUENCES Flight operations cancelled at Charles de Gaulle International Airport. Roads in and out of the areas around the incident were blocked by police and local authorities. Unrest and disruption in the main streets and avenues. 22

23 Case-Study: FMCG Company Case-Study: DuPont Case-Study: Deutsche Post DHL 04 Further applications 23

24 Visualization of Routes and Interfaces with Procurement & Transport Management Systems 24

25 The Supply Chain Risk Exposure Index Budapest Natural Disaster Socio Political Political Violence Operational Overall Index Shenzen Natural Disaster Socio Political Political Violence Operational Overall Index Mexico Mexico City City Natural Disaster Socio Political Political Violence Operational Overall Index Lagos Natural Disaster Socio Political Political Violence Operational Overall Index

26 Implementing Risk Inputs to Reevaluate Total Cost Analysis An Automotive Best Practice for C-Pricing Premium freight costs Shipment costs Taxes & fees Buffer stock Production outage costs (probability) Material costs Supplier specific supply chain costs Packaging costs Warehousing costs Pre-operations and sequence cost Supplier outage (probability) Management costs: Monitoring & troubleshooting Complexity of handling Reputational loss A-price = Product Price B-price = Transport C-price = Risk 26

27 How Investing in Resiliency Pays Off 1 Prevent Cargo and Inventory Loss 6 Avoid Lost Sales 2 Avoid Supplier Failure 7 Be Compliant, Follow Regulations and Reduce Insurance 3 Reduce Premium Freight 8 Consider Health, Safety & Environment 4 Reduce Buffer Stock 9 Maintain Order Volume and Customer Loyalty 5 Avoid Production Outage 10 Limit Reputational Loss 27

28 Keeping Your Supply Chain Safe 28

29 What gets measured, gets managed - Peter Ferdinand Drucker 29

30 Stay resilient! Tobias Larsson 30

31 Key Achievements Monitor trends and developments in countries we operate in Assess proximity of disruptive events to our locations using geo-spatial intelligence Inform and receive near-real time feedback on the level of impact from key contacts same picture Deploy mitigation measures immediately and as necessary 31