1. Supply Base Rationalization Bob Liu, C.P.M. Managing Director, CSCS International Founder, www.scm-blog.comwww.scm-blog.com

2. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) Agenda From Purchasing to Supply Management Supply Base Rationalization Pitfalls

3. From Purchasing to Supply Management

4. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) Purchasing was the last place to stay P urchasing was the last place to stay before a person was let to go. – Prof. John Pearson, W.P. Carey School of Business, Arizona State University

5. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) As Suppliers Become Important, so does Purchasing Outsourcing increases the reliance on suppliers and the importance of purchasing 来源： AT Kearney, The New Procurement Mandate, 2001 More CEOs expect purchasing to add value More companies outsource design and manufacturing

6. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) From Purchasing to Supply Management Supply Management Purchasing Reactive, Fragmented and Internal Focused PO Transactions Price and OTD focused Administrative, not business partners Supplier oriented Proactive, Centralized and Market Driven Supplier relationship Total cost of ownership Strategic resource, business partner Demand management oriented

7. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) It’s Also a Culture Change 来源： Ron Nussle, Jr., President, ICR Group “Hunter” Model “Shepherd” Model Supply Management Purchasing Strategic Sourcing Supplier management Supply continuity KPI Short term relationship Some supplier involvement into NPI Long term relationship Supplier development Relationships, not only orders JV, alliance, ESI

8. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) Case Study: EPC Becomes PEpC at Fluor 来源： Larry Jackson, VP, Strategic Sourcing at Fluor Corporation, 38th ECC Conference Engineering Procurement Construction

9. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) ISM Introduced New Certification Program CPSM is focuses on Supply Management 1 Purchasin g Process 2 Supply Environment 3 Value Add Strategies 4 Management Leadership Supply Management Fundamental Supply Management Performance Certified Purchasing Manager Certified Purchasing and Supply Management 2008

10. Supply Base Rationalization

11. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) Supply Base Requires “Population Control”

12. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) Supply Base Rationalization – A Journey in North America ～ 1970s Competitive bidding Many sources ～ 1990s Supply Base Reduction ～ 2000s Rationalization Average Cost Savings 9% ！ Great savings achieved through supply base rationalization

13. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) Why So Many Suppliers? Not the Fault of Financial Crises The rocks have always been there. They pop up when tide goes away

14. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) Why So Many Suppliers – Deere’s Gloves 6 suppliers 424 kinds of gloves Same glove, different suppliers, different prices Before 1 supplier 24 kinds of gloves 50% reduction in price After Decentralized Purchasing is the Root Cause Dave Nelson Former CPO at John Deere

15. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) Why So Many Suppliers – Motorola’s Batteries 60 cell phone models >100 types of batteries 5 batteries New cell phone design can only pick one of 5 “ 市面上的每种（摩托罗拉）手机都有一种不同的电池。电池的复杂度简直是不可思议。 光库存一项就要了我们的命。 ” – 特蕾莎. 梅提（ Teresa Metty ）, 前摩托罗拉首席采购官 Design proliferation increases complexity BeforeAfter

16. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) Be a Problem Solver, not a Policy Maker VS Supply base rationalization requires problem solving

17. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) Supplier Evaluation Criteria Cost Quality | Delivery | Service Technology | Asset Mgmt | People/Process Infrastructure soundness Operations efficiency Cost competitiveness People, Technology and Process are fundamental to supplier performance

18. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) Supplier Categorization at BP Supplier categorization is critical supply management 来源： Christina De Luca ， BP Plc ， VP ， R&M Procurement, ELP Forum 2006.

19. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) Quarterly Executive Reviews On-Site Supplier Development Supplier Training Monthly Supplier Report Cards Supplier Executive Annual Planning Sessions Supplier Service Level Agreements (SSLA) Mutual Commitment via LTA Supplier Assessment and Selection Processes Supplier Identification and Rationalization No of Suppliers Supplier’s Importance Increases Long Term Agreements Supplier Improvement Five Steps to Rationalize Supply Base Source ： Ron Nussle, Jr. ICR Group

20. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) Integrate Suppliers into Product Flow, Info Flow and Cash Flow Supply chain is about product flow, info flow and cash flow. Suppliers play a critical role in these flows Product Flow Information Flow Cash Flow Product Flow Information Flow Cash Flow Customer Supplier

21. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) “Seamless” Supply Chain 图片来源： http://blogs.mkhalid.com Without suppliers’ support, seamless supply chain is impossible

22. Pitfalls in Supply Base Rationalization

23. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) Supply Base Rationalization is not a One Way Street 图片来源： http://niltimbadia.blogspot.com/ Reasons to Add New Suppliers New product New technology New market Monopoly Existing suppliers exit the sector Existing suppliers can’t catch up Supply base rationalization is a Two Way street

24. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) Performance Management Sustains Results from Rationalization Supply base rationalization achieves one time effort Performance management ensures ongoing results Christina De Luca, Chief Procurement Officer, Refining and Marketing, BP plc Time Performance Supply base rationalized Performance Deteriorates Performance Management Introduced Performance sustains

25. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) Be Proactive in Supply Base Rationalization Good doctors cure a deadly sick patient Excellent doctors cure before the illness is out of control Outstanding doctors cure even before the illness is perceived 来源：时代光华马丽 Take preventive actions, just like any outstanding doctors do

26. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) Don’t be Addictive to Exiting Suppliers The Desire to Exit Suppliers Get rid of the bad boy They deserve it Show my strength Immediate results The Costs of Exiting Suppliers Hurt by suppliers in desperate No time for supplier selection for NPI New problems become chronicle, a vicious circle “ 今日不雨，明日不雨，必有死蚌 ” 对该淘汰的供应商，今年不给新生意，明 年不给新生意，防止新生意流失，随着旧 产品的下市、现有项目的完成，该淘汰的 就自然淘汰，该整合的就自然整合。 No Ensuring new businesses go to preferred suppliers is a better approach to rationalizing supplier base

27. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) Rationalization is a Long Process Supplier rationalization is similar to changing tires for a racing car. A great supply base is just like a Ferrari: It’s not designed and built overnight. It takes years to perfect every detail

28. Color Pallet R, G, B 0, 87, 199 222, 102, 0 250, 191, 30 209, 58, 33 63, 153, 63 125, 61, 186 112, 56, 35 Slide Bkgrd Colors Title bkgrd 73, 87, 103 Body slide bkgrd 197, 202, 209 Corp. bullets 74, 129, 185 Prod. bullets 222, 102, 0 Title rule 147, 166, 184 Orange bar type 255, 175, 95 http://lamweb.lamrc.com/corpcomm/corp_marketing/Templates_Forms/standard_presentation.html (v3) Slide 28 All supply base rationalization starts like this 来源： Ron Nussle, Jr. ICR Group

29. Thank You Bob Liu, C.P.M. Managing Director, CSCS International Founder, www.scm-blog.com bob.liu@ChinaSCservices.com