Critical Mass Makes Magic Happen Sanjiv Bhatia Oct 10, 2013

How Magic Happens?

Relative Benefits

Relative Investment

Low Value

Non Differentiating

Key Differentiating

Spend too much on Low-Benefit Initiatives

Traditional Approach

Elemica Approach

Relative Benefits

Relative Investment

Low Value

Non Differentiating

Key Differentiating

Map $’s Invested to Benefits

Focus Time and Money on Value-Added Initiatives 2

Value Creation Framework

STEP DESCRIPTION KEY DELIVERABLES

Step 1 Value identification, Value Chain Blueprint, Partner Discovery

Value Realization Roadmap, Key Metrics, Business Case

Step 2 eReadiness Assessment, Partner Prioritization

Step 3 HL Program Plan Onboarding RoadMap

Prioritization Matrix

Following Roadmap Development, the Onboarding Program can be implemented in one or more Project Workstreams

Step 4 Onboarding Implementations.. Successful Project Golive

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Step 1: Value Identification

Supply Chain Process Analysis

Supply Chain Blueprint

BUSINESS-SPECIFIC SUPPLY CHAIN

VALUE DRIVERS

MEASURES

PERFORMANCE TARGETS

OPERATIONAL PRACTICES / STRATEGIES

TOOLS/TECHNOLOGIES eBusiness Maturity

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Value Drivers

Asset Intensity Reduction

Cost Reduction n Compress value

network n Automate interactions n Improve coordination n “Hire the customer”

10–20%

Target Value Improvement

n Customize offering n Enable value pricing n Create new offerings n Optimize (virtual

channels) n Improve customer

acquisition/intimacy

n Reduce working capital

n Reduce physical infrastructure

10–20%

30–60%

Revenue Enhancement

Value Focus

$X

$Y

$Z

5

Metrics Identification and Definition - Example

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Employee satisfaction (Culture Index)

Responsibility IndexComplianceSupply chain costs / Sector revenue

Asset utilization

Pocket margin

Cost

Adherence to business rules

Commercial unit satisfaction

Collaboration

Growth

Perfect orderCustomer

MetricTheme

31 - 41 Days

71 - 91 Days

Future Performance Opportunity

133.3 DaysOTC Cycle Time -(Sales Cycle + DRO)

47.3 DaysSales Order Cycle Time

Current Performance

AverageMetric

31 - 41 Days

71 - 91 Days

Future Performance Opportunity

133.3 DaysOTC Cycle Time -(Sales Cycle + DRO)

47.3 DaysSales Order Cycle Time

Current Performance

AverageMetric

90%Not Tracked Today

On Time Delivery and Installation Rate

0.6 - 0.9%

40 - 50 Days

0.92% -1.57%Order Management Cost Percentage of Revenue (Preferred over Cost per Order)

86 DaysDays Revenue Outstanding

90%Not Tracked Today

On Time Delivery and Installation Rate

0.6 - 0.9%

40 - 50 Days

0.92% -1.57%Order Management Cost Percentage of Revenue (Preferred over Cost per Order)

86 DaysDays Revenue Outstanding

BUSINESS AND OPERATIONAL METRICS DEFINED TO DELIVER ON

SUPPLY CHAIN GOALS

Key Steps: 1) Define Business Value Generation Metrics for Greatest Opportunities 2) Calculate Current and Potential Impact on Revenue and Costs

WHAT WILL SUCCESS LOOK LIKE?

POTENTIAL VALUE STRATEGIES FINANCIALS

INC

OM

E S

TATE

MEN

TB

ALA

NC

E S

HEE

T

AnnualBenefits

One TimeBenefits

$65Million

$43Million

Sales

Gross Margin(Cost of Goods Sold)

InventoryCarrying Costs

Selling, General &Admin Expenses

Inventory

Accounts Receivable

Fixed Assets

Accounts Payable

Sales

Gross Margin(Cost of Goods Sold)

InventoryCarrying Costs

Selling, General &Admin Expenses

Inventory

Accounts Receivable

Fixed Assets

Accounts Payable

Improve Commodity Purchasing toProcure with Better Market Timing

Better visibility and management ofInventory to reduce carrying costs at

10% cost of capital

Utilize shared servicesAnd process optimization

Tools for demand chain, forecasting, and build-to-order.

Visibility improvement

Reconfigure Customer Contracts toMotivate Earlier Payment

No Recommendation

Automate and consolidate Process across business to achieve

better control

Increase Supply Chain Flexibilityto Meet Customer Requirements, especially

During Tight Market Periods

$42Million

$4 Million

$32 Million

$18 Million

$6 Million

N/A

$6 Million

$85 Million

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Business Case - Example

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Step 2: Identify Partner Universe

Business Entity (Company, Division etc.) – Product Line/Group

• Customers • Suppliers • Carriers • Warehouse Operators

• …

Discover partners on the Elemica network. Search by Region, Business Process, Transaction, Custom Tags...

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Business Value Rank

Rank Partners on Business Value Enabled

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Technical Assessment

New Message Types, Business Rules, Transformation Requirements Increases

Technical Complexity

Complexity Classification H

M

L

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Partner Prioritization

Partner Name Business Rank Technical Rank

Cementhal 31 14

Evonik 21 8

Tyco 6 33

Cognis 14 42

Toyota 11 16

Hyosung 46 27

…. …. …..

Business Rank is based on analysis of business value created by a partner

Technical Rank is based on the technical complexity associated with onboarding a partner

Partners are ranked independently based on Business and Technical Criteria These are then mapped onto a Prioritization Matrix

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Prioritization Matrix

Technical Complexity

Busin

ess C

ritic

ality

II

Complex Onboarding

IV Complex Onboarding

III Easy Onboarding

I Low Hanging Fruit

Low

High

Low High

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Example Prioritization Matrix

13

eReadiness Assessment

Contact and

survey

Provide options

Provide program timelines Co

ntac

t

Provide info & docs

Select & commit to timelines

Com

mit

Click –thru agreement

Choose options

Roadmap is adjusted based on Partner Response to the eReadiness Assessment 14

Campaign Management

§ Create and Manage Campaigns for large scale on-boarding § Consolidated workspace for event status

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Campaign Management

Monitor trading partner progress across various steps in the on-boarding process.

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Step 3: Rollout Roadmap - Example

Year 1 Year 2 Year 3

1 • Achieve consistency of priorities among the executive and functional leadership

2 • Improve communication, knowledge sharing, and collaboration

3 • Increase ownership of aligned roles & responsibilities

4 • Revenue Recognition and 2 Step Order solution

5 • Gain cross-functional agreement on SSC

6 • Review Sales compensation plan

7 • Reconsider Serialization

9 • Educate Sales & SSC staff re: each others tasks

16 • Create Order Project Managers

8a • Reengineer Sales and SSC processes

11 • Eliminate Evergreen Contracts

10 • System Driven Ibase Updates

7b • Serialization Changes

14 • Develop Change Management Process

18 • Revise ATP Process

15 • Perform Customer Segmentation

17 • Develop eBusiness Strategy

8 • Reconfigure SAP, Siebel, and their Interfaces

12 • Implement Sales BOM

13 • Reengineer Configurator capabilities

Governance

Process

Technology

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In Conclusion

23-80% Automation Savings Orders

$29.49 Cost of Manual Order

$5.99 Cost of Electronic Order

11-30% Automation Savings Shipments

$101.28 Cost of Manual Shipment

$71.37 Cost of Automated Shipment

15-80% Automation Savings Invoices

$22.45 Cost of Manual Invoice

$4.42 Cost of Electronic Invoice

Potential Business Value of using the Elemica Network………..

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