Predictive Supply Chain Analytics © 2010 VTech Communications, Inc. All Rights Reserved. Kedar Kulkarni, Director of Supply Chain

Agenda – Predictive SCM Analytics and Processes Who are we? Supply Chain and the CE/CPG Industry The Role of Analytics – Where is the ROI? Embed Predictive Analytics in Decision Making Processes

Agenda – Predictive SCM Analytics and Processes Who are we? Supply Chain and the CE/CPG Industry The Role of Analytics – Where is the ROI? Embed Predictive Analytics in Decision Making Processes

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. Who Are We | VTECH Electronic Learning Products Contract Manufacturing Services Telecommunication Products

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. Who Are We | VTECH State Of the Art Manufacturing in Mainland China Approx. 36,000 employees including over 1500 R&D professionals Extensive Distribution Networks of Leading Retailers in Europe, North America and Asia Pacific

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. Agenda – Predictive SCM Analytics and Processes Who are we? Supply Chain and the CE/CPG Industry The Role of Analytics – Where is the ROI? Embed Predictive Analytics in Decision Making Processes

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. Supply Chain and The Consumer Electronics Industry Inventory much better managed than the Dot Com Recession Retail In-Stocks not getting any better Retailers aggressive on inventory levels Economy and Commodity + Labor Costs putting pressure on bottom line Corporate Strategies continue to require both revenue and profit growth globally with innovation Difficult for Supply Chains to ACT on increasing data on customers, products and suppliers…

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. Supply Chain and The Industry | VTECH Journey SCM METRIC2003-NOW Inventory Turns100% Forecast Accuracy40%  90% On Time + Complete Order Delivery (Perfect Order) 55%  92% Manufacturing Lead Time to Customer 35% Airfreight Expense$3-4M pa Price Protection> $20M savings since FY’06 Excess Inventory Reserves>$10M savings since FY’06 Compliance Fines> $1M pa

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. Supply Chain and The Industry | VTECH Journey Business Impact Mkt. Share from 22% to over 50% Profitability boosted with record low operating costs Customer Service Level consistently high = maintain and grow shelf position Consistent performance helps asset utilization and suppliers (especially during tight capacities)

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. Root of All Evil – Lack of Knowledge of What Retail Will Sell (POS) POS Fcst Low OTC = Low retail rank Lost Sales = Lost Revenue and profit Excess Inventory = Inventory Carrying + Liquidation Cost Production Inefficiencies = Expedite costs / Waste / Scrap

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. Impact Across the P&L- Cause & Consequences Retail POS Forecast Loss of sales Impact To In Store Stock Levels Loss of Promotions Loss of Planogram Placement Lost Revenue & Profit Missed Deliveries OTC Scores Impacted Retailer Fines Loss of Planogram Placement Lost Revenue & Profit Missed Financial Forecast Expedite Costs Excess Inventory Liquidation Costs Lost Profit

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. The “One Number Plan” Concept Integration of cross functional processes Only ONE point of data entry … all data is SYNCRONIZED POS Data Replenishment Plan Allocation Plan Financial Plan Inventory Plan DRPMPSMRPSuppliers RETAILER Demantra Sales Plan

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. Allocation Management DRP Sales Plan Data Integration – “Single Source of Truth” Library of Business Models Analytic Engines ETL Business Intelligence ODS Source Systems Reporting Staging Area ODS ETL: Extract, Transform and Load Data Supply Chain & Marketing Applications Local Data (non DW) Info Data Read Intranet Oracle ERP BOSS Other Source Read Universal XML Interface Oracle Demand Planning, TPM Read/Write

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. Consumer Driven TPM Process Architecture “Its All About Sell Through, Not Sell In…” RETAILER POS Data Replenishment Plan Promotional Plan – Retailer Driven Corporate Demand Management Application (Oracle/Demantra) TPM Application (Oracle/Demantra) Manufacturer Funded Trade Promotions National Promotions Customer Specific Promotions Profitability Review and Approval with Senior Management Internal S&OP Process, Inventory Optimization to Maximize ROI on Trade Spend

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. Supply Chain and The Industry | Takeaways from Our Journey Winning Plays for a Responsive Supply Chain Move from PUSH to PULL Have an excellent Internal S&OP but an even better Customer S&OP.. Extreme Focus on Consumer Driven Demand Forecasting with Best-In-Class SCM Toolset Invest in Supply Chain – People, Process, Technology and Visibility And Analytics…

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. Agenda – Predictive SCM Analytics and Processes Who are we? Supply Chain and the CE/CPG Industry The Role of Analytics – Where is the ROI? Embed Predictive Analytics in Decision Making Processes

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. The Role of Analytics | Why Now? Demanding Customers + Tougher Competition Fight for a limited share of customer’s and consumer’s wallet Winners will CONSUME intelligence better, faster So what are companies’ priorities at this time? How do companies rate themselves on being Smart?

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. The Role of Analytics | Where are Companies Focused? Source – Consumer Goods Technology Research Reports, 2010

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. The Role of Analytics | How Good is the S&OP? Still hampered by Lack of Cross-Functional Visibility Continues to be primarily inward focused with limited integration of Customer Plans Tactical Cost Objectives are being met Strategic understanding of Product, Channel and Consumer Behavior and tailoring a Profitable SCM response is still limited

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. The Role of Analytics | Pros and Cons of Traditional S&OP STRENGTHS Leads to improved execution Identifies business constraints Leads to improved financial forecasting Reduces inventory Increase visibility WEAKNESSES Planning process cyclical and slow Organizational & not customer focused Too distant from market Process too cumbersome to implement in a live and dynamic format Report are too old, too late Not engaging the Sales force Poor adoption across the enterprise There is nothing wrong with traditional S&OP But moving it to Real-Time and engaging Retail Sales Data (POS) would improve it further

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. The Role of Analytics | Customer Facing Supply Chain Empowered with Real Time Analytical Decision Making

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. The Role of Analytics | Where is the ROI? P&L P&L ItemDESCRIPTIONBenefitReference & saving Sales Gross Domestic SalesImproved Service leads to in stock improvement3%Of Gross Sales Increased Opportunity sales as a reliable vendor3%Of Gross Sales Sales Allowances & Adjustments Price ProtectionReducing Retail inventory proportionately reduces PP-3%As a % of Gross Sales Rebate ExpensesLess requirement to "blow out" excess-2%As a % of Gross sales Cost of Sales Obsolete Inventory - NRVReduces reserves required for obsolete inventory-30%Reduction of reserves Ocean Freight AmortizationOptimize inbound freight to reduce costs-35%Of existing costs Air FreightEliminate all but exceptions & emergencies-75%Reduction of existing costs Freight on SalesOptimize outbound freight & eliminate expedites-25%Reduction of existing costs Net Profit (Loss)3% to 7% improvement is achievable 3% plus An extraordinary opportunity to impact Results

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. Agenda – Predictive SCM Analytics and Processes Who are we? Supply Chain and the CE/CPG Industry The Role of Analytics – Where is the ROI? Embed Predictive Analytics in Decision Making Processes

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. The Role of Analytics | State of The Union

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. The Role of Analytics | Examples of Analytics Driven Processes Demand Mgmt. Revenue Gross Profit Customer Service Forecasting with POS Data POS Repository Integrated Promotional Data Predictive Forecasting Engine Validate against Seasonality and In-stock Position Short List true exceptions Trigger Workflow for forecast adjustment Provided guestimate on impact to Sales Forecast Adjust Sales Forecast prior to Production Commitment Reduce Bull Whip with Instant Reaction to demand changes Validate Statistical Forecast to Fine Tune future Inventory Position Predictive Analytic Sense POS Change Compare to Threshold Determine if reaction needed

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. Inventory Mgmt. Working Capital Operating Profit Customer Service Mkt. Share Inventory Strategy Sales Forecast Orders Product Costs Service Levels Budget Compute Risk vs Profit/Service Level Matrix Periodically Adjust Allocation with volume, risk, lifecycle etc Provide a Visual Roadmap Advanced Managerial Review to Ensure Strategy Reflects latest S&OP Goals Use to validate current Inventory and Production Plan in ERP/APS/ASCP Predictive Analytic Are Limited Inventory $ Optimally Assigned by Product Family? The Role of Analytics | Examples of Analytics Driven Processes

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. The Role of Analytics | Examples of Analytics Driven Processes  Validate Channel Partner Forecast against Channel Inventory and Sales  Monitor Channel Invty. As A Leading Indicator of Potential Order Slowdowns  Sense Stock-Outs and Validate an Effective Fix is in Plan  Advance Price Protection or Markdown Indicator  Forecast Accuracy Drill Down Tool for Quick Forecast and Production Change  Pre and Post Promotion Analytics  New Product Launch Health Check  Retail Planogram and Cannibalization Tracker  Validate Channel Partner Forecast against Channel Inventory and Sales  Monitor Channel Invty. As A Leading Indicator of Potential Order Slowdowns  Sense Stock-Outs and Validate an Effective Fix is in Plan  Advance Price Protection or Markdown Indicator  Forecast Accuracy Drill Down Tool for Quick Forecast and Production Change  Pre and Post Promotion Analytics  New Product Launch Health Check  Retail Planogram and Cannibalization Tracker  Impact of Late Factory Production on Potential Lost Sales by Account  Measure Optimal Alignment of Future Inventory with S&OP Plan  Identify Customers and Products Impacting Cash-To-Cash Cycle  Measure Effectiveness of Expedited Transport to Meet Demand  Profit/Loss Scenario Planner for New Products with high risk  Capacity Modeler and Profitable Allocation of Finite Supply  Impact of Late Factory Production on Potential Lost Sales by Account  Measure Optimal Alignment of Future Inventory with S&OP Plan  Identify Customers and Products Impacting Cash-To-Cash Cycle  Measure Effectiveness of Expedited Transport to Meet Demand  Profit/Loss Scenario Planner for New Products with high risk  Capacity Modeler and Profitable Allocation of Finite Supply

VTT/AAT – Proprietary | This presentation is for informational purposes only and may not be incorporated into a contract or agreement. The Role of Analytics | Takeaways Demand Driven Supply Chains are a MUST have Integrating Customer S&OP into Internal S&OP is a Key Differentiator Predictive Analytics provide the winning edge but need implementation in context of the Biz Process and Decision The Opportunity/ ROI is over 1% of Gross Sales added to Bottom Line

Thank You Kedar Kulkarni Director of Supply Chain VTECH Communications Inc.