High performence through procurement

Slide 1: High Performance through Procurement November, 28th 2007

Slide 4: Accenture | Supply Chain Management Service Line Accenture’s Supply Chain Management practice has unparalleled depth and breadth to serve industry leaders and market-makers globally. • 7,500 professionals with • Strategic insight supply chain experience • Process design • Over 48 countries • Hands-on operational • 18% revenue growth in Comprehensive experience Global Scale FY06 Capabilities • Deep implementation and • Network of businesses technology skills and resources: • Proven BPO experience consulting, technology, outsourcing Client • Supply Chain Transformation Renowned Functional • Decades of focus and Industry • Supply Chain Planning Depth and market-making across all Expertise Breadth • Sourcing and Procurement industries • Manufacturing and Design • Fulfillment • Service Management Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 5: Accenture | Supply Chain Management Offerings • SC transformation • SC configuration Supply Chain Strategy • SC performance assessment • Merger integration • Global operations strategy • Pricing strategy & profitability analysis Product Sourcing and Supply Chain Manufacturing Fulfillment Service Innovation Procurement Planning Management and Product Lifecycle • Sourcing • Integrated • Lean • Integrated • Strategy & service Management Strategic operating model manufacturing fulfillment Planning • Spare parts • Collaboration • Manufacturing • SC execution logistics • Transformation • Forecasting strategy and operations • Global trade • Return, repair, • Strategic • Network planning management warranty • Product sourcing • Manufacturing portfolio mgmt • Inv. management execution systems • Cargo security • Asset • Global sourcing maintenance, task • New product & logistics • Capacity planning • Six Sigma • Transportation scheduling introduction & scheduling • Supplier • Sales & ops • Reverse logistics • Field force • Complexity relationship effectiveness management management planning • Network flow path • Integrated asset • Workforce management • RFID Transformation Technology Enablement Outsourcing Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 6: Accenture | Supply Chain global delivery network Our Supply Chain Global Delivery Network (SC GDN) operates as a supply chain focused component of our integrated global network of delivery centers. • Centers of Excellence provide services focused on defining value driven solutions in a particular Chicago London ParisFrankfurt Prague capability – such as: **Barcelona Slovakia Wilmington Milan Murray Hill MadridSophia Rome • Supply Chain Planning Turin Palo Alto (New Jersey) Antipoli New Delhi Dalian • Procurement Mumbai Manila • Product Life Cycle Bangalore Management. Sao Paulo • Delivery Centers provide technology based skills and resources for delivering technology ● Strategic Center of Excellence ● Strategic Delivery Center solutions. SCM Satellite Center Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 7: Accenture | Procurement Practice . We successfully work with our clients to address all of their procurement issues Vision & Strategy Category Management What should the Make or Buy? How do we find out How do we drive Which categories How do we increase future role of How do we best what we spend in the Strategic Sourcing should we manage our spend with Low procurement be, to leverage the supplier various categories effectively to realize globally, regionally, Cost Country best add value to the capabilities to globally? savings potentials locally? suppliers? business? enhance our market cross units? offering? Building World Class Procurement Capabilities How do we How do we build How do we recruit How do we better How do we best How do we best organize ourselves world class develop and retain integrate with R&D leverage new IT partner with our key globally to best procurement professional buyers? and Manufacturing? technology? How suppliers to drive out cost cross processes? should the new maximize overall multiple units? global IT Supply Chain infrastructure look? efficiency? Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 9: High Performance through Procurement Accenture looked practically at the profiles of 225 respondents as they relate to three procurement processes (strategy, sourcing and category management and supplier relationship management) and three key enablers (workforce, organization and technology). We found: Procurement masters excel across the board Procurement mastery is a clear predictor of high performance through procurement Procurement masters achieve higher savings Procurement masters face fewer organizational challenges Procurement masters have a clear advantage over the competition: Fundamentally, they operate more efficiently and effectively than companies that do not excel in procurement. Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 10: High Performance through Procurement | Survey demographics Exceptionally high quality Broad and diverse survey participants industries and geographies 82% of respondents CPOs or Directors Geographical scope: 19 countries from Europe, Americas, Asia-Pacific 74% are responsible for procurement on a US is the single biggest country in companywide level the survey (20%) followed by Southern Europe (15%) , France 83% have more than 5 years’ experience (14%) and Austria-Germany- in procurement, 59% more than 10 years Switzerland (12%) 50% of companies are businesses with Industries: responses from 25 different equal or more than 5bn$ revenues (2005) industries such as Automotive, Banking, Chemicals, and so on Resources and Communications and High Tech represent the biggest industry segments Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 11: High Performance through Procurement | Research approach The survey is built on five dimensions of procurement mastery 1 Vision, mission, core values Performance management Procurement strategy Operating model Category strategic planning 2 Strategic sourcing Sourcing and category Category management management Category policy setting Compliance monitoring 3 Supplier relationship Supplier performance Supplier development management Contract management and integration 4 Having the right network Working in an organization that Workforce and organization of competent people facilitates working together 5 Technology that delivers Systems cover all functions: Technology the right information strategy to operations Note: Internal stakeholder management is embedded in the categories 1 to 4 and was measured separately Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 12: High Performance through Procurement | Key Results Application of procurement mastery drives high performance results high Low performer Midrange performer Master Masters and low performers have been identified by analyzing 160 statements describing procurement processes in five dimensions according to Accenture’s procurement model Procurement Only those companies who are one performance Average standard deviation better than the average have been classified as master There are some companies with a high performance but a low or average best practice level (upper left box). Due to the low wide and diverse sample, many different industries are part of our analysis and so low Procurement high there are very different companies within mastery this category. Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 13: High Performance through Procurement | Key Results Masters consistently apply best practices across all dimensions 7 6 5 4 3 2 1 Procurement Sourcing and Requisition Supplier Workforce and Technology strategy category to pay Relationship Organization management Management Master Midrange performer Low performer Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 14: High Performance through Procurement | Key Results Masters are more efficient and have a 30% higher effectiveness year-on-year. This translates into 10x higher productivity level Masters cost to procure are half as Masters save 10 times as much as it high but provide 30% higher savings costs them to operate their vs. low performers procurement organizations $82 $82 10x $63 $63 +30% 4x -50% $16 $16 $8 $8 Cost to procure * Savings delivered * Low performer Master Low performer Master Cost to procure * Savings delivered * * On US$1 billion of controlled, normalized spend * On US$1 billion of controlled, normalized spend Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 15: High Performance through Procurement | Key Results Procurement strategy Sourcing and category management Supplier relationship management Workforce and organization Technology Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 16: High Performance through Procurement | Key Results - Procurement strategy Masters systematically apply a strategic approach to purchasing, aligning it to the business needs and proactively managing relationships Proactive strategic 93% Masters undertake strategic category category planning 5% planning (3–5 years exploration) proactively for critical business categories i.e. looking at 86% Clear mandate future business needs/identifying trends to plan 8% supplier selection strategy/relationship to Balanced scorecard 80% guarantee supply at the right cost. 15% 78% Masters have a clear mandate from top Value acceptance 10% management and full accountability to achieve big business impact (innovation, Benchmarking with 56% cost reduction, etc.) competitors 3% Make versus buy 58% 80% of masters measure procurement 0% performance using a balanced scorecard; a clear definition of value is shared throughout Master Low performer the company to drive purchasing decisions. Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 17: High Performance through Procurement | Key Results - Procurement strategy A third of all masters source indirect goods through outsourcing or contracting out “Contract out” and “Outsourcing” of Indirect goods (Percentage of responses) 34% 18% Low performer Master 34% of masters already contract out or outsource the sourcing of indirect goods Procurement: make or buy options 66% source indirect goods through In- house or buy-In services. Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 18: High Performance through Procurement | transaction Masters externalize three times more management tasks Key Results - Procurement strategy Masters externalize three times more transaction management tasks “Contract out” and “Outsourcing” of transaction management (Percentage of responses) 36% 33% 33% 27% 28% 3x more 18% 18% 13% 11% 8% 9% 9% 0% 0% Low performer Master Order Accounts Supplier help User help Catalogue Goods management payable desk desk management receiving Low performer Master Average for all transaction By transaction management management functions functions Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 19: High Performance through Procurement | Key Results - Procurement strategy A multinational electronics and media solutions provider – Procurement strategy definition Challenges Results 1 • Define a 3 year sourcing plan by integrating Mission Statement 5 Sourcing Business Units strategic plans having Value + Risk objectives different business and operating models $ Category Innovation & Risk 2 • Analyse impact on sourcing portfolio and Management Management market trends 3 • Identify key levers and enablers to sustain People & Skills Dashboards and development IT Tools Sourcing strategy 4• Estimate costs, benefits and payback Suppliers Global Category related to the transformation workstreams Partnership Councils : 23 program with 34 categories suppliers covering 85% of 5• Launch Transformation workstreams spend Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 21: Masters leverage centralization and cross- High Performance through Procurementbest practice functional perspectives to provide | Keysourcing – Sourcing &management Results & category Category Management Masters leverage centralization and cross-functional perspectives to provide best practice sourcing & category management Best practice sourcing and category management 100% of masters have implemented a centrally guided category management structure Centrally led category 100% management structure 26% 90% of masters have a best practices in place: Best practices* strategic 89% sourcing process & structure 5% Cross-functional sourcing teams defining for a given category-project the 80% optimal sourcing strategy, running the Focused sourcing analyst pool 5% supplier selection and implementing the contracts. Maximum leverage of global 81% sourcing 5% The execution of the project is formally tracked against key milestones. Value tracking & budget 76% integration with full control over Masters have a systematic approach to 5% noncompliance global sourcing, use dedicated sourcing experts and have a clear mandate to drive Master Low performer change Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 22: High Performance through Procurement | Key Results - Sourcing & Category Management Global Sourcing Project with Global Truck Manufacturer Addressed Categories – 375 m€ Challenges Automotive Industry To synchronize the time schedule for all Category Part Type involved functions (R&D, Marketing & Interior Trim Interior Trim Sales etc) and secure the same priority Acoustic Absorbent from all involved To manage large numbers of article numbers and variants with different and Door Window Regulator complex engineering specifications Components Lock/Door Lock Drive standardization of components Hinges & Door stops during the sourcing project Door Handle To manage the trade off between the Cab Adjustable Steering Column need for brand specific specifications and driving standardization Electrical Wire Harnesses Results Switches (Rocker, Stalk) Total of 12% savings = 45 m€ (Individual categories >40%) Air Production Air Tanks & Storage Compressor 36% reduction of the supplier base Dryer Valves Spend with Low-Cost Country suppliers from 2.5 m€ to 16 m€ Steering Gear (short term) Pump Tank Payment terms from 69 days to 79 Copyright © 2007 Accenture All Rights Reserved. Rods STRICTLY CONFIDENTIAL days

Slide 23: High Performance through Procurement | Key Results – Supplier relationship management Procurement strategy Sourcing and category management Supplier relationship management Workforce and organization Technology Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 24: High Performance through Procurement | Key Results – Supplier relationship management Masters combine a strategic approach to segmentation with an automated supplier performance assessment Best practice in supplier relationship management (Percentage of responses on a best practice level) Masters excel over low performers in that they apply a supply-base segmentation Supply-base segmentation 84% strategy, implementing differentiated approach 1% approaches by supplier segments and tiers. Partnering with key suppliers 46% on a risk-reward sharing basis 3% Masters focus on key suppliers and establish with them long-term partnering Central logging and proactive 80% agreements. management of contracts 8% Masters centrally log contracts and pro- Automated tracking and 83% actively manage contract information reporting of suppliers’ and compliance data. assessment and performance 1% Tracking and reporting suppliers’ Master Low performer performances and assessment is an area of improvement for masters. Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 25: High Performance through Procurement | Key Results – Supplier relationship management Masters formally manage three quarters of their supply-base, three times as much as low performers Share of formally managed suppliers (Three year average in percentage) When managing suppliers, masters have 72% nearly 3 times more suppliers they manager through a formal process than less experienced companies. 25% A formal process is the operational equivalent of what is a company’s Low performer Master documented procurement process, which describes how the company is purchasing goods and services Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 26: High Performance through Procurement | Key Results – Supplier Relationship Management Public Sector Enterprise US Defense Logistics Agency – SAP/SRM solution implementation Challenges Results 1 • Build an integrated SRM solution to support Procurement Cross division complex Government procurement efficiency synergies improvement 2 • Provide end-to-end automation from $ requisition to pay through sourcing and contract creation Suppliers driven Best practices 3 • Provide tight integration with other systems, globally deployment including supply and demand planning and Suppliers Referencing Purchasing category strategy Cost optimization (ROAD MAPS) Formalization of the strategy of the purchasing act Request for Proposal Consolidation, Negotiation, Auctions Decision Contracting Economic spend and evaluation of Suppliers financial management eSourcing ISIS INTRANET • Cover a wide category portfolio from Dashboards & Consolidated 4 pharmaceutical to weapons systems parts reports procurement data Réalisé Octobre 2007 : Montant d’économies par catégorie (% Réalisé Octobre 2007 : Montant d’économies et m€) 250 000 000 € 35 000 000 € 23 Montant négocié Economies (objectif au mois réalisées 30 000 000 € 20 10 et réalisation) 200 000 000 € 25 000 000 € • Support volume of 40,000 purchase orders 20 000 000 € 150 000 000 € Objectifs 11 d'économies 15 000 000 € 9 100 000 000 € 8 8 8 10 000 000 € Nombre de 7 projets 5 000 000 € (objectif et 50 000 000 € réalisation) 0€ 1 2 3 4 5 6 7 8 9 10 11 12 0€ Mois 1 2 3 4 5 6 7 8 9 10 11 12 Réalisé Octobre 2007 : Montant d’économies par catégorie (% Réalisé Octobre 2007 : Montant d’économies par région (% et 5 per day et m€) m€) Economies réalisées Objectifs 25% à date (€) 25% d'économies à 24 271 300 € 306 669 € date (€) 21,39% 289 156 € 22,70% 20% Niveau 20% d'économies 16,17% Niveau 15% réalisées (%) d'économies 14,51% 15% réalisées (%) 10% 10% Objectifs Economies réalisées 5 772 545 € d'économies à date (€) 5,00% 5% 5% à date (€) 2 015 000 € 12 126 € 13 919 € 0% 0% Europe Amérique du Nord AC MP PLV XXX Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 27: High Performance through Procurement | Key Results – Workforce and organization Procurement strategy Sourcing and category management Supplier relationship management Workforce and organization Technology Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 28: High Performance through Procurement | Key Results – Workforce and organization Masters manage by objective and successfully address dynamic category management Best practice in procurement workforce (Percentage of responses on a best practice level) 100% of masters have a clear practice of management by objective. Targets Management by 100% are agreed upon at the highest level and objectives 15% cascaded down to the different teams and individuals. With low performers Dynamic structure of 76% this is 15%. category management 5% 100% of masters have implemented a Competency development 78% structure of centrally-led category across extented network 3% management. “War for talent” is the number two 58% challenge facing current procurement Optimal career path 3% organization 78% of masters have a strategic way of Master Low performer developing skills & competencies Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 29: High Performance through Procurement | Key Results – Workforce and organization Masters have significantly higher portion of procurement people focusing on strategic sourcing activities and use more variable pay Share of procurement skills Use of variable pay (Percentage of total procurement workforce) (Percentage of responses) Low Low Workforce skills Master Variable pay Master performer performer Management 13% 11% Use variable pay 50% 86% Strategic sourcing 20% 46% No variable pay 50% 14% Transaction Variable proportion of the salary in… management, 67% 43% operations Strategic sourcing 16% 17% Operational procurement 7% 10% Masters have significantly higher A significantly higher percentage of portion of procurement people focusing masters (86%) than low performers on strategic sourcing activities (50%), use variable pay. Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 30: High Performance through Procurement | Key Results – Workforce and organization Leading Global Industrial Equipment - Procurement Workforce Transformation Challenges Results Global Purchasing needed to source more Define job roles material more quickly, minimize the threat of product shortages and gain greater Define competencies for success predictability in product pricing. Define training framework that leveraged three modules of delivery Sourcing in this environment called for entirely new and innovative purchasing skills and Conduct a pilot training period practices. Host a business unit wide competency assessment Challenges have been to design a Develop learning plans addressing gaps competency development and learning strategy for 1,200 purchasing employees Deliver training Measure the training exam and evaluation results Report the behaviors learned back to the business Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 32: High Performance through Procurement | Key Results – Technology Masters use common and automated technology which also supports the sourcing process and can provide easy reporting Best practice in technology The importance of a common and automated (Percentage of responses) technology supporting requisition to payment is highly regarded by the masters. Almost 80% of 82% them have the integrated platform in place and Technology support sourcing 8% have achieved to a high degree procurement Common and automed R2P 79% master data harmonization. The ratio of suppliers platform 3% integration technology is fairly high. 46% Self-service e-Invoicing 5% Masters are heavily supporting their sourcing process with technology to keep collaboration and Supplier integration 65% knowledge sharing high. technology 5% Procurement master data 76% The value of user friendly ad hoc reporting harmonization 1% capabilities is seen by over 70% of the masters 71% who deployed technology allowing timely reports Reporting excellence 5% driven transparency into the organization. Master Low performer Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 33: High Performance through Procurement | Key Results – Technology As SAP’s largest global implementation partner, Accenture has completed a substantial number of Accenture has: EBP and SRM implementations in all industry sectors around the world, and is the world leader • Over 1400 current and past SAP projects in SAP SRM / EBP implementations. • Over 50 SAP EBP/SRM implementations • Over 14,000 SAP consultants globally. Global Network of Delivery Centers offering 24x7 access to extensive industry leading capabilities A global initiative has been set up for SAP SRM partnerships worldwide. In 2006, SAP has appointed Accenture Netherlands as mySAP SRM Special Expertise Partner. Accenture’s methodology has been aligned to enhance SAP’s ASAP methodology. SAP is a Top 10 corporate priority for Accenture with an investment of more $150 million last year Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

Slide 34: High Performance through Procurement | Conclusions Procurement masters achieve higher savings All masters take a supply-chain-wide view of the practice of procurement. They consistently outpace competitors by working effectively with product development, design, manufacturing, logistics and service/warranty management. For every purchased item, procurement masters know the total costs of ownership : the acquisition costs, the logistics costs, the integration costs and the potential cost of obsolescence or failure. Procurement masters know that changing demographics can turn today’s low-cost source of materials and components into tomorrow’s mid-cost source. For this reason, they insist that their procurement organizations and staff are flexible and open to change. Copyright © 2007 Accenture All Rights Reserved. STRICTLY CONFIDENTIAL

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