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Rationalizing ABgene and MatrixLines in Liquid Handling Business
David Follette, Mike Irwin, Chad Sailer, PaulWitinski, Chris Lin
Massachusetts Institute of Technology
November 8, 2008
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Executive summary
• Inorganic growth has increased complexity,generating potential savings through SKUreduction
Strategiccontext
• High overlap in ABgene and Matrix products; low
2
re un ancy w nuncOperationalsituation
• Rationalize SKUs by gradually eliminating ABgeneproduct design
• Transition to ABMatrix brand globally
Proposedsolution
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Agenda
• Strategic context
• Current operational situation
• Rationalization strategy
• Implementation/challenges andtakeaways
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Acquisitions have resulted in growth, butadded complexity
12.0
70
1.1 1.2
37
60%
70%
80%
90%
100%
4Note: Revenues are for full year 2007, Inventory on hand and # of SKUS are at year-end 2007
3.3
5.0
149
11.4
0%
10%
20%
30%
40%
50%
Revenue ($M) Inventory on hand (K) SKUs
nunc
Matrix
Abgene
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Currently, similar products are being shippedacross the ocean at substantial time & cost
28 days
Matrix shipped to UK
5
28 days
ABgene shipped to US
Distribution center
Manufacturing facility
Legend
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Agenda
• Strategic context
• Current operational situation
• Rationalization strategy
• Implementation/challenges andtakeaways
6
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ABgene and Matrix have highly overlappingproduct portfolios
97% 98% 98%100%
Matrix
Percentage of Matrix with a
corresponding ABgene product
85%
97% 98%100%
ABgene
Percentage of ABgene with a
corresponding Matrix product
0%
25%
50%
75%
SKU Units Revenue
7Note: Only tubes included
0%
25%
50%
75%
SKU Units Revenue
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Matrix and ABgene have similar distributionstrategies; ~90% TFS controlled
80%
100%
% of sales by channel
0%
20%
40%
60%
Matrix ABgene
Distributor
TFS-owned partner
Direct
8
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Despite some hurdles, ABgene and Matrixcould largely be substituted for one another
• Product mix• Channel mix
• Raw materials
Factors suggestinghigh similarity
Factors suggestinglow similarity
• Unique branding (esp.ABgene)
• Integration with
• Compete for samecustomers
9
time
High probability of successfully integrating
ABgene and Matrix product portfolios
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nunc is very different, and should not beconsidered part of SKU rationalization
• Used in high density, very low temperatureapplications
• Low volume customers with specific needs
End customeruse
• Sold only through distribution channelsDistribution
10
Rationalizing nunc SKUs would likely hurt
sales due to customer attrition
• Built as a honeycomb, not rack, systemProductfeatures
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Matrix has the highest gross margin of allthe 3 brands
60%
70%
80%
Gross margin by brand (2007)
26.9%
68.7%
34.2%
0%
10%
20%
30%
40%
ABgene Matrix nunc
11
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Agenda
• Strategic context
• Current operational situation
• Rationalization strategy
• Implementation/challenges andtakeaways
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Key goals of rationalization strategy
• Move to common architecture on ABgene and Matrixto reduce redundancy
• Leverage strengths of existing brands
• End wasteful shipping across ocean
• Leave nunc alone
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Key components of solution
•Migration of ABgene designs to Matrixdesigns
•Introduce new ABMatrix brand to lobal
1
2
market
14
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Standardized designs implementedgradually, driving $3M/year of savings
• Three year phased implementation
-Standardize tube manufacturing system
-Set Matrix design as the standard
-Work closely with customers throughout process
• UK manufacturing to match US (Matrix) manufacturing
-
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Leverage ABgene name and Matrix design
manufacturing to drive $3M savings
• End with 119 fewer SKU’s due to redundant ABgenedesigns
• Pass through manufacturing savings onto customers
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Customer impact of migration to Matrix designwhile maintaining ABgene brand strength
Highly automated, $100Mpharma in Bristol, UK,
ABgene user
• Pass through savings• Eventual transition to
ABMatrix
1
2
16
Small cancer researchstartup in Munich,Germany, ABgene user
Regional branch of majorFrench biotech firm, locatedin Columbus, Ohio usingABgene like its parentcompany
• No impact due to lowautomation
• Pass through savings• Eventual transition toABMatrix
3
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Financial impact is significant
• Safety stockreduction: $188k
One-time savings
• Safety stockreduction: $21k
• Elimination of
Ongoing savings
• Minimal impact totop-line revenue
Revenue impact
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transit costs:$145k
• Manufacturingsavings: up to $3M
Total 3 year savings of $0.7-$4M, with little
to no impact to revenue
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Agenda
• Strategic context
• Current operational situation
• Rationalization strategy
• Implementation/challenges andtakeaways
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Implementation timeline is a phasedapproach
Year 2 Year 3Year 1
• Design migrationcomplete
• Complete
• Design migrationcontinues
• Lower number of -
• Introduce unifiedglobal brand(ABMatrix)
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SKUs
• All products soldunder singleABMatrix brand
shipments
• Continue to honordeclining need of old SKUs
customers torationalized SKUs
• Continue to honorcurrent customers’
old SKU needs for 3years
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Risks and mitigations
• Customer pushback on design
changes
Risks
• Phased implementation plan
• Pass on portion of savings tocustomers
Mitigation
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• Manufacturing productivitydoes not meet targets
• Proven in US
• Best practice sharing w/ USsite
• Lose revenue with brandtransition through customerattrition
• Pass on portion of savings tocustomers
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Change and risks fit with TFS core values
Integrity
Innovation
• Honor commitments to customers whosespecific product needs span several years
• Take calculated risks duringimplementation to capitalize on significant
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Intensity
Involvement
opportunities
• Focus on desire to streamline productoffering to achieve higher standards of
efficiency
• Encourage communication between
regions, functions, and customers
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Key takeaways
• ABgene and Matrix merge into ABMatrix toleverage relative strengths of each brand
• After 3 years of phased implementation,. - .
• Good for customers, good for core values,
and good for bottom line
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Q&A
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