Parts Management Agreements Flexible, Easy to Use, Vendor-Managed Inventory Programs

Common Obstacles & Opportunities Lack of shelf space Duplication of common components Insufficient stock of critical spares Obsolescence Multiple vendors New machine spares Inventory integrity Strategic lifecycle management Carrying costs Rationalizing inventory Optimization of spares Reduce downtime Identify migration strategies Drive standardization Asset/cost avoidance Reduce downtime/ maintenance cost Create baseline for obsolete equipment Elimination of excess spares

Parts Management Agreement Program A Parts Management Agreement provides a flexible, easy to use, vendor managed inventory program that ensures access and availability of critical spares to maximize machine uptime and throughput while reducing overall inventory carrying costs. Improves Return on Net Assets Reduces downtime Minimizes inventory costs Simplifies budgeting . Understanding a Customer’s Requirements Most companies that produce and market a product have two main requirements: maximizing uptime and minimizing assets. In addition, any systems employed in meeting these requirements must be easy to implement and financially justifiable. Maximizing Uptime Our customers are in the business of making product. When the customer isn’t making product, the customer isn’t making money. In order to be profitable, the customer needs to keep its systems running as efficiently as possible. A customer that has invested heavily in Rockwell Automation products, and has automated many of its processes in order to maximize production is maximizing the profitability of the company. If the automation system doesn’t work properly, the profitability declines. For this reason, Rockwell Automation and our customers share the same goal of keeping the automation system running smoothly and effectively so that our customers can be as competitive as possible. Having the right part on-hand when a machine needs repair minimizes downtime as well as the Mean-Time-To-Repair (MTTR). The less time a process is down, whether for scheduled or emergency maintenance or during start-up, the more profitable it can be. Return On Net Assets (RONA) Definition Return on Net Assets (RONA) is simply a calculation of how well a company converts assets to sales, and therefore, income. Sales - Expenses Net Profit RONA = ------------------------ = ------------------------ Net Assets Net Assets Inventory, as it relates to spare parts for the automation system, is usually considered a capitalized asset. It is purchased for its potential to create income. Keeping a well- stocked inventory of spare parts is an important part of the automation system, and while inventory itself is usually considered an asset, money spent maintaining that inventory can be a large expense. Expenses are costs associated with keeping the business operational. If a customer wishes to increase its RONA, they must do one of the following: increase sales, decrease expenses, reduce assets Using RA’s Asset Management Services, a customer can reduce the carrying cost (expenses) of maintaining an inventory of spare parts. We own and manage your spare inventory for a fixed amount and replenish with Rockwell Automation remanufactured and renewal parts

Parts Management Agreements Parts Management Agreements ensure ready access to critical spares by providing Rockwell Automation owned inventory at your site or a Rockwell Automation location. Fixed monthly/quarterly pricing Flexible over time In-service warranty on agreement stock Extended warranty option may be purchased Providing critical spares to maximize machine uptime while reducing overall inventory carrying costs

Parts Management Agreements Benefits Purchasing Power – allows access to more and/or higher-end equipment Balance Sheet Management – helps you better manage the balance sheet by conserving operating capital and freeing up working capital and bank credit lines for inventory, expansion and emergencies Efficient Capital Leveraging – the term of the agreement can be matched with the useful life of your equipment; there is no down payment! Risk Management – provides access to equipment for specific periods of time at fixed payments. Rockwell Automation assumes and manages the risks of equipment ownership Flexibility – allows you to adapt to equipment changes dictated by market conditions Tax Treatment – expenses are treated as operating expense and don’t show up as a capital expenditure Upgraded Technology – provides you with the ability to keep pace with technology and upgrade or add equipment to meet ever-changing needs. NOTE (this is a US based statistic – I pulled it out of the slide and into the notes section in case you may find value in the information): Over 30 percent of all capital equipment in the United States is acquired through leasing. In fact, 8 out of 10 companies lease their equipment.

Decision Considerations: PMA or Alternative Parts Management Agreement Critical factors: operating uptime and how are spares managed to maximize uptime. Need a guarantee you will have the spares you need to keep your lines up. Need a plan in place to help manage obsolescence. Parts management is a critical process and downtime must be minimized. Have added a new facility or a new process to an existing facility. Interested in reducing spares inventory assets. Alternative Asset Management Choice Confident in the integrity of your existing spares inventory. Confident in having the appropriate spares in stock. Have adequate controls in place to manage spares inventory. Available cash for large capital expenditures; the cash is best utilized by making the purchase and not allocated elsewhere. There are currently no company initiatives to reduce inventory; and none in the foreseeable future. There are no plans to upgrade/migrate technology in the future. No line additions and/or deletions. We recognize that there is a consideration to be made: whether you choose a Parts Management Agreement or purchase the assets or some other alternative; our goal is to equip you with information that will guide you in making the optimal decision for your plant. Those who choose a Parts Management Agreement: Are looking for alternatives to a spare parts purchase, have an application in which uptime is critical, want a reduction in mean time to repair, want to improve control of their inventory assets, want a reduction in the carrying costs associated with maintaining inventory, require immediate availability of critical spare parts, want improved inventory integrity. Another factor is the importance of uptime to our customers: if this customer is willing to pay *****USD per hour (this is the PMA monthly fee in US Dollars) to avoid an unplanned downtime situation and ensure that the right parts are available when they need them, then the a Parts Management Agreement is suitable for their needs. Is *******’s cost of downtime greater than *****?

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Parts Management Agreements