1. © 2010 E2open, Inc. All rights reserved. Supply Chain Performance in a Green Context IFC Event – Can Green & Lean Go Together? Washington, DC – December 13 th, 2010

2. IFC Event {Can Green & Lean Go Together} – December 13 th, 20102 Agenda Framing the Challenge The Green Context of Supply Chain Operations How New SCM Practices Can Enable the Green Trend 11 22 33 Framing a Comprehensive Green SCM Strategy 44

3. IFC Event {Can Green & Lean Go Together} – December 13 th, 20103 First off, The Field of SCM is Highly Difficult to Optimize The Uncanny Resemblance with Chaos Theory 1. Complex systems consist of a large number of elements. 2. The elements have to interact and this interaction must be dynamic. 3. The Interaction is fairly rich, i.e. any element in the system influences, and is influenced by, quite a few other ones. 4. Firstly, the interactions are non-linear. 5. The interactions usually have a fairly short range, i.e. information is received primarily from immediate neighbours. 6. There are loops in the interaction. 7. Complex systems are usually open systems, i.e. they interact with their environment. 8. Complex system operate under conditions far from equilibrium. 9. Complex systems have a history. Not only do they evolve through time, but their past is co-responsible for their present behaviour. 10. Each element in the system is ignorant of the behaviour of the system as a whole.

4. IFC Event {Can Green & Lean Go Together} – December 13 th, 20104 … and In addition to Its Inherent Complexity Optimizing SCM requires Collaboration; Are We Wired for It? The Idea: Unlike ants and bees, humans aren't hard-wired for cooperation; we tend to act out of self-interest. That inclination repeatedly draws us into "social dilemmas" where, in an attempt to gain more for ourselves, we ultimately fare worse than we would have by cooperating. The evidence: The trick is to establish an agreement where everyone's self-interest is best served by cooperating. That means removing incentives to violate the agreement. The Conclusion: Businesses are nothing but federations of human beings. We think we’re different and unique and we behave in ways that protect and promote that uniqueness. We need to overcome some innate apprehensions to build a winning green value proposition for key supply chain partners http://www.newsweek.com/id/170380

5. IFC Event {Can Green & Lean Go Together} – December 13 th, 20105 Why is Supply Chain Management a Good Starting Point? Source – http://www.eia.doe.gov/emeu/aer/pdf/aer.pdfhttp://www.eia.doe.gov/emeu/aer/pdf/aer.pdf 60%

6. IFC Event {Can Green & Lean Go Together} – December 13 th, 20106 … and yet, the Green SCM Revolution Remains Elusive Fortune 500 22 # of Fortune 500 companies that have initiated some Green SCM strategy # of Fortune 500 companies that have approached this with their trading partners 0 J ANUARY 2010

7. IFC Event {Can Green & Lean Go Together} – December 13 th, 20107 There Are Some Good Signs, Though…

8. IFC Event {Can Green & Lean Go Together} – December 13 th, 20108 Achieving this Paradigm Shift Requires a Perception Change of CO 2 as a Decision Variable DefectsInventoryWaiting Excess Motion Over Production Over Processing Transportati on CO 2 / GHG 1234 567 88 Carbon in the Business Environment Needs to be De-Mystified Introducing Carbon as the 8 th Muda

9. IFC Event {Can Green & Lean Go Together} – December 13 th, 20109 Agenda Framing the Challenge The Green Context of Supply Chain Operations How New SCM Practices Can Enable the Green Trend 11 22 33 Framing a Comprehensive Green SCM Strategy 44

10. IFC Event {Can Green & Lean Go Together} – December 13 th, 201010 Where is the Carbon in the Supply Chain? Everywhere! Supply Chain activities create significant carbon emissions, making supply chain an important focus for clients seeking to reduce their carbon footprint Suppliers & Manufacturers Customers & Channels Design for the Environment Carbon footprint thinking throughout product lifecycle design Design for the Environment Carbon footprint thinking throughout product lifecycle design How can the total network be optimized considering service, cost, “green” tradeoffs What CO2 impact is there from various inventory concepts & planning methodologies How can the total network be optimized considering service, cost, “green” tradeoffs What CO2 impact is there from various inventory concepts & planning methodologies How can we best measure a supplier’s carbon impact (product, packaging, upstream logistics) and ultimately compliance with carbon reduction requirement? How should we evaluate carbon offsets? How can we best measure a supplier’s carbon impact (product, packaging, upstream logistics) and ultimately compliance with carbon reduction requirement? How should we evaluate carbon offsets? What operations strategy (facility location, operating model) provides the best trade-off between cost, service, carbon? Is there a role for sustainable factory / facility mgmt? What operations strategy (facility location, operating model) provides the best trade-off between cost, service, carbon? Is there a role for sustainable factory / facility mgmt? What distribution network strategy (facility locations, sizes, transport modes) provides the best tradeoff of cost, service and carbon? How can packaging be reduced and recycled? What distribution network strategy (facility locations, sizes, transport modes) provides the best tradeoff of cost, service and carbon? How can packaging be reduced and recycled? How can field service operations reduce carbon footprint with better routing and parts inventory tracking? Feedback loop to engineering to reduce impact Various strategies to reduce impact throughout lifecycle How can field service operations reduce carbon footprint with better routing and parts inventory tracking? Feedback loop to engineering to reduce impact Various strategies to reduce impact throughout lifecycle Flows: Product, Process, Information, Cash SC Strategy ProcurementProcurementLogisticsLogistics Integrated Ops PlanPlanSourceSourceMakeMakeDeliverDeliverDesignDesign Service & End-of-Life Asset Management Finance Sustainable facilities management: Green building & renewable energy; carbon footprint asset management; Asset utilization (Real-time data on energy usage; Carbon dashboard) Paperwork Reduction; Environmental Cost Accounting; Environmental Tax Benefits Tracking PLMPLM

11. IFC Event {Can Green & Lean Go Together} – December 13 th, 201011 On the Need to Embed CO 2 as a New Operational Variable Exhibit 1 – Procurement Strategy Scenario Volume Distance Carbon Impact Unit Cost Mexico ChinaAs-IsTo-Be New “Green” Value Equation = Actual Cost (Production + Transportation) + Corresponding Carbon Cost ABC, Inc Classic Value Equation = Least Production Cost despite the Transportation Cost ABC

12. IFC Event {Can Green & Lean Go Together} – December 13 th, 201012 On the Need to Embed CO 2 as a New Operational Variable Exhibit 2 – BOM and Routing in a CO 2 -Constrained SC

13. IFC Event {Can Green & Lean Go Together} – December 13 th, 201013 On the Need to Embed CO 2 as a New Operational Variable Exhibit 3 – Planning ‘Noise’ & GHG Responsibility A Value Chain Network View Prevailing View Our View Leverage +– What is a fabless company Carbon Footprint? What is its environmental responsibility?

14. IFC Event {Can Green & Lean Go Together} – December 13 th, 201014 Noise in the Supply Chain is Neither Lean nor Green The Carbon Reverse Bullwhip Effect Extended Supply Chain View End Customers Suppliers Retailers Plants Caron Buildup Process Classic Bullwhip Effect True Customer Demand Inventory Produced Amount of Inventory Inefficiencies Carbon Produced Amount of Carbon Inefficiencies

15. IFC Event {Can Green & Lean Go Together} – December 13 th, 201015 On the Need to Embed CO 2 as a New Operational Variable Exhibit 4 – The Elusive SCM Cost Breakdown Labor Cost Supply Chain Cost Drivers The “Fictitious” Border between Tangible & Intangible Costs Cost Drivers Material Cost Manufacturing Costs Logistics Costs Tangible Costs Intangible Costs Obsolescence Exposure Quality Costs Green Cost Hypothetic Dependency of Network Structure, Logistics Cots & Oil Price Source – Gross, W. and Hayden, C. – Oil Price Impact on Logistics Network Structure – a Model-Based Approach Proceedings of the International Workshop on Applied Modeling & Simulation May 5-7, 2010 – Buzios, Rio de Janeiro, Brazil

16. IFC Event {Can Green & Lean Go Together} – December 13 th, 201016 Observation # 1 Local and Regional Models need to be encouraged (less carbon footprint and less inventory as a result of reduced lead times) Local Model Regional Model Global Model Which Leads Us to Some Interesting Observations CCXCCX ECXECX APAP OCEOCE Observation # 2 Proliferation of CO 2 trading platforms will delay properly tackling the problem Carbon trading should be approached as a global commodity

17. IFC Event {Can Green & Lean Go Together} – December 13 th, 201017 Agenda Framing the Challenge The Green Context of Supply Chain Operations How New SCM Practices Can Enable the Green Trend 11 22 33 Framing a Comprehensive Green SCM Strategy 44

18. IFC Event {Can Green & Lean Go Together} – December 13 th, 201018 Green Supply Chain Management Value of a Network Approach BOM Analysis Tier2+ Partner Selection Channel / Distribution Reverse Operations Supply Substitutable components Sourcing choices Location choices Inventory policy Safety stocks Lot sizes Replenishment VMI/VMR Packaging Package size options Package recycling options Corrugated box Energy Embodied Energy GHG Regulatory $ Impact Transportation Modes Shipment frequency Load consolidation Carrier routing Processing Manufacturing process Quality control Processing Repair / refurbishment process Shipment process Quality control Processing Order fulfillment Shipment process QC process Organizational management process

19. IFC Event {Can Green & Lean Go Together} – December 13 th, 201019 Green Supply Chain Management Implementing a Network Approach Provide performance KPI’s to customers Associate compliance to Orders & Inventory Automate Compliance Data Collection Sustainability & SC Integration 19

20. IFC Event {Can Green & Lean Go Together} – December 13 th, 201020 Agenda Framing the Challenge The Green Context of Supply Chain Operations How New SCM Practices Can Enable the Green Trend 11 22 33 Framing a Comprehensive Green SCM Strategy 44

21. IFC Event {Can Green & Lean Go Together} – December 13 th, 201021 12 Ideas to Make Your Supply Chain Greener

22. IFC Event {Can Green & Lean Go Together} – December 13 th, 201022 Exploring the Ideas Redesign the productReconfigure ManufacturingShift to Green Suppliers Shorten Distances Alter service-level agreementsShrink packaging

23. IFC Event {Can Green & Lean Go Together} – December 13 th, 201023 Exploring the Ideas (continued) Plan for reverse supply chain activityConsolidate shipmentsPlan smaller routes Start now: define a green strategyTake a life-cycle viewCoordinate with partners