Key Note delivered by Daniel Helmig and Eva Bouchoux: 1'000 days to transform ABB's Supply Chain - Lessons learnt on the move to mastery

1. —GARTNER SUPPLY CHAIN CONFERENCE - SEPTEMBER 25, 2018
1,000 days to transform ABB’s Supply Chain
Lessons learnt on the move to mastery
Daniel Helmig, Head of Quality & Operations. Eva Bouchoux, former PMO Head

2. —
ABB: the pioneering technology leader
September 25, 2018 1. Source: Q4 2017 published financial results; ABB analysisSlide 2
What
(Offering)
For whom
(Customers)
Where
(Geographies)
Utilities Industry Transport & Infrastructure
Globally
Asia, Middle East, Africa Americas Europe
~$34 bn revenue1 ~100 countries ~147,000 employees
Pioneering technology
Products Systems Services & software

3. —
Fortune names ABB among Top 10 Companies in “Change the World” List
September 25, 2018 Slide 3
People make the difference. We are committed to the fourth industrial and the energy revolutions
ABB ranks #8 among companies that
“help the planet and tackle social problems.”
Running the world, without consuming the Earth

4. —
The “why”…

5. —
Are we set up for the world around us?
September 25, 2018 Slide 5
Constantly changing environment Increasing velocityManaging technological disruption
Global economy vs. local priorities New GenerationsMore Transparency
Cloud Mobile Social Analytics

6. —
Supply Chain Management (SCM) in 2015
September 25, 2018 1. According The Hackett GroupSlide 6
Facts
1,000,000
hotel nights booked p.a.
5,000+ SCM
professionals in ABB
18 billion USD
external spend annually
> 60,000
suppliers for direct materials
Multi billion dollar
internal vertical supply chain
< 20% of purchase orders
processed automatically
World class cost
reduction performance1
26,000
order lines created every day
3,500 suppliers used globally
for Transportation & Logistics
3,000 supplier records
created in ERP each month
2,455
different payment terms in ABB
970,000
part numbers created in a year

7. —
ABB has a global team with local presence everywhere
September 25, 2018 Slide 7

8. —
Lean
business
functions
Our ABB Executive Committee provided the framework to transform SCM
September 25, 2018 Slide 8
Global
shared
services
Market-
-oriented
complexity
reduction
Global
shared
services
Lean
business
functions

9. —
First we looked externally…
September 25, 2018 Source: the Hackett Group, Center for advanced purchasing studies (CAPS) – Cross Industry Benchmarks 2014Slide 9
… and we found great gaps to go after
Total procurement costs
as a percentage of total spend
World-class
Non world-class
ABB peer group
ABB (ext. sup.)
Hackett benchmark CAPS benchmark
0.6%
0.8%
0.7%
1.9%
Industrial
manufacturing
ABB
1.2%
1.9%
FTE per BUSD in spend
World-class
Non world-class
ABB peer group
ABB (ext. sup.)
44
61
61
170
Industrial
manufacturing
ABB
75
170
Performance gap of ABB to peer group: x3 x2

10. —
…then we looked internally…
September 25, 2018 Slide 10
… and we found, and found, and found
– MUSD 185 spend covered by 1,930 suppliers
– 9 category teams approaching same suppliers
– 50% price difference for identical cable sourced
from different suppliers
– MUSD 550 spend covered by 1,100 suppliers
– 10 category teams approaching market for
different BUs/geographies
– ~300 PCBA contracts with 119 suppliers owned
by 51 category managers
– MUSD 500 spend covered by 4,400 suppliers
– 4 category teams approaching market on BU or
geography level
– Highly fragmented supply base: 14 suppliers
covered 20% of spend with largest accounting for
only 2.6%
LV/MV cables PCBAs Machined & turned parts

11. —
The “what”…

12. —
Big Hairy Audacious Goals (BHAGs1)
September 25, 2018
1. The term "Big Hairy Audacious Goal" was proposed by James Collins and Jerry Porras in their 1994 book entitled “Built to Last: Successful Habits of
Visionary Companies”
Slide 12
The SCM Transformation
… in 1,000 days
Transportation Management Centers (TMC)
10 centers globally
Manage from order to cash
1 global Transport Management System
Centers of Expertise
(CoE)
3 main hubs
50% of spend consolidated
Leverage ABB’s buying power
Global Business Services
(GBS)
5 centers globally
1’200 processes reduced to 50
Handles 80% of Purchase Orders

13. —
We were on the right track
September 25, 2018 Source: Fortune 500, Capital IQ, Press researchSlide 13
Two out of three Fortune 300 companies already have some form of the concepts we planned to implement
300 28
71
108
93
All Two One None or n/a
ABB

14. —
The “how”…
Designing the new blueprint…

15. —
Developing the blueprint
September 25, 2018 Slide 15
Planned Transport Management Centers
Finland (Vaasa)
China (Shanghai)
Singapore
India (Bangalore)
Italy (Dalmine)
Switzerland (Baden)
Poland (Krakow)
USA (Memphis)
Brazil (Guarulhos)
UAE (Jebel Ali)

16. —
Transport Management Center (TMC)
September 25, 2018 Slide 16
The design principle
Transport Management Center
(TMC)
Manufacturing
Authorities
Customs
Suppliers
Shipments
Order
management
Distributors/
retailers
Warehouses

17. —
Developing the blueprint
September 25, 2018
Global GBS service center
Regional GBS service center
Slide 17
Planned Global Business Services
China (Xiamen)
Poland (Krakow)
Estonia (Tallinn)
Mexico (San Luis de Potosi)
India (Bangalore)

18. —
Function management
for GBD (strategy
deployment, FTE,
cost control)
SCM Training delivery
SCM communications
delivery – Newsletter
Develop SSC resources
Performance and
efficiency monitoring
Global Business Services
September 25, 2018
1. CRUD = Create, Review, Update, Delete
2. Reporting & Analytics specific to LPG / LBU
Knowledge Capture and Transfer
Slide 18
The design principle
ProcessesGBS
Category Analytics
Category Market
reporting
Rfx management
e-Sourcing support
e-Sourcing vendor
onboarding and training
Reverse auction
execution
e-Sourcing reporting
Supplier Assessment
support
Supplier Qualification
support
Supplier Claim and
Quality Management
support
Supplier EDI onboarding
Solve day-to-day cost /
quality / scheduling
issues
Local Supplier
assessment, onboarding
& development
Supply Base
Management & Quality
Strategy development
and Maintenance
Contract data
management – template
creation, CRUD1 in
contract management
system
Supplier data
management – CRUD
Item data management –
CRUD
Catalogue data
management – CRUD
Data Cleansing –
Supplier, Material ,
Contract & catalogues
Material Compliance
supplier verification &
follow-up
Sustainability
development program
Purchase Requisition –
CRUD
Purchase
Order – CRUD
Tactical quote collection
and evaluation
Open order
management
Inquiry Support
Reporting²
GR / IR Management
Issue resolution
SCM Performance
controlling, reporting and
analytics²
Risk Management
(global processes)²
Sourcing &
Category
Management
Supplier
Management
Contract & data
management
Procure to Pay Invoice to Pay
Reporting &
Compliance
Training & People
Management
Grey processes are not
in scope for process
mapping

19. —
Centers of Expertise (CoE)
September 25, 2018 Slide 19
The design principle
Spend managed at the highest level
– Business units continue to own CoE
resources, budgets on corporate level
– Managed by business units, led by
Global SCM Council
– Physical central CoE hubs and local
CoE spokes in BUs
Empowerment of category leaders
– Right of supplier selection
– Final say on negotiated contracts
– Compliance management
– The best trained resources
– Right tools to source
– Right to sign deals across divisions and
regions
Finding the right mix between control and centralization

20. —
Virtual Centers of Expertise across the globe
September 25, 2018 Slide 20
Each plant, each country, each category and each buyer is exactly planned
Overall roll-out plan for CoE BU category management set-up

21. —
It takes a village… and a good friend
September 25, 2018 Slide 21

22. —
Change management in figures
September 25, 2018 Slide 22
Facts
100
hours of SCM Councils & Division level
leads meetings
125
PMO meetings
1,440
lines in ramp-up/down plans
35
full-time WCP employees
2 3-day-
change management meetings in Riga
480
managers supported census
8,000
hours of knowledge capture
40%+
Budget savings
+5,000
employees identified as SCM in census
22
countries completed fit-gap
1,500
SOPs created
168
gigabytes in WCP SharePoint
+350
manufacturing units visited during
knowledge capture

23. —
The results…

24. —
Supply Chain Management (SCM)
September 25, 2018 Slide 24
The SCM transformational change – end 2017
Delivered all BHAGs plus…
Transportation Management Centers (TMC)
10 centers globally
80% of spend
60+% reduction of suppliers
Centers of Expertise
(CoE)
3 hubs established
50+% spend under control
280+ category managers
Global Business Services
(GBS)
5 centers globally
65% of spend, moving towards 80%
1,500 operating procedures standardized
+ + +
+
Centralized supplier qualification process Centralized trade management Buy/sell operations as service
Delivered additional cost reductions

25. —
We delivered on the “why”… and it’s getting better all the time
September 25, 2018 Slide 25
Beating every budget target on
productivity and cost reductions (up
to 40%)
Delivered +20% cost reduction Indirect procurement makes record
savings against productivity
benchmark
Supplier qualification exploded from
25% to 80% coverage
Supplier Sustainability program wins
several awards in
emerging markets
SCM Head takes over the entire
trade workgroup for the
ABB Group

26. —
What we learned…

27. —
Last…
September 25, 2018 Slide 27
What we learned…
Your Plan
Reality

28. —
Involve all layers of the
organization
Stay flexible Control headcount from start to
finish
Inclusive blueprinting
pays off
Hand- shakes Stay linked to the
“mother ship”
Change management project
September 25, 2018 Slide 28
What have we learned …
Communicate, communicate, communicate

29. —
Transport Management Centers
September 25, 2018 Slide 29
What have we learned …
Communicate, communicate, communicate
Design solutions that reduce time
between knowledge mapping and
implementation
Less is more External support can help but you
need to do the actual work
Hand-shake Systems should be well tested –
big is beautiful

30. —
Global Business Services
September 25, 2018 Slide 30
What have we learned …
Select the right leaders from the
GBS industry
Lift and shift vs. fix at GBS,
then shift
There is no shortcut – every plant
has to be looked at individually
Watch your overheads Be careful about where tactical
and strategic processes are
handled in “mixed” roles
Ensure control of IS systems
(e.g. ERP accesses)
Communicate, communicate, communicate

31. —
Demonstrate early successes
Centers of Expertise
September 25, 2018 Slide 31
What have we learned …
Communicate, communicate, communicate
Gamification” can make
implementation easier
Ensure you have the right people
in key roles
In your blueprint, be very specific
about which resources are
counted for strategic sourcing
Check plan vs reality
(organizational charts
vs actual set-up)
vs

32. —
Wait until the time is right
Final Conclusions
September 25, 2018 Slide 32
Start with the “why” – rather than the
“how” and “what”
Three is plenty Know your numbers
If the goals are big enough,
the momentum will carry us forward
Change is a team sport –
no audience allowed

33. —
The next 1,000 days…
… thinking bigger