Product Lifecycle Management Why Now? February 13, 2007 DESIGN WRAP UP

2 Why is Innovation Important? Innovation is a Major Driver of Top and Bottom Line Results The four main conclusions from a 2005 global Innovation Excellence study were: Innovation-based profit growth tops the corporate agenda Innovation excellence can boost EBIT margins by 4 percentage points Top innovators have 2.5 times higher sales of new products and get more than 10 times higher returns from their innovative investments Top innovators focus on customers, clarity of purpose and great people and get the highest impact from idea, technology and resource management Based upon an Arthur D Little global survey of more than 800 companies to obtain their insights on Innovation Excellence. The sample covered most industries from engineering and manufacturing to consumer goods and public and professional services. Untapped improvement potential of innovation management

3 How well do Companies Innovate? Innovation Performance Measure – Product Launch Success Based on a 2006 AMR Research study involving 216 interviews with IT decision makers in U.S. based companies with more than $250M in revenue. The interviews included discussions of current and future supply chain spending plans, business processes, budget allocations, and application usage. Vertical segments represented: Process Manufacturing (n=39) – Chemicals, pharmaceuticals, and consumer package goods Discrete manufacturing (n=80) – Automotive, aerospace, and high-tech Services (n=71) – Retail, wholesale distributors, and transportation

4 What are the Supply Chain / PLM Trends? More Integration, Innovation, and Collaboration PLM – The second wave Productivity Process Reengineering Process Reengineering SCM ERP In the past 5 years, companies have invested in basic PDM- functionalities The main focus was so far around capturing product information for downstream processes (e.g. for manufacturing or service) The next S-curve is starting – new process coverage including systems engineering open innovation product value management requirements engineering Main focus is to generate real business value from available technologies across the whole product lifecycle and the extended enterprise Material master data Bill-of-Material Document Mgmt. Classification CAD-Integration Eng.-Change-Mgmt. Requirements driven E. Open Innovation Portfolio-Mgmt. Product Value-Mgmt. Systems Engineering Knowledge-based Eng. Efficiency inside Firewall Cross-Company Collaboration Basics Business Transformation Configuration-Mgmt.

5 Price Pressures The global market is driving increased pressure to reduce costs Revenue Enhancement Offering new products and entering new markets is driven by the desire to stabilize revenue streams and increase shareholder value –Gaining a first to market advantage –Avoiding obsolescence Increased Customer Demands –A more informed and demanding customer with high product and service performance and quality expectations –Risk averse, cautious, focused on performance and more willing to switch providers Emergence of New Channels –Availability of multiple channels, appropriate to different products, services and environments: –Off shore manufacturing capabilities will drive new channels for sourcing Consolidation Ongoing Merger and Acquisition activity is driving the need for greater coordination and economies of scale Globalization New players are continually entering markets as both suppliers and competitors bringing skills and challenges from other parts of the globe “PLM is the fourth major class of enterprisewide business applications (after ERP, SCM and CRM), given its importance to product strategy and execution and today’s level of software investment” – Gartner. Why PLM? It is the Primary Extended Enterprise Strategy to Drive Product & Process Innovation and Cost & Revenue Improvements PLM Enabled Innovation

6 What are the Benefit Drivers of PLM? Motivation to Leverage PLM Varies Significantly by Industry Sector CharacteristicAerospace & Defense AutoHigh TechConsumer Products Retail PharmaMed Equip Development Time & Complexity  Product Complexity  Value of Innovation  External Collaboration   Level of R&D Investment  Degree of Regulation  Outsourced Manufacturing    # of “SKUs”    Packaging Complexity  Launch Difficulty    Service Management    Instance of New Product Failure    = High or Extensive  = Low or Limited  = Moderate Sectors beginning to focus on PLM related transformation (e.g., CPR, Pharma, Telecom) are driven by reasons that are different from traditional adopters of PLM.

7 Who is Leveraging PLM? The Fastest Growth is in Industries That Have Not Traditionally Employed PLM

8 How is PLM Involved? Product Lifecycle Management Involvement Across the Demand Chain 8. Maintain 5. Make 4. Buy2. Design3. Plan 7. Sell 1. Decide 6. Move Design product offerings Collaborate with Sales & Marketing to optimize products Collaborate with sourcing and manufacturing Provide product information to support sales Manage complex product configuration Capture future requirements Manage quality control Monitor manufacturing performance Aggregate purchasing spend Manage sourcing Improve quality and service Maintain product information Service & repair information Manage part to part relationships Asset management Monitor market conditions Identify potential offerings Select product and service offering categories Determine timing of product launch Schedule production capacity Plan phase out of products Transport product from manufacturing / sourcing through distribution to retail Manage transportation capacity

9 How Does PLM Assist? PLM Contributes to Increased Revenue or Reduced Cost Across the Entire Demand Chain Supplier Collaboration Channel Collaboration Design and Engineering: Specifications and structures BOMs Engineering Change Development & testing Configuration and Sales Support: Configuration Mgmt Integration to CRM Future requirements capture Manufacturing Execution: Product change phase in & out including review, approval and notification Batch control & lot traceability Quality control & assurance Document control Design & Sourcing Management: Integration with product definition & changes eRFI,,RFQ,,RFP Promote use and reuse of preferred parts and optimal part selection As Built Lifecycle Information: Service & repair information Part to part relationships & configuration management Asset management Product Portfolio Management: Regular review of internal and external performance and trends Review of internal portfolio performance Portfolio balancing and rebalancing to align with strategic goals and objectives 8. Maintain 5. Make 4. Buy2. Design3. Plan 7. Sell 1. Decide 6. Move Lifecycle Program Management: Manage innovation funnel New product launch Transition planning End of life planning Product Inventory Management: Obsolescence & stock write-off Product recall Asset tracking

10 PLM – Why Now? Support for innovation translates to a standardized process for multiple pathways leading to commercially scalable product. Concept Technical Design Final Selection and Approval Internal Development Commercially Available Product Shared Development Strategic Partnerships

11 PLM – Why Now? Current growth strategies include forming partnerships between prior competitors, overtaking the same customer mind- and pocket-share Golf Equipment “PLM interested us because we needed to gain efficiency in our computer-aided design, both to increase the number of new products we were bringing to market each year and to cut the time it took to do it.” Dan Shoenhair, Director of Engineering, Ping Inc. CIO Insight, July 2006 Outdoor Equipment “The linkages between groups and their various processes supported by PLM add much more value than product data-management tools alone ever could.” Kevin Myette, REI Director of R&D CIO Insight, July 2006 Consumer Package Goods “By consolidating their specifications for purchasing across all of its global units, P&G has reduced its direct materials costs on common materials such as corrugated box materials, pigments, and chemicals totaling hundreds of millions of dollars” Source: MatrixOne/P&G Press Release 6/27/02 Apparel “If you look at the cycle times from design to retail shelf, about two-thirds is spent in product development. The new system has the potential to remove months from the production cycle…” Boyd Rogers, VP of supply chain and technology, VF Corp. Information Week.com February 2005 Innovation “Aberdeen’s Product Development in Consumer Industries Benchmark reports the following benefits from companies utilizing product development automation: 17.5% reduction in product costs 25% to 35% reduction in design cycle times 10% to 15% reduction in time-to-volume cycles 75% reduction in Engineering Change Order cycle times …” Aberdeen Group 2005 survey of 65 manufacturing companies

12 Challenges to introducing PLM Organization New Skill sets Readiness for change Process discipline New Data Requirements Discipline Understanding how to leverage Storage Executive Sponsorship