Smart Supply Chain Strategies for Uncertain Times Presenter’s Name: Presenter’s Title:

Smart Supply Chain Strategies for Uncertain Times

Presenter’s Name:

Presenter’s Title:

CONFIDENTIAL: All capabilities and dates are for planning purposes only and may not be used in any contract

The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decision. The development, release, and timing of any features or functionality described for Oracle’s products remains at the sole discretion of Oracle.

Safe Harbor Statement


“…this crisis is affecting equity and credit markets… and the discretionary spending power of virtually everyone and every business. This means that all companies must do two major

things with regard to their global supply chains:

1. Find every bit of cost reduction and efficiency gain possible without degrading service, especially to their key customers, and

2. Determine what selective investments in supply chains will payback in the near-term when the economy begins to turn around.”

Uncertainty Requires New Thinking

Gene Tyndall,“Global Logistics Person of 2007”

Author- “Supercharging Supply Chains”

December 2008

Gene Tyndall,“Global Logistics Person of 2007”

Author- “Supercharging Supply Chains”

December 2008


“In times of economic downturn, leading companies will focus on restructuring

supply chain operations to better position themselves to grab additional market share and profits as economies around the world

start down the path of recovery. A large part of supply chain re-engineering efforts focus on driving out inefficiencies while

balancing risk.”

-- Bernie Hart, J.P. Morgan

Today’s CrisisCan Drive Tomorrow’s Transformation

Source: Global Supply Chain Risks and Rewards, Top Challenges for '09, December 2008


““Manufacturers and retailers are forming crisis Manufacturers and retailers are forming crisis management teams not only to cope with their own management teams not only to cope with their own suddenly dimming financial picture, but those of their suddenly dimming financial picture, but those of their transportation and logistics partners as well.” transportation and logistics partners as well.”

William Hoffman, Managing in a Crisis, Traffic World, December 2008William Hoffman, Managing in a Crisis, Traffic World, December 2008

Re-calibrating Your Supply ChainOptimizing For Risk

Re-calibrating Your Supply ChainOptimizing For Risk


Smart StrategiesLook for High-Impact Opportunities

Targeted technology investments can deliver up to 10X the impact of traditional IT cost reduction efforts

3%-5%

3%-4%

1%-2%

.5%

Source: Managing IT in a Downturn, McKinsey on Business Technology, Fall 2008


Actions You Can Take ImmediatelyActions You Can Take Immediately

Minimize Product Costs & Risks

Optimize Inventory & Maximize Profits

Reduce Spend on Goods & Services

Lower Logistics Costs

Smart Strategies: Focus on Costs, Risk, ROI


Source: DARPA Rapid Design Exploration and Optimization Project

100

80

60

40

20

Concept Develop/ Prototype NPI / Ramp Volume

Life Cycle CostDeterminations

70%

85%

95%

Cost ReductionOpportunities

35%

22%

Technology & Supplier

Decisions are Made

Technology & Supplier

Decisions are Made

Typically… ERP Visibility

Begins

Typically… ERP Visibility

Begins

Material Costs are Locked

Material Costs are Locked

With Today’s Cycle Times You have to Design for Supply – Get it right at the Point of Attack

Only 12.5% of manufacturers involve sourcing & suppliers before the prototype/pilot phase¹

Product Cost & Risk Locked in Early70%-85% of Sourcing Decisions & Costs Determined before Prototype

Archana Raghuram

What is this 1?


Product Lifecycle ManagementMinimize Product Costs and Risks

ChallengeChallengeChallengeChallenge SolutionSolutionSolutionSolution BenefitBenefitBenefitBenefit

Lack of or delayed visibility into product costs and risks

Proliferation of products, designs, & specifications

Low collaboration with outsourced partners during design

Numerous design and prototype iterations

Oracle Product Lifecycle Management Solutions

• Collaborate across stakeholders

• Design for supply & costs

• Manage across product network

• Reduce product costs & risks through early cost visibility & target cost mgmt.

• Reduce costs through parts & design re-use, reducing product cannibalization

• Drive product success by investing in lower risk, higher profit projects

• Reduce design & prototype iteration costs, scrap and rework with multi - disciplinary collaboration


Verifone

COMPANY OVERVIEW• VeriFone is a global leader in secure electronic

payment technologies, providing solutions that enable electronic payment transactions and value-added services at the point of sale. Products include Point-of-sales terminals, kiosk systems, multi-media and petrol solutions.

CHALLENGES / OPPORTUNITIES• $575M Spend, 80% outsourced (EMS and ODM)

with 100% control on the AVL• 1500 Suppliers . 48 sub-commodities. Split 50/50

Mechanical vs Active Components• Cost refresh was taking months & included NPI –

pulling BOMs in Agile to Excel, added demand to aggregate 8-12 level deep products, up to 3000 items per SKU.

• Only 70-85% of spend under control (20% parts / 80% value) – savings tapping out at $1.3M qtr over qtr

• NPI was a tedious process for suppliers to get the drawings, review and quote price and terms of delivery

• Resource reduction resulted in 50% less resources to do the work of 12 resources

RESULTS

• Four months to implementation, starting with 700 suppliers on-boarded

• Cost Refresh cycle time down to 3 weeks from eight weeks (could achieve 1 week)

• One ‘push’ sends requests to 1,500 suppliers

• Increase coverage of spend to 99% of spend

CUSTOMER PERSPECTIVE

“With Agile PCM we’ve been able to double our cost savings over manual cost refresh methods by covering a greater supply base in a shorter amount of time, with half the resources.”

-- Khanh Ngo, Global Supply Chain Operations Manager

Pending customer approval – Internal Use Only

SOLUTIONS• Agile Product Cost Management 7/07• Sierra Atlantic PCMNet and custom process

extensions• Product Collaboration since 1998• Sierra Atlantic ECO Lens

SOLUTIONS• Agile Product Cost Management 7/07• Sierra Atlantic PCMNet and custom process

extensions• Product Collaboration since 1998• Sierra Atlantic ECO Lens


• Consider changes in demand patterns

• Re-align inventory levels to reflect market conditions

• Maximize on-time product delivery while minimizinginventory costs

• Reduce inventory write-offs

Senior executives will respond to a 10 day reduction in days in inventory when expressed as change that can generate $100M in cash

flow and add $1 EPS

Senior executives will respond to a 10 day reduction in days in inventory when expressed as change that can generate $100M in cash

flow and add $1 EPS

Inv

en

tory

Co

st

Product Delivery

10 30 50 75 80 85 90 95 100

WithoutOracle

WithOracle

LowerLowerInventoryInventory

CostCost

ImproveImproveOn-TimeOn-TimeDeliveryDelivery

Optimize InventoryRe-Balance to Current Market Conditions


Value Chain PlanningOptimize Inventory and Maximize Profits


Impact profitability, and generate cash

Adjust to demand shocks & changing patterns

Optimally manage resources in a volatile environment

Identify and exploit opportunities for competitive advantage

Oracle Value Chain Planning Solutions

• Predict demand and risk

• Adapt to changing conditions

• Align enterprise response

• Generate cash by optimizing your supply chain network and rationalizing assets

• Identify leading indicators of demand shifts for quick and profitable response

• Quickly balance capacity and supply to current demand and align operating plans with financial goals

• Leverage service business to improve revenue


Leap Frog Sees Dramatic Cost Savings by Implementing Oracle Planning Solutions

COMPANY OVERVIEW• Designs, develops and markets innovative,

technology-based learning products and related proprietary content for the education of infant through grade school children in schools around the world.

• 2006 Revenues: US$ 464 million• Approx. Employees: 90,000+• Industry: Consumer Products (Education,

Media & Entertainment)

CHALLENGES / OPPORTUNITIES• Need to replace home-grown custom

applications• Poor visibility into demand and inventory• Cumbersome, inaccurate forecasting and

planning process• Need to centralize processes for global business

SOLUTIONSOracle E-Business Suite

• Advanced Supply Chain Planning• Global Order Promising• Demand Planning• Advanced Procurement October 2008

RESULTS

• Gross margin increase of 8 to 10%

• Inventory reduced from $200 million to $50 million

• Chargebacks reduced from $12million to $400K

• Annual obsolete inventory writedowns reduced from $36 million to <$1 million

• 90% reduction in Airfreight

WHY ORACLE

“We complete 80 percent of our business within a six-month period to help ensure that our learning products and games are on the shelves of Wal-Mart, Target, and Toys ‘R’ Us for the Christmas shopping season… With Oracle, we now have the scalability and visibility we need to support the dramatic fluctuations in our supply chain and ensure that we meet our customer demand while reducing inventory levels.”

-- Robert Moon, CIO



Procurement’s Direct Impact on Margin

Other Costs

Profit

Purchases

100% 100%

45

50

45

47.5

57.5

-5%

• Increase sales by 50%

• Reduce overhead by up to 20%

• Significantly reduce headcount

A 5% reduction in purchase cost can result in a 50% increase in profit margin!

A 5% reduction in purchase cost can result in a 50% increase in profit margin!

In order to obtain an equivalent impact, a firm would have to...


Supply Management Reduce Spend on Goods and Services


Growing Risk of Supplier Financial Instability

Restricted Access to Credit & Capital

Extreme Volatility in Commodity Prices

Ongoing Shortage of Procurement Resources & Talent

Oracle Advanced Procurement

Dramatically Cut All Supply Management Costs

• Use Sourcing On Demand to negotiate immediate price cuts from suppliers

• Reduce risk & TCO with online collaboration & award optimization

• Optimize cash, early payment discounts, & DPO with integrated Financial & Supply Management

• Slash overhead costs & cycle time with complete “Source-to-Settle” automation


TOYS “R” US Completes Implementation in 16 Weeks

OVERVIEW• $11.3 billion retail leader with 1,599

children’s stores• Fiercely competitive, low-margin business

CHALLENGES / OPPORTUNITIES• Leverage buying power to reduce the costs of

products and services

CUSTOMER PERSPECTIVE

“We chose Oracle because of its ability to develop and deliver an integrated e-business suite that addresses both the strategic and tactical aspects of the procurement process.” -- Kimberly Brown, VP of Procurement

RESULTS

• 16-week implementation of entire Advanced Procurement Platform

• Began on-line sourcing with auctions:

– eg. Carpeting for retail stores -- saved nearly $500K in 38 minute auction

– eg. Shopping bags -- saved $2 million in two hours through a reverse auction

• Advanced to negotiating direct materials (eg. kids apparel and registry stationary)

• Expanding to Real Estate department and Internationally (eg. Germany)

SOLUTIONSOracle E-Business Suite • Sourcing

• Purchasing

• iProcurement

• iSupplier Portal

• Purchasing Intelligence

• Financials

• Sales Analyzer


28.9%

42.1%

13.2% 13.2%

2.6%

0%

10%

20%

30%

40%

50%

% o

f C

om

pa

nie

s R

ese

arch

ed

1-5% 6-10% 11-20% 21-30% x > 30%

Source: The Logistics Institute at Georgia Tech (companies with annual transportation spend > $10M)

Savings Opportunity

Transportation Mgmt

Solutions can Save Most

Companies 5%-25%

Company with $ 750,000,000 in sales annually

Spends on average $ 69,600,000 on logistics

And of that $ 35,100,000 is spent on transportation

At 10% savings $ 3,510,000 can be saved annually by installing a TMS

Transportation Management Opportunity


Logistics and Transportation Management Lower Logistics Costs


• Lower costs through best-in-class optimization and execution techniques

• Improve service via reporting and analytics tools that create accountability

• Distributing control and centrally managing information creates cross-business synergies

• Reduced emissions and a more environmentally friendly operation

Controlling costs and environmental impact of operations

Measuring performance and adjusting plans

Managing holistically across businesses and geographies

Lowering risk and increasing security

Oracle Transportation Management

• Global capabilities

• Local execution

• Central management

High Performance

TransportationOptimization

Global TransportationCollaborationand Execution

Logistics Automation

with ExceptionManagement

Complete LogisticsNetwork Visibility

Global, Local, andCentral Logistics

Management


Kraft Foods Reduces Transportation Costs with Innovative OTM Solution

COMPANY OVERVIEW• #1 food company in the US and #2 in the world

(behind Nestle). A century-old company that currently serves consumers and retailers in 155 countries. Seven of Kraft’s brands have more than US$1 billion in annual revenues. Kraft has 159 manufacturing and processing facilities worldwide.

• 2006 Revenues: US$34.4 billion; Net Income: US$3.0 billion

• Approx. Employees: 90,000+

CHALLENGES / OPPORTUNITIES• Sought transportation cost reductions through

long-term planning within a dense network• Manage operations across common carriers and

private fleet• Operate globally across many currencies, languages

and transportation modes• Transport dry, refrigerated and frozen goods

SOLUTIONSOracle Transportation Management• Operational Planning• Cooperative Routing January 2008

RESULTS

• Transportation cost savings of 10%-15% through strategic planning and execution of cooperative routes

• Improved operations and analytics with a single global instance

• Improved carrier performance via long-range capacity forecasts

WHY ORACLE

Kraft Foods views Oracle as a strategic partner to provide a single, global, scalable, multi-country, multi-mode transportation instance able to plan and execute across common carriers and private fleet to reduce transportation costs while improving service levels


• Freight Payment, Billing and Claims

• Freight Payment, Billing and Claims


Smart StrategiesFocused Initiatives Deliver Tangible Results

Action Benefit Area Percentage Improvement

Minimize Product Minimize Product Costs & RisksCosts & Risks

• Products ‘right’ for cost & supply

• Streamline global NPD & NPI

• Maximize reuse & rationalization

• 2%-5% direct material cost reduction

• 25%-50% reduction in scrap & rework

• 10%-30% labor efficiency improvement

Optimize Optimize Inventory & Inventory &

Maximize ProfitsMaximize Profits

• Optimize supply network

• Improved demand fulfillment

• Better forecasts & replenishments

• 20%-60% reduced inventory

• 5%-10% increase in profitability

• 10%-15% service margin improvement

Reduce Spend on Reduce Spend on Goods & ServicesGoods & Services

• Reduced material costs

• Reduced sourcing cycle time

• Reduce sourcing admin. costs

• 2%-20% savings on historical prices

• 50%-60% savings over manual methods

Lower Logistics Lower Logistics CostsCosts

• Optimize lanes and providers

• Better rates and utilization

• Consolidation and mode selection

• 3%-8% reduced transportation spend

• 5%-15% lower transportation costs

RESULTS YOU CAN SEE IMMEDIATELYRESULTS YOU CAN SEE IMMEDIATELY


Customers Implementing Smart StrategiesOracle Supply Chain Management

Reduced inventory by 65% and cycle times by 75%

Cut supply base 25%, spend shifted strategic players

Cut inventory costs by 85% and write-offs by 50%

Improved gross margins 8%, cut inventory 4X

Saved 10-15% in transportation costs

Reduced per kilogram freightcosts by 15-20%

$34M in cost savings over 6 years expected

Procurement solution live in only 16 weeks


Smart StrategiesCritical Success Factors

• Design products right up-front for cost, supply, & quality

• Synchronize product definitions and changes across functions

• Streamline NPI across global teams & outsourced partners

Minimize ProductCosts & Risks

Optimize Inventory & Maximize Profits

• Improve cash flow by optimizing your inventory and assets

• Profitably balance capacity and supply with demand

• Transform service business from a cost center to a profit center

Reduce Spend onGoods & Services

• Analyze historic spending & develop portfolio of strategic sourcing projects

• Define & refine complete purchasing requirements across stakeholders

• Enable online collaboration and negotiation to improve cost and quality

LowerLogistics Costs

• Optimize transportation providers and lanes

• Lower transportation rates & increase resource utilization

• Improve load consolidation & make better modal decisions

• Design products right up-front for cost, supply, & quality

• Synchronize product definitions and changes across functions

• Streamline NPI across global teams & outsourced partners

• Improve cash flow by optimizing your inventory and assets

• Profitably balance capacity and supply with demand

• Transform service business from a cost center to a profit center

• Analyze historic spending & develop portfolio of strategic sourcing projects

• Define & refine complete purchasing requirements across stakeholders

• Enable online collaboration and negotiation to improve cost and quality

• Optimize transportation providers and lanes

• Lower transportation rates & increase resource utilization

• Improve load consolidation & make better modal decisions

Performance Performance

ManagementManagement

& Visibility& Visibility

Fast Fast

Time-to-Time-to-

ImplementImplement

Quantifiable Quantifiable

ROIROI


Compare alternatescenarios

Analyze keyPlanning metrics

Analyze profitand loss

Analyze constrained forecast

Supply Chain Performance Management Supply Chain Intelligence and Top-Down Performance Visibility


24

Achieving Benefits Quickly and IncrementallyFocus on the Most Important Problem First

• Start with the biggest opportunities, plug-in additional solutions incrementally • Configurable, best-in-class applications deploy quickly• Reconfigure & upgrade without reimplementation

PAIN POINTS LOW HANGING FRUIT STRATEGIC SOLUTION

LogisticsCosts

Inventory &Asset Optimization Demand

Management

Supply Chain Management

ProductCost & Risks

Spend Management


Summary: High-Impact OpportunitiesSupply Chain Management

• Demand shaping, product mix and spares optimization

• Sourcing optimization• SAAS / on-demand

• Optimized sourcing• Load & mode optimization

• Performance management

• Inventory & optimization• Postponement

VALUE DRIVERS & QUICK ROI /VALUE DRIVERS & QUICK ROI / HIGH-IMPACT OPPORTUNITIES HIGH-IMPACT OPPORTUNITIES

• Product cost optimization • Network & location optimization

• Capacity & utilization

2-5%

15-40%

5-35%

15-30%

25-50%

ReturnReturn

CostCost

Invested Capital

Invested Capital

EconomicValue

EconomicValue

Fulfillment & Service


ProcurementProcurement

Logistics / Transportation


Material & ConversionMaterial &

Conversion

SG & ASG & A

InventoryInventory

Assets & EquipmentAssets &

Equipment


Rapid ROI Solutions for High ImpactOracle Supply Chain Management

ORACLE SOLUTIONSORACLE SOLUTIONS

ReturnReturn

CostCost

Invested Capital

Invested Capital

EconomicValue

EconomicValue



ProcurementProcurement



Material & ConversionMaterial &

Conversion

SG & ASG & A

InventoryInventory

Assets & EquipmentAssets &

Equipment

• Demand Management,Spare Parts Planning

• Sourcing Optimization• Sourcing-on-Demand

• Transportation Management

• Enterprise Performance Management

• Inventory Optimization

• Strategic Network Optimization• Product Lifecycle Management

• Strategic Network Optimization• Mfg. Operations Center


Conclusion

• Current Economic Climate: Challenge & Opportunity– Leaders will capitalize – Clear winners and losers will emerge

• Target High-Impact Opportunities across Supply Chain– Quick ROI focused on Costs, Revenues, Cash, Risk – Determine selective investments in technology

• Compress Time-to-Deployment & Measure Performance– Configurable Applications & Business Accelerators – Application Integration Architecture (packaged integrations)– Enterprise Performance Management (visibility & intelligence)


Documents

Smart Supply Chain Strategies for Uncertain Times Presenter’s Name: Presenter’s Title: