1. 1 Supplier Reliability Track October 3-4, 2007 Review with the Supply Chain Risk Leadership Council

2. 2 Agenda  Membership  Track deliverables/scope  Risk matrix  Survey  Capability key elements  Summary  Next steps

3. 3 Membership Tony AloiseProcter & GambleGlobal Material Supplier Mgr Purchases BCP Coordinator SS FuTSMCDeputy Director, Procu-2, Material Management Div Glen PengTSMCMaterial, Facility, Commodities Procurement Dept Paul (BC) ChenTSMCSenior Manager of Corporate Risk Management Division Eddy LiuTSMCManager, Risk Management Department Hau LeeStanfordThoma Professor of Operations, Info and Technology, Co-director, Stanford Global SC Mgt Forum Erik StewartCiscoSC Risk Management Eric PrauseJabilDirector of Supplier Development

4. 4 Track Deliverables  Risk matrix as framework  Identify best-in-class work for key work process gaps  Develop the next level key element assessment for the identified capabilities (with scoring capability)

5. 5 Track Scope  Supplier-related risk…inbound materials and services to our company

6. 6 Risk Matrix- Analysis Structure  As framework, team developed a risk matrix… Enter Risk Importance in the aqua- shaded cells (scale = 3, 2, 1) i.e. which risk are you most concerned about? 5 = demonstrated good results, experienced 4 = system is ready/tested, people are trained 3 = plan in place 2 = initial consideration given 1 = not in place0 Enter a 0 (low linkage), 1 (medium linkage) or 2 (high linkage) for each of the empty white cells..

7. 7 Risk Matrix  Came up with the result from Boeing, Cisco, P&G, Jabil, TSMC

8. 8 Risk Matrix (Risk Areas)

9. 9 Risk Matrix (Capabilities)

10. 10 Guidance on Use of Risk Matrix  SCRLC-level -create common framework to facilitate alignment -identify benchmarks/best-in-class -prioritize capability development  Company level -use risk matrix as an assessment tool -identify areas for improvement from the risk matrix

11. 11 Survey (Risk Priorities)  Top 3 risks have been identified

12. 12 Survey (Capability Effectiveness)  12 out of 17 capabilities have full capability score

13. 13 Survey (Linkage between Risk Area and Capability)  5 out of 17 capabilities are strongly linked with risks (> 5 items with high linkage)

14. 14 Survey (What capability we shall focus on)  Top 3 risks (supply chain complexity, supplier capability, recovery capability) have high-linkage to 7 key capabilities, but no one has full capability score on “Supplier Business Interruption Risk Insurance”

15. 15 Survey (Identify Priorities)  SCRLC level: top 3 weakness (average capability <3) –The track recommends Cisco to share “Supply network visibility” and “Risk Analysis” because only Cisco has full capability score –Consider developing “Supplier Business Interruption Risk Insurance” as no company has full capability score  Company level –Many spaces to be improved after we review individual company

16. 16 Key Elements  Essential elements of a work process are those if in place could give us the confidence that the work process will meet objectives. These elements should be something that can be visibly checked.

17. 17 Capability Key Elements (1/2)

18. 18 Capability Key Elements (2/2)

19. 19 Summary  Top 3 risks: –Supply chain complexity –Supply capability –Recover capability  7 key capabilities have strong linkage to top 3 risk –Supplier business contingency plan –Internal material contingency plan –Sustainability/regulatory –Strategic material planning/RCCP/material at risk –Supply network capability –Supplier Business Interruption Risk Insurance –Risk analysis  The bottom 3 capabilities of above are weaker areas for improvement

20. 20 Next Steps  Determine whether to share “best-in-class” work processes  Determine whether to develop “Supplier Business Interruption Risk Insurance” capability