1. © 2008 Cisco Systems, Inc. All rights reserved.Cisco ConfidentialAMR Confernce 1 © 2007 Cisco Systems, Inc. All rights reserved.: Not for Distribution 1 Globalization: Changing the Game of Supply Chain Risk Management Steve Darendinger Senior Vice President Global Supply Chain Management June 4 2008 Steve Darendinger Senior Vice President Global Supply Chain Management June 4 2008

2. © 2008 Cisco Systems, Inc. All rights reserved.Cisco ConfidentialAMR Confernce 2 © 2007 Cisco Systems, Inc. All rights reserved.: Not for Distribution 2 © 2007 Cisco Systems, Inc. All rights reserved.Cisco ConfidentialGSCM All Hands 2 Agenda How This Changes the Game for SCM Our Opportunity as Supply Chain Leaders The Complexity of the Global Marketplace

3. © 2007 Cisco Systems, Inc. All rights reserved.Cisco ConfidentialGSCM All Hands 3 Agenda How This Changes the Game for SCM Our Opportunity as Supply Chain Leaders The Complexity of the Global Marketplace

4. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 4 Why Globalize? InnovationTalentGrowth © 2007 Cisco Systems, Inc. All rights reserved.Cisco ConfidentialGSCM All Hands 4

5. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 5 USA South America Africa AsiaAsia Europe Where Are All the People Going To Be? 1803 5222 768 392 632 3680 796 729729 305 520 20072050

6. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 6 © 2007 Cisco Systems, Inc. All rights reserved.Cisco ConfidentialGSCM All Hands 6 10001820191319502005 2025 50% 75% 25% 1500 100% Developed Economies Emerging Economies Share of Global GDP* *At purchasing power parity Source: The Economist, “The New Titans,” 16 Sept. 2006 Greatest Economic Shift in 100 Years

7. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 7 © 2007 Cisco Systems, Inc. All rights reserved.Cisco ConfidentialGSCM All Hands 7 Back to the Future 1820 Source: World Bank/Angus Maddison. The World Economy: Historical Statistics PricewaterhouseCoopers/Michael Milken Institute, Chairman, Fastcures/Goldman Sachs The World’s Top 10 Economies 20502005 China28.7% India16.0% France5.4% U.K.5.2% Prussia4.9% Japan3.1% Austria1.9% Spain1.9% U.S.1.8% Russia1.7% U.S.28.4% Japan10.6% Germany6.4% UK5.0% France4.8% China4.4% Italy3.9% Spain2.6% Canada2.5% India1.7% China25.6% U.S.20.3% India16.0% Japan3.9% Brazil3.5% Russia3.4% Indonesia2.3% U.K.2.2% Germany2.1% Mexico2.0%

8. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 8 “Do You Know?” Video

9. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 9 © 2007 Cisco Systems, Inc. All rights reserved.Cisco ConfidentialGSCM All Hands 9 Types of Chains by Performance Competitive Advantage / Profit Complexity Low High Business Impact Traditional ® Joseph L. Cavinato. 2007 Chains that Tie Down the Firm (force the system to conform to it) 3 Synergistic Chains (let’s eliminate duplicative costs and gain buying power) 7 Trading Company Model (find and build business opportunities among markets) 17 Brand Entity (innovate and market) 15 Information Networks (competitiveness in the information) 16 Project Logistics Chains (efficiently create and deliver in project situations) 10 Solutions Business (wrap specialized services around product mixes) 14 Don’t Know (our third party logistics firms handle it) 2 Extended Supply Chain (supplier to customers - efficiencies) 9 Cash-to-Cash Cycle (speed and retain cash flow) 6 Demand Chain (feed customers in ways that are efficient for them) 8 Innovation (push growth opportunities) 13 Supply Integration (model and lead supplier/ firm/customer linkages) 12 Market Dominance and Blocking (keep others out of market) 11 Micro-Chain (balance the components of supply and demand) 5 Nano-Chain (efficiently feed the economics of the internal system) 4 None (current functions are fine as-is) 1 McDonalds Cash to Cash

10. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 10 © 2007 Cisco Systems, Inc. All rights reserved.Cisco ConfidentialGSCM All Hands 10 Types of Chains by Performance Competitive Advantage / Profit Complexity Low High Business Impact Traditional ® Joseph L. Cavinato. 2007 Chains that Tie Down the Firm (force the system to conform to it) 3 Synergistic Chains (let’s eliminate duplicative costs and gain buying power) 7 Trading Company Model (find and build business opportunities among markets) 17 Brand Entity (innovate and market) 15 Information Networks (competitiveness in the information) 16 Project Logistics Chains (efficiently create and deliver in project situations) 10 Solutions Business (wrap specialized services around product mixes) 14 Don’t Know (our third party logistics firms handle it) 2 Extended Supply Chain (supplier to customers - efficiencies) 9 Cash-to-Cash Cycle (speed and retain cash flow) 6 Demand Chain (feed customers in ways that are efficient for them) 8 Innovation (push growth opportunities) 13 Supply Integration (model and lead supplier/ firm/customer linkages) 12 Market Dominance and Blocking (keep others out of market) 11 Micro-Chain (balance the components of supply and demand) 5 Nano-Chain (efficiently feed the economics of the internal system) 4 None (current functions are fine as-is) 1 Procter & Gamble Demand Chain

11. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 11 © 2007 Cisco Systems, Inc. All rights reserved.Cisco ConfidentialGSCM All Hands 11 Types of Chains by Performance Competitive Advantage / Profit Complexity Low High Business Impact Traditional ® Joseph L. Cavinato. 2007 Chains that Tie Down the Firm (force the system to conform to it) 3 Synergistic Chains (let’s eliminate duplicative costs and gain buying power) 7 Trading Company Model (find and build business opportunities among markets) 17 Brand Entity (innovate and market) 15 Information Networks (competitiveness in the information) 16 Project Logistics Chains (efficiently create and deliver in project situations) 10 Solutions Business (wrap specialized services around product mixes) 14 Don’t Know (our third party logistics firms handle it) 2 Extended Supply Chain (supplier to customers - efficiencies) 9 Cash-to-Cash Cycle (speed and retain cash flow) 6 Demand Chain (feed customers in ways that are efficient for them) 8 Innovation (push growth opportunities) 13 Supply Integration (model and lead supplier/ firm/customer linkages) 12 Market Dominance and Blocking (keep others out of market) 11 Micro-Chain (balance the components of supply and demand) 5 Nano-Chain (efficiently feed the economics of the internal system) 4 None (current functions are fine as-is) 1 Hewlett Packard Brand Entity

12. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 12 © 2007 Cisco Systems, Inc. All rights reserved.Cisco ConfidentialGSCM All Hands 12 Types of Chains by Performance Competitive Advantage / Profit Complexity Low High Business Impact Traditional ® Joseph L. Cavinato. 2007 Chains that Tie Down the Firm (force the system to conform to it) Synergistic Chains (let’s eliminate duplicative costs and gain buying power) Trading Company Model (find and build business opportunities among markets) Brand Entity (innovate and market) Information Networks (competitiveness in the information) Project Logistics Chains (efficiently create and deliver in project situations) Solutions Business (wrap specialized services around product mixes) Don’t Know (our third party logistics firms handle it) Extended Supply Chain (supplier to customers - efficiencies) Cash-to-Cash Cycle (speed and retain cash flow) Demand Chain (feed customers in ways that are efficient for them) Innovation (push growth opportunities) Supply Integration (model and lead supplier/ firm/customer linkages) Market Dominance and Blocking (keep others out of market) Micro-Chain (balance the components of supply and demand) Nano-Chain (efficiently feed the economics of the internal system) None (current functions are fine as-is)

13. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 13 Drivers of Supply Chain Complexity… Source: Deloitte, “The Challenge of Complexity”, 2003 Pressure to drive down costs Quickening pace of product innovation Pursuit of new markets and channels Globalization

14. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 14 © 2007 Cisco Systems, Inc. All rights reserved.Cisco ConfidentialGSCM All Hands 14 The Supply Chain Game Is Changing… “…the goal must be to recognize, and use, the best, most-productive capabilities, wherever they are…This means going borderless…The challenge is how to do it.”

15. © 2007 Cisco Systems, Inc. All rights reserved.Cisco ConfidentialGSCM All Hands 15 Agenda Our Opportunity as Supply Chain Leaders The Complexity of the Global Marketplace How This Changes the Game for SCM

16. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 16 © 2007 Cisco Systems, Inc. All rights reserved.Cisco ConfidentialGSCM All Hands 16 Global Factory and Distribution Infrastructure PCBA Sites Service Provider Video Technology Group (SPVTG) Box Build SitesLinksys PCBA/Box Build SitesStrategic Logistic Centers Longhua, China Pardubice, CZ Tiszaujvaros, HU Houston, TX Hong Kong, China Tokyo, Japan Penang, MY St Petersburg, FL Laem Chabang, TH Roermond, NL Galway, IE Singapore Guadalajara, MX Zalaegerszeg, HU Futian, China Shenzhen, China Ontario, CA Atlanta, GA El Paso, TX Juarez, MX Naperville, IL Brno, CZ South Hampton, UK Shanghai, China Austin, TX Toronto, Canada Kortrijk, BE 4 EMS Partners, 5 ODM/OEM Partners 31 Manufacturing Sites 4 Logistics Partners 17 Logistics Sites 4 EMS Partners, 5 ODM/OEM Partners 31 Manufacturing Sites 4 Logistics Partners 17 Logistics Sites Chennai, India Doumen, China

17. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 17 © 2007 Cisco Systems, Inc. All rights reserved.Cisco ConfidentialGSCM All Hands 17 Differentiators of Cisco’s Supply Chain Hybrid Production Model Most Products Are Configured to Order Wide-range of Products (from IP Phones to the CRS) Breadth of Customers (Consumer to Enterprise; Global Markets) Acquisition Integration (125 to date)

18. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 18 Customer Experience Country of Origin Local Manufacturing Landed Cost Local Source Counter Trade Distributor Financials Social Responsibility/Green Risk Management Business Model Innovations 18 Supply Chain Complexities in a Global Marketplace Any Innovation Any Business Model Anywhere in the World Any Innovation Any Business Model Anywhere in the World

19. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 19 External factors drive supply chain solutions Marketplace Complexity New business dynamics demand differentiated and localized service, speed, quality, and innovation requirements Marketplace Complexity New business dynamics demand differentiated and localized service, speed, quality, and innovation requirements © 2007 Cisco Systems, Inc. All rights reserved.Cisco ConfidentialPresentation_ID 19 Evolution of Global Supply Chain Management Consumer Big Enterprise Commercial Mid-Tier Enterprise Service Provider Segments Disti VAR Direct DVAR SP DMR Channels Emerging EMEA US / Canada APAC Japan Theatres Holistic Solution

20. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 20 Customer Experience Country of Origin Local Manufacturing Regulatory Local Source Counter Trade Supplier Financials Social Responsibility/Green Risk Management Business Model Innovations 20 Supply Chain Risk in a Global Marketplace

21. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 21 Supply Chain Scope and Types of Risk Component Suppliers Customer\ Distributor PCBA Factory Our Dock DF Factory  Plant disaster Demand Risk Examples  Gulf region disruption  Service provider downturn  Disruptive technology intro Supply Risk Examples  Port closure  Component disruption

22. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 22 Understanding Supply Chain Risk ModerateSevereExtreme Likelihood Component Supply Disruption PandemicQuality Issue BankruptcyGulf Coast Hurricane Labor Disruption Taiwan Earthquake Japan Earthquake West Coast Earthquake Flood

23. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 23 Risk Management Example: Chengdu Earthquake Manufacturing Sites Logistics Centers Suppliers Impact Analysis  Suppliers/Sites  Components affected  Emergency contacts Partner Impact No Impact Moderate Impact (suppliers in region) Customer/Rev$ Impact  Time to Recover  Impact on delivery and revenue  Crisis events can dramatically impact revenue, compliance and customers Risk Management  Risk mitigation is critical to supply chain and business viability Risk Mitigation

24. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 24 How We Measure Supply Chain Resiliency Goal Index Metrics Not Resilient Very Resilient 10 1 2 3 4 5 6 7 8 9 Substitutes Manufacturing Recovery Test Recovery Component Recovery Single / Sole Sourced Likelihood of Disruption ? ? ? Weeks % Range?

25. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 25 Supply Chain Risk: A leadership vacuum  Supply Chains face ongoing risk challenges  Companies face impact to business Revenue, Continuity, Customer  There is a need for SCRM leadership  SCRLC has developed a framework  SCRLC can assume the leadership mantle

26. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 26 Supply Chain Risk: Discussion Points  China dependency mitigation  Evolving need for higher velocity & localized innovation models (OEM, ODEM, JDM) and the attendant risk  Reconciling ever-increasing environmental requirements with traditional supply chain considerations (cost, lead- time, quality)  Reconciling Lean initiatives with supply chain resiliency requirements  Globalization- Complying with Country of Origin requirements in an increasingly global outsourced / subcontracted supply chain

27. © 2007 Cisco Systems, Inc. All rights reserved.Cisco ConfidentialGSCM All Hands 27 Agenda How This Changes the Game for SCM The Complexity of the Global Marketplace Our Opportunity as Supply Chain Leaders

28. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 28 © 2007 Cisco Systems, Inc. All rights reserved.Cisco ConfidentialGSCM All Hands 28 “The supply chain is not going to be about buying things. It will be about managing relationships.” Today’s Supply Chain Challenge Source: Supply Chain Management 2010 and Beyond, Michigan State Univ., Nov. 2006

29. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 29 © 2007 Cisco Systems, Inc. All rights reserved.Cisco ConfidentialGSCM All Hands 29 Functional Focus Internal Integration External Integration Collaboration Followers Leaders Supply Chain Evolution Documented, clear supply chain processes Company-wide alignment of processes, measured against common objectives Strategic Partnering Web 2.0 enabled collaboration Stage 1 Stage 2 Stage 3 Stage 4  Real time information, planning and decision making  Execution of customer requirements  Accelerate innovation  Increase efficiency  Shared objectives  Common processes  Performance metrics WE ARE HERE

30. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 30  Supply-Demand Synchronization  Collaborative Design  Proposals  Negotiations  Reviews  Supply-Demand Synchronization  Collaborative Design  Proposals  Negotiations  Reviews Improve Supplier Interactions Collaboration Drives Performance in the Extended Supply Chain Collaboration Objectives  Increase alignment across the extended supply chain through higher quality interactions  Improve and enhance the flow of real time data  Increase alignment across the extended supply chain through higher quality interactions  Improve and enhance the flow of real time data Collaboration Objectives  Increase alignment across the extended supply chain through higher quality interactions  Improve and enhance the flow of real time data  Increase alignment across the extended supply chain through higher quality interactions  Improve and enhance the flow of real time data

31. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 31 Scaling Supplier Capability through Collaboration Face-to-Face Meetings  Design Reviews  SBRs  Exec Meetings  Design Reviews  SBRs  Exec Meetings Commodity Councils Infrequent E-mail Communications Spreadsheet Cost Management TelePresence Wikis Quarterly WebEx Briefings Online, Real Time Cost Management and Quoting System

32. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 32 Collaboration Drives Performance in the Extended Supply Chain  Supply-Demand Synchronization  Collaborative Design  Proposals  Negotiations  Reviews Improve Supplier Interactions  Logistics Optimization  Delivery  Quality  NPI Increase Business Performance Collaboration Objectives  Increase alignment across the extended supply chain through higher quality interactions  Improve and enhance the flow of real time data  Increase alignment across the extended supply chain through higher quality interactions  Improve and enhance the flow of real time data  Internal Supply Chain Wiki & Blog  WebEx  TelePresence  Websphere Portal  C-vision  Internal Supply Chain Wiki & Blog  WebEx  TelePresence  Websphere Portal  C-vision Utilize Enabling Technologies Enhance Core Systems and Processes  Demand and Collaborative Planning  Cost Management  Product Data Management  Risk Management

33. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 33 Your Opportunity as a Global Supply Chain Leader Supply chain management is drastically changing with these requirements There are unprecedented levels of complexity in the global marketplace Collaboration is essential to managing complexity and increasing capacity in the extended supply chain

34. © 2007 Cisco Systems, Inc. All rights reserved.Cisco Confidential: Not for DistributionGSCM All Hands 34 Together We Can Change the Game of Supply Chain Management… “Innovation is a social process. And this process can only happen when people do that simple, profound thing—connect to share problems, opportunities, and learning.” A.G. Lafley, Ram Charan, “The Game Changer”, 2008

35. © 2007 Cisco Systems, Inc. All rights reserved.Cisco ConfidentialAptos, 3/18/08 35