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Resilient Supply Chains: How to Dynamically Manage Risk, Opportunity, and Business Continuity
July 11, 2013
Welcome to Today’s Webcast
Copyright © 2013 IHS Inc. All Rights Reserved.
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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.
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.
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.
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
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
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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
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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
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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
Org
an
izati
on
al F
oc
us
on
Ris
k M
itig
ati
on
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 00s Early 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)
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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 Conditions
Shown: Thailand Flood
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Copyright © 2013 IHS Inc. All Rights Reserved. 14 14
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
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Copyright © 2013 IHS Inc. All Rights Reserved. 15 15
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
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Copyright © 2013 IHS Inc. All Rights Reserved. 16 16
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
Bu
sin
ess V
alu
e
Assuring Business Continuity
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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
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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
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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
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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
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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
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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
Importer Exporters
Telecom
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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
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Copyright © 2013 IHS Inc. All Rights Reserved. 24
Example Dashboard:
A Look Into Recent Global Scenarios
Supply Base Critical Commodities Labor & Wage Countries
Continuity Threats
Chemical Supply Disruption Political Unrest Food Supply Instability Fuel Price Spike
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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
Copyright © 2013 IHS Inc. All Rights Reserved.
Chemicals & Plastics Value-Chain
Consumers Retail Finished Goods
Energy Derivatives
Petrochemicals
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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
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
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
Copyright © 2013 IHS Inc. All Rights Reserved.
U.S. Gulf Coast Operations & Hurricane Season
(June – November)
Potential Path of US Gulf Hurricanes… 30
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…
Copyright © 2013 IHS Inc. All Rights Reserved.
Natural Gas
Gas
Separation
Unit
Refinery Crude 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
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
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
Copyright © 2013 IHS Inc. All Rights Reserved.
Agriculture & Food Value-Chain
Consumers Retail
Grain Elevator
Farmer
Meat Producer
Finished Goods
Food Processor
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Copyright © 2013 IHS Inc. All Rights Reserved.
0
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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
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
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
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
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
Copyright © 2013 IHS Inc. All Rights Reserved.
Thank You! Questions?
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survey at the conclusion of
today’s live event will be
entered into a drawing to win a
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*Offer limited to qualified entities until July 31st , 2013.
How to Participate?
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For More Information
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