The 13th Annual Leaders for Manufacturing Alumni Conference Breakout Session #1 Case Studies and Troubling Issues in Establishing Global Supply Chain Strategies October 12, 2006

1 AGENDA I.CASE STUDIES A. Corporate Strategy B.Global Logistics C.Worldwide Distribution D.Global Conglomerate II.ISSUES IN ESTABLISHING GLOBAL SUPPLY CHAIN STRATEGIES A.Being Truly Global B.Differences C.Outsourcing and Offshoring Manufacturing C.Futures in Global Supply Chains

2 I. CASE STUDIES A. Corporate Strategy Global Industrial Equipment Manufacturer The Board of Directors set a new objective for the company: n Increase shareholder value through a sustained increase in share price. The Corporation n Manufactured multiple product lines. n Numerous plants in North America and Asia. n Sells products that are industrial in nature and supplied to industry for use in industrial settings or for use by OEMs. n Acquired many businesses, growing the company ten-fold. n Operated most businesses as independent entities with little interaction. Now, to accomplish the corporate objective, the corporation desired to: n Bring the entities together. n Have them operate together. n Institute performance measurements. n Drive financial and operational improvements.

3 Improvement Program n Evaluated abilities of the corporation by: –Spending time with individual Board members. –Meeting with members of the management team at corporate and at each entity. –Visiting physical operations. –Working with the top management team. n Developed a new multi-tiered corporate strategy including: –Objectives –Strategies –Tactical action plans n The new full strategy was tested and further developed with expanded management team meetings and rolled out to become the basis for the new direction of the corporation. n The corporation has now achieved a significant, sustained increase in share price and multiple performance improvements across the board. n Through the new success, the corporation is now moving on to continued growth and performance improvement.

4 B. Global Logistics Multibillion Dollar Global Chemical Manufacturer Objective: to evaluate the practices of logistics activities worldwide and identify the opportunities for cost reduction as a part of an overall financial revitalization of the corporation. The Company n Produced unique products in separate business units for use in industry. n Sourced raw material throughout the world from agricultural and other natural sources. n Transported and processed in multiple stages at plants on multiple continents. The corporate supply chain was a complicated, evolutionary business process including: n Planning systems n Procedures n Transport, management and storage of inventories of raw material, work in process and finished goods.

5 Improvement Program n Change the network of stocking facilities. n Strengthen the supporting systems to better control and reduce inventory investment. n Renegotiate the transportation modes, routes, carriers, and rates, combining volumes for maximum leverage with logistics vendors – ocean, land and air freight carriers; material storage and handling companies; and systems providers. n The corporation prioritized management and pursuit of the opportunities and benefits accumulated on the bottom line.

6 C. Worldwide Distribution Worldwide Equipment Manufacturing Corporation Objective: to streamline the incoming flow of orders and the outgoing flow of products. The Corporation n Produced industrial equipment, parts, consumables, and supplies in many plants on multiple continents. n Included multiple product lines; the result of numerous acquisitions over many years. Needed to satisfy different customer requirements, including some of their other businesses within the corporation. n Sold products around the world to customers and owned subsidiaries. n Organization was in constant flux due to the complexity of the company, the products and the evolving markets; personnel, processes and systems were constantly changing. n Orders entered in a given country for products, parts and consumables would be split into many component orders and then forwarded to other countries and continents for fulfillment. n Customers would sometimes receive many shipments over a long span of time in response to an order and requirement for material. n The complication of the entire supply chain limited the implementation of any single solution.

7 Improvement Program n Mapped the process and developed a strategy for streamlining the flow of information from order origination back to the warehouses and plants responsible for supplying the products. n Developed a new strategy for the physical movement and delivery of goods. Both of these strategies were then used as a guide for decision making in each business and on each system and process. The company was able to agree, for the first time, on a method for moving forward and was able to make coordinated decisions on system investments, order processing methods, and physical handling and shipping. The strategy developed was used for years as the overriding direction for further developing the business.

8 D. Global Conglomerate Multi-billion Dollar Global Conglomerate that Produces Industrial and Consumer Electronic and Media-related Products Objective: significantly increase profitability levels through Supply Chain improvement Each of its conglomerate’s seven operating companies had: n Many product-specific sales and marketing organizations, each with different customer bases, distribution channels and service requirements. n Different manufacturing sites in Asia, North America and Europe. n Independent logistics organizations that operated completely autonomous logistics networks that had different combinations of: –Transportation modes (ocean, air, motor, etc.) and types (private, contract, etc.). –Ports of entry/ports of loading within countries. –Warehousing configurations and warehouse types (private, third parties, etc.).

9 Improvement program: n Developed a documented state of the corporation including: –Customer bases –Distribution channels –Customers’ service requirements –Business objectives –Issues related to the current Supply Chains n Gathered data and modeled the current Supply Chains and alternative scenarios including: –Overseas consolidations –Different ports –Distribution center consolidations –Product mixing centers –Cross-dock activities –Distribution center locations Project resulted in the development of a realistic, comprehensive three-year Supply Chain strategy that identified an 8 to 10 percent reduction in Supply Chain costs while maintaining or improving service performance levels.

10 II. ISSUES IN ESTABLISHING GLOBAL SUPPLY CHAIN STRATEGY #1 – Being Truly Global n Some companies sell to the world, some manufacture product in multiple places in the world. What does it mean to be global? n What are the differences in domestic vs. global supply chain strategy? n What does it mean for a leader in manufacturing to act global? What does this mean we should be doing? Presence in every country Thinking Global

11 #2 – Culture and Management Differences n Being global means significantly different cultures, management styles, work ethics, objectives, metrics, and standards. Which differences are the most challenging? n How should manufacturing companies deal with these differences? n Can a global company have one set of cultures, management styles, work ethics, objectives, metrics, and standards? Issues in Establishing Global Supply Chain Strategy

12 Issues in Establishing Global Supply Chain Strategy #3 – Outsourcing and Offshoring Manufacturing n What is the real value of outsourcing? Will it last? n Will the tide turn? When? Triggered by what? In what ways? n Are there manufacturing industries that are not impacted? n What does this mean that a leader in manufacturing should be doing in preparation?

13 # 4 – Futures in Global Supply Chain Strategies n The desirability of long supply chains will change — in 2010, and 2020 life in manufacturing will be different. What will be the profile of supply chains in the next decade? n What are the improvements or changes that will have the largest impact on global supply chain strategy? n What skills or experiences will best prepare us for being leaders in the future environment? Issues in Establishing Global Supply Chain Strategy