Global Sourcing Strategies in a Volatile Environment ELC Procurement Quality Service Global Sourcing Strategies in a Volatile Environment Leonardo DeCandia, P.E. Cost Best Practices October 12, 2010 Global Procurement

About the Estee Lauder Companies About the Presenter Presentation Agenda ELC Procurement Quality Service About the Estee Lauder Companies About the Presenter Sourcing Practices at ELC Current & Evolving Challenges Tactics & Strategies Q & A Cost Best Practices Global Procurement 2

The Estee Lauder Companies Inc ELC Procurement Founded in 1946 $8 Billion in Sales Over 25 Brands/Over 40 Global Affiliates Prestige Beauty Segment A Culture of “High Touch” – Unique Connection to the Consumer Building & Investing on a Tradition of Excellence Quality Service Cost Best Practices Global Procurement 3

8 Years @ Roche; Last Role – Chief Supply Officer Pharma NA Leonardo DeCandia ELC Procurement Quality Service 15 Years @ J&J; Last Role – Head of Supply Management Consumer Companies 8 Years @ Roche; Last Role – Chief Supply Officer Pharma NA 4 Years @ AmerisourceBergen; Last Role – SVP/CPO Supply Chain Management Part Time Lecturer – Rutgers University Graduate School of Business Chair Emeritus – Rutgers University Supply Chain Center Cost Best Practices Global Procurement 4

ELC Procurement Balanced Approach to Supply Base Management Adherence to ELC Standards & Expectations Robust & Reliable Quality Systems Consistent & Repeatable Global Execution Adherence to Promise Date Responsive & Flexible to Change Clear Understanding of Priorities ELC Procurement Quality Service Cost Best Practices Global Systems & Tools Organizational Training & Development Investment in Innovative Practices & Technologies Marketplace Leadership Continuous Improvement Mindset Optimal Asset Utilization Global Procurement Wednesday February 10th, 2010

Current & Evolving Challenges A Cautious Supplier Base – Is this recovery sustainable? A Dynamic Geopolitical Environment – The changing of the guard in Asia & the re-industrialization of the US & Europe? An Overleveraged Consumer in the Major Markets – Can the growth of emerging markets off-set the revenue loss? The Constant Need to be Quicker & More Efficient – Procurement’s role in facilitating access to innovation and expansion of profit margins? ELC Procurement Quality Service Cost Best Practices Global Procurement 6

ELC Procurement Priorities & Focus Direct Material Sourcing Global Brand Leads (Experienced & Integrated Resources) Global Category Leads (Leadership @ Source Supplier) Global Innovation Lead (Integrated w/R&D Colleagues) Third Party Manufacturing Global Strategy & Supply Management Consolidate Suppliers Based Upon Core Competencies Formal Innovation Management Practices Indirect Procurement Global Buyer’s Network w/Regional Hubs Global/Regional/Local Category Management Processes Global Roll Out of SAP with Common Data & Policy Organizational Development & Investment Common Category Practices for All Procurement Rotation Programs – Cross Brands, Regions & Procurement Training in Performance Management Quality Service Cost Best Practices Global Procurement 7

Service Quality Best Practices Cost Tactics & Strategies for the Current Environment Service Global Center-Led Policy & Processes with Regional Execution Lead Time Reduction Programs & Capacity Planning Innovation in Common Platforms with Brand Customization Metrics: On time delivery; flexibility to change; lead time average; etc Quality Full Understanding of Global Regulatory Environment Dynamic Measures & Supplier Reward Systems Early Supplier Engagement in Design for Execution Metrics: Quality @ receipt; % suppliers @ highest level; etc Quality Service ELC Procurement Best Practices Cost Best Practices Cost Organizational Design Aligned with ELC Strategy Core Competency Focus Integrated & Complementary to Business Partner Needs Procurement Professional Development @ Global Level Metrics: Training hours; retention levels; high potentials %; etc Brand Driven COGS Targets with Procurement Programs Category Life Cycle Management & 5 Year Pipeline Plans Global Market Expertise & Dynamic Supplier Management Metrics: COGS; year to year savings; supply base consolidation; etc Global Procurement 8

Thank you Q & A ELC Procurement Quality Service Cost Best Practices Global Procurement 9