Supply Chain BCM: Case Study in Infineon

Jason TeoSenior DirectorBusiness ContinuityAsia & Japan region

Purpose

The purpose of supply chain resiliency awareness training is to ensure appropriate Infineon employees are aware

of the potential disruption risks associated with transport and logistics operations and the steps

necessary to minimize these risks.

Supply Chain Resiliency

VISION• Create added value through a safe and

secure supply chainMISSION Coordinate and support the implementation adequate

business continuity standards for shipping and warehousing.

Initialize and coordinate crisis management and loss investigations.

Realize governmental, customers' and authorities' resiliency obligations world-wide

Represent Infineon’s interest at international freight business continuity and security forums (Transported Asset Protection Association-TAPA, Business Continuity Management Institute - BCMi)

Benchmarking

General Situation

• International trade is one key driver of global economic growth.

• In today’s globalized world, supply chains are complex and involve a great number and variety of parties

• Virtually everyone is impacted by any disturbance in the supply chain: manufacturers, shippers, vendors, suppliers, carriers, ports and terminals, freight forwarders, cargo custodians, container leasing companies, insurers, consumers, and government agencies

• Unfortunately, supply chains are vulnerable to theft, pilferage, mother nature, and in a worse case scenario, loss of lives.

Supply Chain: BC Risks and Impact

Likelihood

Impa

ct:f

inan

cial

, leg

al, r

eput

atio

n

LOW HIGHMEDIUM

LOW

ME

DIU

MH

IGH

Terrorism

Losses by human error

Criminal OffenseTheft / pilferage

Organized crimeBlack Market / Product Piracy

Natural Disasters, Diseases, Wars…

Financial Losses

Impact on Insurance Premium

Delivery problem – impact on Infineon or customer production

Down ranking / Loss of obtained supplier status (i.e. C-TPAT)

Reputation Damage

IMPACT

Supply Chain Resilience

• "* Adverse weather was the main cause of disruption around the world, with 53 per cent citing it – up from 29 per cent in 2009.

• "* Unplanned IT and telecommunication outages was the second most likely disruption and the failure of service provision by outsourcers was third, up to 35 per cent from 20 per cent in 2009. These incidents led to a loss of productivity for over half of businesses.

• "* 20 per cent admitted they had suffered damage to their brand or reputation as a result of supply chain disruptions. For ten per cent of companies the financial cost of supply chain disruptions was at least 500,000 euros.

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The survey, Supply Chain Resilience 2010, was sponsored by Zurich and conducted by the Business Continuity Institute. It covered covers 35 countries and 15 industry sectors.

• "* Where businesses have shifted production to low cost countries they are significantly more likely to experience supply chain disruptions, with 83 per cent experiencing disruption. The main causes were transport networks and supplier insolvency.

• "* 50 per cent have tried to optimise their businesses through outsourcing, consolidating suppliers, adopting just-in-time, or lean manufacturing techniques.

• "* Only 7 per cent had been fully successful in ensuring suppliers adopted business continuity management practices to meet their needs, with nearly a quarter not taking this step. Even when suppliers were regarded as key to their business, nearly half of respondents had not checked or validated their supplier's business continuity plans.

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Supply Chain Resilience

28.04.2014Safeguard for Revenue & EBITSafeguard for Revenue & EBIT

What Business Continuity aims to do?

• Identify potential business interruption risks• Provide a framework for ensuring

– resilience, – contingency and – capability of effective responses

• that secures the – supply chain,

• safeguards the commitments to our customers, – our reputation, – brand and – value creating activities.

9 March 2011

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10

Myraid of Security regulationsCountry SAFE Framework related (i.e.: AEO, mutual recognition

etc) Other security regimes

Australia AEO (pilot completed Dec 2007, recommendations being drafted)

Advanced Export Data (pilot ongoing). Regulated Air Cargo Agent Regime.

China Advanced manifest reporting (will come into effect 1 Jan 2009)

Administration measures on classification of enterprises (came into effect 1 Apr 2008)

Hong Kong Nil Regulated Agents Regime (RAR) and Road Cargo Systems (ROCARS) (forms of „Known Shipper‟ program).

Japan AEO legislation passed 1 Apr 2008. Implementing regulations are ongoing.

Nil

Malaysia AEO applicable to Local Shipper 1. Customs Golden Client (came into effect Sept 2004). Being revised to a security focused / driven program but remains predominantly focused

2. IATA cargo security pilot programme

New Zealand Secure Exports Scheme Rule 109 (a form of the „Known Shipper‟ program)

Philippines Customs-Trade Alliance to Protect and Accelerate Trade (C-TAPAT) (yet to be established but a Customs Administrative Order dated 12 May 2008 mandates it)

Nil

Singapore -Customs‟ Secure Trade Partnership program (came into effect May 2007)

Regulated Cargo Agents Regime (RCAR) (for commercial air cargo came into effect 1 Apr 2008 whilst other air cargo including EDS is to be advised)

Taiwan Planning for AEO – estimated roll-out date yet to be announced.

Regulated Agent Regime (RAR) (started 1 July 2007).

Thailand AEO Working Group established 26 Dec 2007 with an estimated AEO Program start date of 1 Jan 2009

Aviation security regulations are under review with the option of introducing a Regulated Air cargo Programme

Vietnam AEO programme due to start but no final details available

NASP

OriginalE’prise Mfg PA / Whse Air/Port Carrier PA / WhseAir/Port Cgnee

RoadFeeder/Barge

RoadFeeder/Barge

RoadFeeder/Barge

RoadFeeder/Barge

Air/Port Authority

Gr Hdling/Terminal

Gr Hdling/TerminalFSR FSR

National Security Program

Customs-Trade Partnership Against Terrorism/C-TPAT

Security Management

National Security Program

Identifying the nodes in the supply chain

TSR TSR

TSR TSR

CTBSP / TACSSCTBSP / TACSSAEO AEO

Business Continuity Management System

Risk / outage scenarios

Contain

Influence

Control

Contingency Sites

Data Center Facilities Networks

Loss of IT Processing Capability Loss of Communications

Disaster Preparedness

Compliance Fraud

Internal Operations & Infrastructure

Authorities LEA Regulatory bodies

Counterparties Service providers Vendors

Clients Partners

Finances Services Industry Infrastructure

Public Transport Emergency/Disaster Recovery Services

External Infrastructure

Economic interdependence

Public Confidence Business Cycles International linkages

Worst case scenario planning

Total destruction or severe damage to business facilities and premises

Denial of access to business facilities and premises indefinitely

Loss of Key Staff

Integrated Business Continuity Management

Security & Crisis

Management

Real Estate &Facility

Management

Loss & Fraud Investigations Environmental

Affairs & Sustainability

Asset Protection

Operations Support

BusinessContinuityPlanning

Business Continuity

April 28, 2014 Page 14

Infineon Business Continuity Departmentreports directly to Infineon Board

Key Considerations in Managing Supply Chain Disaster

• Lowest cost

• Highest Quality

• Fastest delivery

• Always available

• Always reliable

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Highest Risk?

Highest Cost?

Highest Cost?

BCP

Background checks

Just In Time Delivery?

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