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Global Sourcing Strategies in a Volatile Environment Leonardo DeCandia, P.E.

October 12, 2010

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Presentation Agenda Presentation Agenda

Quality• About the Estee Lauder Companies

• About the Presenter

• Sourcing Practices at ELC

• Current & Evolving Challenges

• Tactics & Strategies

• Q & A

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The Estee Lauder Companies IncThe Estee Lauder Companies Inc

Quality• Founded in 1946

• $8 Billion in Sales

• Over 25 Brands/Over 40 Global Affiliates

• Prestige Beauty Segment

• A Culture of “High Touch” – Unique Connection to the Consumer

• Building & Investing on a Tradition of Excellence

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Leonardo DeCandiaLeonardo DeCandia

Quality• 15 Years @ J&J; Last Role – Head of Supply

Management Consumer Companies

• 8 Years @ Roche; Last Role – Chief Supply Officer Pharma NA

• 4 Years @ AmerisourceBergen; Last Role – SVP/CPO Supply Chain Management

• Part Time Lecturer – Rutgers University Graduate School of Business

• Chair Emeritus – Rutgers University Supply Chain Center

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Global Indirect Procurement •Wednesday February 10th, 2010

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ELC Procurement Balanced Approach to Supply Base Management

• Adherence to ELC Standards & Expectations• Robust & Reliable Quality Systems• Consistent & Repeatable Global Execution

• Adherence to Promise Date• Responsive & Flexible to Change• Clear Understanding of Priorities

• Marketplace Leadership• Continuous Improvement Mindset• Optimal Asset Utilization

• Global Systems & Tools• Organizational Training & Development• Investment in Innovative Practices & Technologies

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Current & Evolving ChallengesCurrent & Evolving Challenges

Quality

• A Cautious Supplier Base – Is this recovery sustainable?

• A Dynamic Geopolitical Environment – The changing of the guard in Asia & the re-industrialization of the US & Europe?

• An Overleveraged Consumer in the Major Markets – Can the growth of emerging markets off-set the revenue loss?

• The Constant Need to be Quicker & More Efficient – Procurement’s role in facilitating access to innovation and expansion of profit margins?

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ELC Procurement Priorities & FocusELC Procurement Priorities & Focus

Quality

1. Direct Material Sourcing• Global Brand Leads (Experienced & Integrated

Resources)• Global Category Leads (Leadership @ Source

Supplier)• Global Innovation Lead (Integrated w/R&D

Colleagues)

2. Third Party Manufacturing• Global Strategy & Supply Management• Consolidate Suppliers Based Upon Core

Competencies• Formal Innovation Management Practices

3. Indirect Procurement• Global Buyer’s Network w/Regional Hubs• Global/Regional/Local Category Management

Processes• Global Roll Out of SAP with Common Data & Policy

4. Organizational Development & Investment• Common Category Practices for All Procurement• Rotation Programs – Cross Brands, Regions &

Procurement • Training in Performance Management

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Tactics & Strategies for the Current EnvironmentTactics & Strategies for the Current Environment

Quality• Full Understanding of Global

Regulatory Environment• Dynamic Measures &

Supplier Reward Systems• Early Supplier Engagement in

Design for Execution• Metrics: Quality @ receipt; %

suppliers @ highest level; etc

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• Global Center-Led Policy & Processes with Regional Execution

• Lead Time Reduction Programs & Capacity Planning

• Innovation in Common Platforms with Brand Customization

• Metrics: On time delivery; flexibility to change; lead time average; etc

• Brand Driven COGS Targets with Procurement Programs

• Category Life Cycle Management & 5 Year Pipeline Plans

• Global Market Expertise & Dynamic Supplier Management

• Metrics: COGS; year to year savings; supply base consolidation; etc

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• Organizational Design Aligned with ELC Strategy

• Core Competency Focus Integrated & Complementary to Business Partner Needs

• Procurement Professional Development @ Global Level

• Metrics: Training hours; retention levels; high potentials %; etc

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Q & AQ & A

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Thank you