1. BIOTECH SUPPLY October 8-9, 2012 Crowne Plaza, Foster City, CA The Supply Chain Challenge: Creating Value Wayne McDonnell Director, Advisory PwC

2. Preparing for the “New Normal” In an era of increased change and unanticipated events, volatility is becoming the “new normal” 9/20/2015 2

3. Emerging from the “Save” Mentality Companies can realize the strategic advantage of a robust supply chain by modifying the ‘old’ view of its capabilities Resiliency Cost Containment Risk Avoidance Agility Integration Flexibility & Segmentation Companies are shifting from the ‘save’ mentality to seeing the effects a robust and flexible supply chain has on top line growth and bottom line value 9/20/2015 3

4. How do we create value? 9/20/2015 4 Supply Chain Strategy and Capabilities

5. . 9/20/2015 5 Six key elements of an end to end supply chain planning process Business Assumptions Key market trends Product roadmap Pricing and promotion plans Financial targets Metrics Inventory turns On-time delivery Cycle time Forecast accuracy Planning Calendar Cross-functional responsibilities Daily/weekly activities Weekly//monthly/quarterly approval meetings Systems and Tools Automated demand and supply plan generation with allocations End-to-end supply chain inventory visibility Organization and Decision Making Executive staff NPI / Operations / SC Sales and marketing Finance 456 12 Demand Planning Supply Planning Demand / Supply Balancing Implementation Supply Plan 3 Implementation Demand Plan Step 1 Step 2 Step 4 Step 3 Step 4 Sales and OperationsPlanning Process INTEGRATED

6. Customer & Market Analytics Current Capability Assessment Cluster Value Chain Requirements Design Portfolio of Supply Chains Align & Enable Dynamic Cost Model Align Cross- functional Metrics & Incentives Govern & Refine Understanding Segmentation Seven Step Process 9/20/2015 6

7. 7 The Power of Supply Chain Segmentation Supply chain leaders know how to created differentiated supply responses to various demands…and create / deliver value A B C Volume Low/ConstantHigh/Erratic Consumption Variability High Low A B C Volume A B C I. II. Event/ Promotions NPI/ EOL III. Forecast Accuracy Safety Stock Planning Benefits Low High Grouping FLEXIBLE

8. 9/20/2015 8 The Power of Supply Chain Segmentation Increasing forecast accuracy and reducing forecast dependency is equally managed by supply chain leaders Strategic Options Reduce Forecast / SC Planning Dependency Deploy processes to increase forecast accuracy -and- Optimize Safety Stock Deploy strategies to reduce forecast dependency whenever possible Aggressive Lead Time Reduction Optimal Safety Stock Postpone Differentiation MTO Co-planning Event/ Promotion Process Seasonality Statistic Safety Stock NPI / EOL Smallest Return on Investment SC Planning Practices Differentiated End-to-end Supply Chain Model Supply Chain/ Performance Impact A demand driven, near real-time supply chain successfully optimizes inventory and manages other costs related forecasting error Forecast Accuracy and Process Improvement SC Planning Processes and Systems Highest Return on Investment Reduce Dependency on the Forecast AGILE

9. Understanding Net Profitability Profitability modeling enables fully loaded net margin visibility and provides new insight into the drivers of financial performance 9/20/2015 9 Slightly Better: Managing primarily by Contribution Margin Worst: Managing primarily by Gross Margin Best: Managing by primarily by Net Margin Customers that Gross Margin suggests are the “best” often become the “worst” when all cost are included Ignores substantial costs to serve Justifies unprofitable business Leads to business complexity Includes all costs of business Clarifies profit contributing and non-contributing customers, products, channels, etc. Leads to better management and higher performance Includes only direct variable costs Excludes substantial costs that should be managed as variable but typically are not (overhead, SGA, etc.) ILLUSTRATIVE

10. Enterprise Profit Realization (EPR) 9/20/2015 10 EPR is based on achieving dramatic improvements in customer lifecycle, product lifecycle, and supply chain management Customer Lifecycle Management Product Lifecycle Management Supply Chain Management Profitability Modeling & Measurement Customer portfolio rationalization Sales force effectiveness Pricing strategy Customer profitability by segment and channel Account management Sales OpEx CLC process improvement and tools Customer portfolio rationalization Sales force effectiveness Pricing strategy Customer profitability by segment and channel Account management Sales OpEx CLC process improvement and tools Customer Life Cycle Mgmt Sourcing improvement Manufacturing process improvement Distribution network optimization Inventory management Freight cost reduction SLA s reflect cost to serve Supply Chain OPEX Sourcing improvement Manufacturing process improvement Distribution network optimization Inventory management Freight cost reduction SLA s reflect cost to serve Supply Chain OPEX Supply Chain Mgmt Product line rationalization Marketing and technology investment return/ affordability Price Setting and Administration Product line profitability by segment Portfolio management Marketing OpEx PLC process improvement and tools Product line rationalization Marketing and technology investment return/ affordability Price Setting and Administration Product line profitability by segment Portfolio management Marketing OpEx PLC process improvement and tools Product Life Cycle Mgmt Profitability Modeling is the critical enabler to moving to best in class. Factoring in fully loaded costs and fully allocated discounts and revenue offsets at a transaction level is critical. It enables transparency into true customer and product profitability and enables fact-based decision making using new Performance Metrics Profitability Modeling is the critical enabler to moving to best in class. Factoring in fully loaded costs and fully allocated discounts and revenue offsets at a transaction level is critical. It enables transparency into true customer and product profitability and enables fact-based decision making using new Performance Metrics Profitability Modeling Enterprise Profitability Realization Framework Delivery Model Corporate/BU Vision, Mission, Values and Strategy

11. Profitability Opportunities Five typical issues that are usually not addressed by traditional cost-cutting and restructuring initiatives; KEY is understanding Gross to Net 9/20/2015 11 Economic Profit Improve Gross Profit Decrease SG&A Increase Capital Efficiency Improve Cost of Capital Increase Revenue Decrease COGS Reduce Selling/ Marketing Costs Reduce Distribution Costs Reduce Admin. Costs Large number of products have low sales and serve low or unprofitable customers Price is the largest contributor to NOI improvement, but rarely used Sales force is structured to sell products, not target profitable customers Many Marketing/Media Initiatives result in low or negative ROI Large customers do not always equate to profitable customers 1 2 3 4 5 Excess inventories due to customer/ product inefficiencies

12. Supply Chain Opportunities Profitability modeling enables supply chain opportunities assessment on five key supply chain areas; performed based on benchmarking 9/20/2015 12 ILLUSTRATIVE Processes that balance aggregate demand and supply to develop a course of action which best meets sourcing, production and delivery requirements Processes that procure goods and services to meet planned or actual demand Processes that transform product to a finished state to meet planned or actual demand Processes that provide finished goods and services to meet planned or actual demand, typically including order management, transportation management, and distribution management Processes associated with returning or receiving returned products for any reason. These processes extend into post- delivery customer support Functional Processes Demand Planning Inventory Forecasting Sourcing Procurement Inbound Transportation Inventory Management Production Scheduling Manufacturing Assembly Kitting Warehousing Distribution Outbound Transportation Reverse Logistics PlanSourceMakeDeliverReturn

13. Improving Profitability Start with 360 degree profitability view of the enterprise, then rationalize customers and products, and optimize operations and supply chain 9/20/2015 13 Develop Profitability Model Rationalize Customer Portfolio Rationalize Product Portfolio Optimize Operations Customers Products Sales Supply Chain Customers Products Sales Supply Chain Exit unprofitable customers Shift low profitable customers to distributors Customers Products Sales Supply Chain Sunset products that no longer sell Rationalize low performing products to tier 2 or 3 customers Customers Products Sales Supply Chain Rationalize Sales and Supply Chain for less complex portfolio Create end-to-end financial picture of the enterprise Align sales to more profitable customers/products

14. Thank You! 9/20/2015 14 We create client value by building the critical link between strategy and execution…what is your strategy?