Golden Valley Operations – Supply Chain Model MillerCoors Company University of Colorado Presentation Jack Buffington March 31, 2009

About MillerCoors… New MillerCoors operations is a 8 brewery network across the U.S. Coors has 2 breweries, including the world’s largest brewery in Golden, Colorado. Miller has 6 breweries, including its home brewery in Milwaukee, Wisconsin Significant cost savings ($500mm) a year through network optimization of its breweries and brand families, plus non Supply Chain related savings. Combined company revenue of $6.6 billion.

Problem of the Past: Golden Brewery Design – Our Supply Chain Design (the “V” Curve, but not really…) Golden Brewery’s “V” Curve “V” Curve is intended to be a strategic supply chain design for Coors Goal is for Brewing & Logistics to have some capacity than Packaging (thus a “V”) Supply Chain wasn’t in a “V” format, so capacity was lost/costs were higher. Supply Chain Issue: Transform Supply Chain to fix “V” Curve Brewing Process (22mm bbl’s a year) Logistics Process (15mm bbl’s a year) Packaging Process (20mm bbl’s a year)

Step #1: Enterprise Resource Process (ERP) Project (“Cornerstone”) Planning Process Demand Planning Sales & Operations Planning Use of APO (SAP’s tool) Order Management Over 500 distributor orders Order this week, ship next Web-based order system ERP System SAP Planning & Execution tools Some specialty tools included End to end connectivity Plant Scheduling Process Build Packaging Line Schedule Sales & Operations Planning Use of APO (SAP’s tool) Move to Execution Week Load Building Process TMS to Orders Match Plant Schedule, Orders, and TMS Send Planned Loads to Distributors Order Fulfillment

Step #2: Process Rationalization Process Mapping – “As-Is” Formal process mapping tool to establish current state “People/Process/Technology” Different levels of process mapping (high level to detailed levels) Logical data flows for systems & tie to process maps Process Mapping – “To-Be” Conclusion: We have lost capacity and higher costs (we need to do something) “How should it look?” Brewing capacity “is what it is” Packaging capacity can improve, but Logistics is the issue Conclusion of Process Mapping: we must do something about Logistics

Step #3: Golden Valley Logistics Strategy Scope of Golden Valley Logistics Goal of Golden Valley Logistics (enable Packaging to achieve capacity – not being done) Two warehouses (Plant Warehouse & Distribution Center run by Third Party) Truck Operation (on property moves = to 30 trucks full time, 24 hours a day) Rail Operations (on property moves = 3 full time locomotives on property, 24 hrs a day) Transload Operations (managing shipping materials, kegs, pallets, etc.) Maintenance & Field Operations Strategic Focus Improve capacity of Golden Valley thru Logistics (increase logistics capacity) Reduce Logistics cost Develop capacity and cost solutions given process/technology requirements Question: Can we do both at the same time?

Step #4: Warehouse Automation & Outsourcing Needed something to break the chain: happens through Warehouse Automation Semi-automation of Distribution Center to “break the chain” Automation enabled in DC: Cost/Capacity improvements possible. Third Party Logistics (3PL) Strategy Replace 3PL for Distribution Center: costs decrease 225% and capacity increases by 50%. Outsource truck operations: cost and capacity improve by over 50% Outsource rail operations: cost and capacity improve by 25% Moral of the story: Productivity (cost & capacity) is enabled by process improvements, not by technology alone.

Golden Brewery Design – The “V” Curve of the present.. Golden Brewery’s “V” Curve “Packaging is at the bottom of the “V” curve, as designed. Throughput capacity increased by 20% across supply chain. Increased allowed for sales improvements at Coors in 2007 & 2008 Additional capacity possible, as necessary Logistics Process (25mm bbl’s a year) Brewing Process (22mm bbl’s a year) Packaging Process (20mm bbl’s a year)

What’s Next for Golden Brewery? What Must Change: Right-Sizing Brewery Plan isn’t for Golden to be the “world’s largest brewery” in the future. Golden is now one of eight breweries versus “the brewery” of the company. Need to look at fixed cost and variable cost assets very differently. What Can’t Change: Worker-Management Relationship Golden Brewery has longstanding relationship between workers and management. Changes to operation must be done with employees, not to them. How is this possible? Concept of “change” and “stability” (change can’t be continuous) Engage workforce in changes (harder process, but valuable if strong workforce)

What it takes to be a leader in Supply Chain/Logistics My view: SC Leaders must seek to drive top line as well as bottom line growth. Coors Brewing Costco Dell Computer Many others: SC is a strategic advantage Need to understand “system thinking” Understand the entire supply chain, not just your area Understand “Cost/Service/Quality/Safety”, and not just one Understand “People/Process/Technology”, and not just one Strategy to Execution Leaders Ability to “influence “C” level leadership at a company. Ability to influence and lead line workers (shop floor workers)

What it takes to get there… The importance of influence: Leadership is more about influence than power Great leaders can relate to anyone Influence and networking go “hand in hand” Influence is a part of life The importance of preparation: “The battle is won before it is fought” Brought knowledge across many areas (for general management) Influence and preparation go hand in hand Start as soon as possible Tough economy = lots of competition You can’t start early enough on your career