1. © Barloworld Supply Chain Software 2014 INVENTORY METHODOLOGY

2. © Barloworld Supply Chain Software 2014 Inventory optimization essentials 2

3. © Barloworld Supply Chain Software 2014 Primary inventory categories

4. © Barloworld Supply Chain Software 2014 Safety Stock Inventory cover for 1 SKU, or many SKU’s 4 Target RC Target RC Target RC Target RC Average / Model Cover RC = Replenishment Cycle (order cycle strategy) The model cover for all SKU’s should meet or exceed financial coverage targets

5. © Barloworld Supply Chain Software 2014 Two Months Safety Stock Risk coverage High Low Individual SKU’s Long lead time, unpredictable demand patterns, unreliable supply, infrequent review Short (1 day) lead time, very stable demand patterns, very reliable supply, daily review We still get stock-outs Balancing safety stock cover and inventory cover targets Medium lead time, stable demand patterns, less unreliable supply, more frequent review

6. © Barloworld Supply Chain Software 2014 Released Investment First step: optimize the current risk investment Risk coverage High Low Individual SKU’s

7. © Barloworld Supply Chain Software 2014 Inventory Cover Time Forecast Accuracy Lead Time Reliability Replenishment Cycles Cycle Stock Safety Stock Review Periods Review Periods Target Service Levels Lead Time Six Dimensional Problem Time Inventory optimization – A 6-dimensional solution

8. © Barloworld Supply Chain Software 2014 7 key processes for inventory management Product Classification Demand Planning Supplier Management Strategy Modeling  Shortfall  Excess  Expedite  De-Expedite  Redistribution  Shortfall  Excess  Expedite  De-Expedite  Redistribution  External Orders  Internal Orders  Constrained Orders  External Orders  Internal Orders  Constrained Orders Inventory Management Metrics Data integrity Metrics

9. © Barloworld Supply Chain Software 2014 Next step: Reduce the risk & need for safety stock Risk coverage High Low Individual SKU’s 80:20 rule and TARGETS

10. © Barloworld Supply Chain Software 2014 Two phases to inventory optimization Inventory Team processes are improved, releasing time for more advanced planning processes

11. © Barloworld Supply Chain Software 2014 Phase 1: Start with a time-phased SKU forecast

12. © Barloworld Supply Chain Software 2014 Phase 1: Operations forecast management

13. © Barloworld Supply Chain Software 2014 Phase 1: Supply performance management

14. © Barloworld Supply Chain Software 2014 Phase 2: Sales and Operations Planning

15. © Barloworld Supply Chain Software 2014 The S&OP process Vital to success of S&OP process: A Centralized Material Planning Function that has S&OP responsibility & authority Vital to success of S&OP process: A Centralized Material Planning Function that has S&OP responsibility & authority

16. © Barloworld Supply Chain Software 2014 Central materials team responsibilities

17. © Barloworld Supply Chain Software 2014 Hierarchy forecasting functionality Prorate by Forecast History Copy Average None Aggregate Protected Nodes (below primary forecast) Hierarchy transfers SKU planning forecast Primary Forecast level Primary forecast level Illustrative structure Territory Market

18. © Barloworld Supply Chain Software 2014 Demand Planning Workflow Forecast Accuracy: Measure, Track, and control Forecast Quality Sales Conditioning: Cleanse History Outlier adjustment Stock-out compensation New Product Introductions: Launch Profiles Replacement profiles Forecast Conditioning: Causal & Event Management Seasonality & Algorithms Lifecycle & Proration Sign-offs: Approval staging Financial Review Gross requirements planning Commitment to material planning Generation: Forecasting Generate history Archive history

19. © Barloworld Supply Chain Software 2014 Process sample