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1 APAC Distribution Operations Gabriel Goh Stock Rotation Process Details.

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1 1 APAC Distribution Operations Gabriel Goh Stock Rotation Process Details

2 2 General Process Information Description: The Stock Rotation Policy allows Distributors to return up to the agreed percentage of stock shipments from the preceding quarter for credit. Once Stock Rotation requests are approved, Distributor will be notified of a RMA (Return Material Authorization) and will subsequently be able to return the product. Once Distributor returns product they shall wait for the credit memo issued and take a deduction from their payments to Cisco (except India). Collections will apply corresponding stock rotation RMA credits to the RMA based on the credit memos issued. Scope: This document is applicable only to the APAC 2-Tier Stock Rotation Return Process. Process flow includes steps of Stock Rotation request, Approval Cycle, Return Process, Discrepancy/Variance Handling, and Application of Credit.

3 3 WWCO Customer Return Team Liaison between Cisco and Teleplan Establish guidelines for Cisco internal engagement with Teleplan Establish and maintain reporting and support requirements Point of escalation for Cisco internal Distribution Operations Resolve the escalation related to Stock Rotation claims from the distributor Guidance on part(s) eligible for WPL Channel Finance Tracks shipment dollar volume and provides Stock Rotation allowances Guidance on re-allocation of claims from Stock Rotation to Obsolete Final approval of Stock Rotation claim Roles and Responsibilities

4 4 CS-Ops / GCC Process and book RMA requests COLLECTIONS Own the relationship with the distributors Accounts Payable to resolve credit disputes Investigate and reconcile Distributor's credit claims against credit memos issued by Cisco Channel Specialist Group - CSG (To be effective Q3FY11**) Point of contact for distributor, disti operations, Channel finance, Collection and CS-GCC Liaison between WWRL, Customer Returns Team, Teleplan and Cisco disti operations, Channel Finance and Collection team **Remarks: For Q1 & Q2FY11 (before CSG onboard), Disti Ops & Customer Returns team will cover the role to coordinate with various stakeholders on Stock Rotation Returns issue. Roles and Responsibilities

5 5 Policy: Limited to percentage of the dollar value of Products from the Wholesale Price List (or, if no Wholesale Price Lists exists for the Distributors Territory, then the applicable Price List) shipped to such entity, net of credits, less returns to Cisco, in the preceding ninety (90) day period. The Stock Rotation percentage allowable is stipulated in the Disti Agreement with Cisco. Credit is based on the original Wholesale Unit Price sale, less off price protection paid. e-Delivery item is not intended to be stocked (not included WPL) and shall not be included in Stock Rotation Returns. Distributors are encouraged to claim stock rotation once per quarter. Stock Rotation Policy

6 6 Criteria of stock rotation product: Product must be in original packaging with Cisco factory-seal intact. Product must be a recognized Cisco part, not a third-party or OEM part. Acceptances criteria: Product returned must be unused and unopened box. Product returned must new in the box with a factory seal intact. Physical product serial number must be tie in as the serial number reflect on the carton box. All approved products must be returned by 30 days from the start date of RMA book date (refer appendix A) in Cisco system. An aging RMA report will be sent to distributors upon 60 days and Cisco reserves the rights to cancel any aging RMA once RMA# is over 90 days. Products returned that are not within the Stock Rotation approval list will be rejected. Distributors are required to pick up the rejected products within 21 days upon Ciscos notice from Teleplan Hong Kong facility. Freight charges are borne by distributors. Stock Rotation Acceptance Criteria

7 7 Process Description 1.Channel Finance calculate the Stock Rotation Allowance on quarterly basis and DCAM is to communicate the allowance to Disti 2.Distributor completes request form with Stock Rotation product return information. See template in slide 15 3Distis shall separate the returns from different ship from locations in the application form to allow separate RMA to be issued. (see Request Form template in slide 15 4Distributor sends stock rotation request to DCAM with Subject Heading as Stock Rotation Request -Qx /FYyy- Customer Name Qx= Q1 for quarter 1, Q2 for quarter 2, Q3 for quarter 3 & Q4 for quarter 4 FYyy= FY10 for Fiscal Year DCAM s Channel Finance of the Stock Rotation form & cc copy: WWCO team posts request and spreadsheet in WebEx Connect Space named APAC Stock Rotation Collaboration under Stock Rotation Request sub-folder. Each stock rotation request will be filed under the quarter of the respective stock rotation request. The request is posted as a txt or html format and the request form in MS Excel format. SLA = 24 hours 6.Channel Finance reviews request form to validate PID#, S/O#, Price & serial numbers. Is the request approved? If Yes, proceed to Step 7b. If No, Channel Finance approver to notify respective disti & proceed to Step 7a. SLA = 7 working days 7a.Channel Finance to communicate directly with Disti to request for clarifications or modifications. Notify the Distributor of areas requiring clarification and modification. Distributors will be able to resubmit the request. If Distributor is resubmitting a new request, proceed to Step 1. If Distributor is NOT resubmitting a new request, no further action is needed.

8 8 Process Description 7b.Channel Finance* approves the request and to the approved form to CS-Ops/GCC to issue RMA cc copy alias SLA = 24 hours 8.Oracle Teleservice case number is auto created and the requester (Channel Finance) is notified of the case number. CS-Ops/GCC will review the attached approved stock rotation request form. CS-Ops/GCC creates a RMA(s) for the approved stock rotation request. -Process one RMA record for each warehouse location/ grouping noted on the Stock Rotation Return Request File. One RMA will be created for each distributor warehouse grouping on template. CS-Ops/GCC will then the RMA number(s) to the requestor (Channel Finance) & cc copy alias: while notification is sent to disti from QTC system. SLA = 48 hours 9.WWCO team posts the GCCs with RMA# to in WebEx Connect Space APAC Stock Rotation under the Stock Rotation Request folder. SLA = 24 hours 10.Distributor to complete a self audit/check-off of product coming back to Cisco prior to shipment. Recommended Timeline = 14 days from RMA book date

9 9 Process Description 11Distributor to adjust their internal record of shipment and send the pre-shipment alert: ANZ – delivery notice to in-country receiving depot to schedule the delivery window Rest of APAC - Pro-forma invoice to RMA regional Hub (Teleplan HK) for import license validation to obtain the green signal to ship. Disti shall also advise the adjusted RMA to their Finance to ensure their awareness of actual RMA Items shipped that will be credited. Pre-shipment alert should be sent to: a. For Rest of APAC countries (except ANZ) Cisco Systems International B.V. c/o Teleplan Service Solutions Asia B.V. YKK Building, 15 th Floor, Phase 2 No. 2 San Lik Street Tuen Mun, New Territories, Hong Kong All return shipment must follow below process:- Send pro-forma invoice to for Import License Await for the notification before releasing shipment

10 10 Process Description 11b. For Australia: Cisco Systems Australia C/O TNT Storapart Unit B3, 2-8 Mcpherson Street Banksmeadow NSW 2019 Australia Attn: RMA Receiving address: & For New Zealand: DHL Exel Supply Chain Highbrook Site Kerwyn Avenue East Tamaki 2013 Auckland New Zealand address: & All products must be in original packaging with Cisco factory-seal intact. See the detailed return location at the following URL.

11 11 Process Description 12Distributor communicates the variances from the original request to the self-audit. Distributor to update Cisco approved Stock Rotation request template from step 7b (column M to Column Q) to communicate any changes in Return Quantity and send to WWCO Customer Return team alias: 13WWCO Customer Return team to work with CS-ops/GCC to adjust the quantities on the RMA & post the updated Stock Rotation request form with self-audit result to APAC Stock Rotation Collaboration Space under the Stock Rotation-Self Audit Result sub-folder. Note: Variance allows only for cancellation of lines or adjustment of quantities lower on lines. No additions to the RMA are allowed SLA = 24 hours 14CS-Ops/GCC updates the RMA to reflect the final return quantity as per instruction from WWCO Customer Return team. SLA = 48 hours 15Distributor returns product to the Receiving Vendor. Receiving Vendor details: refer to Step 11. Disti to send notification to confirm completion of shipment to receiving vendor and provide tracking # along with RMA. Recommended timeline= within 30 days from book date 16The Receiving Vendor receives product against RMA. SLA = 5 business days Discrepant Parts received? If Yes, skip to Step 18. If No, proceed to Step Credit memo(s) will be systematically generated 48 hours following receipt of parts against RMA. With the exception of India, Distributors can apply these credit memos against their outstanding AR with Cisco. For India Distributors, Collection Team will process a TT Remittance every quarter. Please see slide 17 to 19 for the detailed process flow. SLA = 48 hours 18.Teleplan logs Discrepant Parts in the Receiving Warehouse Problem Log. Parts returned that are not listed on the RMA are considered discrepancies and will be quarantined during the receiving process. A problem log will be created for discrepancies by the Receiving Warehouse. WWCO Asset Recovery manages all Problem Log cases.

12 12 Process Description 19.WWCO Customer Return Team follows up with the distributor to resolve variances and discrepancies. Source of truth for variance will come from Problem Log & Receiving Report from Regional RMA hub, which are to be used to check against the update Stock Rotation request template (with self-audit result) from Distributor to validate what was received. Discrepancy Reports will be run 5 days from time of shipment received at Teleplan HK facility or in country receiving location in Australia. -a new Right Now case is created to document and track discrepancies. WWCO Customer Return team will work with FSRM to contact Distributor regarding variances. a. Provide Stock Rotation request template with Self-audit result to Distributor Discrepancy Scenarios: 1) Overages (Distributor returned unauthorized product against RMA) Distributor to validate and provide confirmation to send product back along with information (reference #) that is required in order to receive product in at their warehouse. 2) Shortages (Distributor did not return all authorized product against RMA) Distributor to validate and advise a)Confirms to adjust or cancel lines on RMA b)Disti to provide POD with Serial #s to validate RMA parts shipped 3) Distributor sent product under wrong RMA / no RMA # Distributor to provide correct RMA # for Teleplan to receive in. WWCO Asset Recovery team will need to provide Distributor with Tracking # product came back, Product ID, Serial #,RMA #. SLA: 24 hours

13 13 Process Description 19.b. Distributor to reply back to (WWCO / FSRM) with response on variances (SLA: 5 business days) c. WWCO AR team will address responses, action accordingly and update Right Now case 1) Confirmation to collect overages back –WWCO AR team would notify Teleplan to prepare product for disti to collect back. -Proceed to Step- e 2) Confirmation to adjust RMA for shortages – WWCO AR team will request assistance from FSRM or contact the GCC directly to adjust the RMA -Proceed to Step-d 3) Confirmation with correct RMA # to receive in – WWCO Asset Recovery (AR) team will need to determine if product can be received in under correct RMA number If RMA is open, product can be received in to credit. -Proceed to step - f d. The FSRM/WWCO requests adjustment on original RMA for shortages Contact to update and/or cancel lines on Respond back to confirm that original RMA was updated so case can be resolved. -Proceed to Step- f SLA: 72 hours e. Teleplan will make ready to release overages to Distributor for collection. -Ensure Teleplan release the overage as per record to the distributor -Update case with POD record and serial #s of product released -Proceed to Step f SLA: 24 hours f. WWCO Customer Return team to validate that tangible lines on Stock Rotation RMA are closed and closes RNT case. -Send notification to Disti alias that discrepancies have been resolved. -Close Right Now Case SLA = 24 hours

14 14 Process Description 20WWCO Customer Return team to check if all intangible lines are closed. If not, review the open intangible lines and to GCC to close out the lines. -WWCO Customer Returns team will send the mail to the below alias according to the theater with subject line Release NR-Credit Hold RMA#XXXXXXX. SLA = 48 hours 21.Collection team reconciles with Distributor for any credit variance & discrepancies related RMA credits. - Collection will refer to the Stock Rotation Template in the WebEx Connect Space in Step 13 to investigate the discrepancy between customer's claims & what Cisco has approved. This will be communicated to Disti's Accounts Payable contact by . SLA =72 hours 22For Stock Rotation returned from the distributors in India, remittance will be made as per Exception Process – India Stock Rotation Remittance See detailed procedures in slides 17 to 19. SLA= 10 working days

15 15 Example of the Stock Rotation Template Stock Rotation Template

16 16 Stock Rotation Returns – For UCS Stock rotation allowances for UCS products are separate from Cisco Classic and Small Business products. Disti are not to include UCS products into their normal stock rotation forms. A separate form is to be submitted. Stock rotation for UCS products only applies to UCS products on WPL.

17 17 Exceptional Stock Rotation Returns Cisco will only accept stock rotation returns that are in compliance with policy and criteria listed in the beginning of the these slides. For any returns falling outside the Stock Rotation policy and criteria, e.g. Items that have been opened or used, will only be approved on exception basis. Process: 1.Disti to route their request for Stock Rotation to indicating the reason(s) for exception 2.Disti Ops/WWCO/Disti Finance to review and decide on whether request is approved or denied. Business Approval from Disti Ops team Business Approval from WWCO Customer Returns Team Finance Approval from Disti Finance

18 18 Exception Process – India Stock Rotation Remittance Rationale for Exceptional Process for India Distis According to feedback from India Distis, Credit Memos issued for Stock Rotation cannot be used to contra against the AR owed to Cisco without prior consent from RBI as per RBI guideline below: Reserve Bank of India Notification No. FEMA 23/2000-RB Dtd 3rd May 2000 under the Foreign Exchange Management (Export of goods and services) Regulations, 2000, Para 14 - C outlines the provisions pertaining to adjustment of exports against imports: Counter Trade Any arrangement involving adjustment of value of goods imported into India against value of goods exported from India, shall require prior approval of the Reserve Bank Implication for Cisco: - Cisco can engage an external legal counsel to apply to RBI for exception to the above but legal fees could be in excess of US$ 10K with no guarantee of success. - Hence, Cisco Channel Finance and Collection Team have collectively agreed to an exceptional process to process remittance for Stock Rotation credit memos for India Distis.

19 19 Exception Process – India Stock Rotation Remittance CID/BID to be used for processing Stock Rotation Ingram Micro India CID BID Redington India CID BID * Both Distis are enrolled in the Cisco Capital Extending Financing Program under GE. To ensure that Stock Rotation Credit Memos can be paid out by Cisco as a Remittance, the credit order must be loaded to the above Open Terms BID. * This is updated in Customer Specifics for the above Distis to ensure CS book the credit order using the correct BID

20 20 Exception Process – India Stock Rotation Remittance Refund Process PeriodDescriptionSLA Month 3 Week 2 Collection Team will process SR Refund on a quarterly basis5 working days 1. Run Oracle Statement of Accounts on the SR CID/BID 2. Obtain list of SR Credit memos from shared drive 3. Reconcile list of open Credit Memos. Ensure that: - All SR Credit Memos are still in Open status - All SR RMA are closed and there's no more outstanding Credit Memos 4. Complete Special Payment Request Form (SPR) & Collection Payment Request (CPR) 5. Obtain approval 6. Submit Cash Application & Remittance Request to AR Team 7. Notify Disti once Accounts Payable has processed the Remittance & attach list of SR Credit Memos processed * If Remittance Advice is required, Collection has to log a case & request from Accounts Payable 8. AR apply SR Credit Memos in Oracle & submit Remittance Request to 2 working days Accounts Payable (AP). AR open Case Id with AP 9. AP process remittance and release payment to the Bank2 working days 10. Bank credit customer's account1 working day

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