Edwards

Lean Distribution Strategy

Med Device Supply Chain Council

Nov 2011

Edwards Leads Growth Industry • Global leader in science of heart

valves and hemodynamic monitoring

• Cardiovascular disease is progressive; leading killer and health expense

• Continuing transformation into an innovation-focused, faster-growing company – 2010 sales: $1.45 billion – 6,800+ employees – Broad global presence

World’s Leading Killers

2010 Sales by Region

2011 Net sales of $1.60 to $1.67 billion; R&D Investment of 15% of Sales 2

Nyon, Switzerland Horw, Switzerland

Añasco, Puerto Rico

Irvine Draper, Utah

Haina, Dominican Republic

Sao Paulo, Brazil

Tokyo, Japan

Edwards’ Global Operations

Singapore

40+ offices in 35 countries

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Global Leader in Core Businesses • Heart Valve Therapy

– Unmatched product pipeline – Driving transformation of valve treatment

• Critical Care Technologies – Unique global channel – Demand for high value monitoring products

• Over 95% of sales from products with #1 global positions

• High barriers to entry and strong brand recognition

* Estimated 2010 sales

~$1.9 billion

Other

Edwards

Global HVT Market*

Sorin

Global Hemodynamic Monitoring Market*

~$600 million

Edwards

Pulsion Other

ICU Medical

MDT

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Hemodynamic Monitoring Sepsis Management

Access Products

Minimally-Invasive Instruments Cannulae

Embolic Protection

Clot Management Systems Surgical Accessories

Surgical Replacement & Repair Transcatheter Replacement

Sales by Business Unit

57%

4% 7%

31%

Edwards’ Business Units

Vascular Therapies

Critical Care

Cardiac Surgery Systems

Heart Valve Therapy

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Transportation - 68% Logistics - 26%

Global Distribution Components Baseline 2011- Fragmented & Regional

8 EW Warehouses

22 3PL Warehouses / 17 Providers

Lack clarity into all 3PLs

Locations, volume, services, cost

No standardization of requirements

No standardization of performance metrics

Regional partnerships (no leverage)

Regional decision making – silo benefits

Air, Ocean, Truck, Rail / 87 providers

RAW/WIP, Replenishment, Customer

EW intra-company = 100+ lanes

ROW data at summary AP level only

Lanes / mode / cost not visible

Basic to no global freight auditing

Brokerage Services - 6% 27 Brokerage / Freight Forwarding providers Service not covering all local regulations Small providers with local relationships Independent contracts / benefits (no leverage)

Brokerage

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Business Unit Transportation Intra Edwards

THV: Transcatheter Heart Valve HVT: Heart Valve Therapy

CC / VAS: Critical Care / Vascular CSS: Cardiac Surgery Systems

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Lean Six Sigma Approach to Global Distribution Strategy

• Apply Appropriate Metrics CONTROL

• Eliminate Waste in the Process & Enhance Relationship with Global Partners IMPROVE

• Map Value Streams Across Global Markets MEASURE / ANALYZE

• Determine what Customer’s Value & Communicate to Partners DEFINE

Building a stable foundation…

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Our Aspiration Our Strategy

Components

Logistics

Mission

Develop and integrate a lean distribution model encompassing BU requirements with strategic partnerships .

Transition 70% in 3 years 90% in 5 years

Vision

Partner with Best in Class global providers who bring operational excellence, quality healthcare facilities, global capability, and cost effectiveness throughout the global supply chain

RAW/WIP FG

Freight

Multi Plant

Service & Delivery

Temp & Humidity

Regional Labeling

THV / HVT Multipack

EW Growth

Regional & BU requirements FG to Healthcare level

Quality Systems & Processes Common IT Platforms / Integration Transparency Analytical Decisions Leverage volume Rationalize Lean entire SCM chain globally P-Card MSA

Strategic Partnerships Benefits

Freight Mgmt Freight Auditor - 12 reviewed - IntraVex NA / PR / EU / SNG - Details - Data Mining Rationalize to Key Partners Transaction reduction Assessorial reduction

Logistics Map Loc & Requirement Partners Engaged 1. Global 2. Multi functional 3. Healthcare

Rationalize 3PLs Lean transaction focus 1. Integrate 2. Eliminate 3. Automate

Brokerage Map Current Global Requirements Region Partner Capability Link to Frt / Logistics Rationalize

. Lean Initiatives .

Strategy Development

Transportation

Brokerage Service

17 Providers 87 Providers

25 Providers

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Global 3PL Distribution Roadmap

SNG

Q1 12

Canada Q4 12

2 USA Q3 12

2011 2012 2013

8 Asia 3PLs

Rhenus Q3 13

2 Japan Q1 16

5 EU Q2 13

Brazil Q2 12

Status MSA s negotiated with potential partners - Complete Regional requirements, volume, consolidated - Complete Statement of Work with providers - In Process

Freight strategy to be developed after EU data in IntraVex

Mexico Q2 13

China Q2 12

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Transportation Spend Auditing - IntraVex

IntraVex Transition Plan Evaluate 12 providers - Complete Selection Dec 2010 - Complete Transition USA - Complete Transition DR - Complete Transition PR - Complete Draper - Complete EU - Q4 2011 Asia Pac - Q1 2012 Canada - Q2 2012

IntraVex is a best in class freight auditing & data mining tool Capabilities: • Increased freight auditing to a global level 80%+ of EW spend • Strong data mining tool and spend analysis • Actionable information to directly impact EW bottom line cost

Benefits Identified so far: Missed guaranteed delivery time Identified 200 different assessorial charges Duplicate charges Incorrect charges ( not EW )

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THV Lean Kitting Tilburg, NL

Morpheus Horw, CH

EW Draper Multi Pack Line Draper, UT

Japan Multi Pack Line Tokyo, JP

Draper • SCM • Ops • Quality • IT

� The Global Multipack Project

Develop a standardized project methodology to incorporate -

• LEAN thinking & principles, • across cross-functional teams, • geographical locations & • a time-phased approach;

to achieve highly flexible, scalable & robust solutions.

Objective

EU • SCM • Quality • IT

RA THV • SCM • Quality • Eng.

GCO • SCM • IT • BEST

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� BEST Lean Systematic Approach

Base Condition Video

• Meeting held w/ key stakeholders

• Current state value stream mapping

• Videotaped baseline returns process

• Completed Product Process Flow Analysis • Value Stream Mapping Session

Completed both Current and Future State maps

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�

Operator traveled 564 feet to pick one kit!

Old Multi Pack Process

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�

Operator traveled 356 feet to return one kit!

Old Returns Process

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� BEST Lean Systematic Approach

Lean Condition Video

• A layout was designed including… • IT solution for soft allocation • Line Layout and Material Handling • Added mistake proofing on picking process • Sales Order now generates Work Order • Eliminated Manual Keying • Benefits include: 76% productivity improvement, 95% throughput / WIP reduction, 39% reduction in space

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�

• Moved from Regional to Global approach • Simplified & rationalized all elements of Distribution

• 3PLs • Transportation • Brokerage

• Applied Lean 6 Sigma approach & principles • Eliminate waste, unnecessary steps, value stream mapping, network analysis • Developed takt-time based multipack lean cell

• Systems standardization & Integration • Improved Leverage / Cost & Service Levels • Upgraded 3PLs to global healthcare standards

Summary

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�

• Carl Bennett – carl_bennett@edwards.com 949-250-2344 • Marc Fernandez – marc_fernandez@edwards.com 949-250-2006

• Qlickview For Main Website and Product Tour: http://www.qlikview.com/ For download of Free edition: http://www.qlikview.com/us/landing/go-sm/meet-qlikview.aspx?SourceID1=Google+Search&KW=QlikView&gclid=CKa5js6Q4qwCFeldtgodamKinQ

• IntraVex

http://www.intravex.com/

Contacts

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Q & A