Shanghai, December 14th 2018

Sourcing & Logistics Offering Presentation

Offering presentation

14 Dec 2018

Contents of the document

Sourcing: Approach and selected cases

Logistics: Approach and selected cases

14 Dec 2018

Purchasing and shareholder value

Main purchasing goals shall be aligned with Value Creation objectives

Main company goals Main purchasing goals

Reduction of financial

requirements

Raise market shares

Enter new markets

Reduction of operative

costs

Reduction of

amortizations

Reduction of working

capital (supplier

payments)

Higher specification

comformity

Wider portfolio of

sourced products

Reduction of average

price paid (sourcing)

Optimization of

make or buy decisions

X1 * SALES

X2 * EBITDA

X3 * EBIT

Shareholder Value

P.F.N.

14 Dec 2018

Best

Practices

Best

Perform

ances

Complete Strategic Sourcing offering

Through focused initiatives we address all areas of improvement of a Purchasing organization

Sourcing

assessment

Operational

sourcing

Sourcing roll-out

& interim

management

Organization

redesign

Organization

development

14 Dec 2018

Sourcing Assessment

Leveraging proven methodologies, in very short time we identify areas of improvement

ORGANIZATION UNDERSTANDING

• Purchasing Function Mission and Goals

• Organization Chart(s) and location(s)

• GSMM Evaluation

• Process Coverage

• Available Tools

• Spend Breakdown (Categories and SG’s)

BUYERS QUESTIONNAIRE

• Self evaluation of resources allocated to each and every sub-process

SPA METHODOLOGY

• Analysis of the net potential benefits generated by the application of each of the 44 sourcing levers for 1 selected SG

F/E SOURCING POTENTIAL

• Evaluation of structural cost advantage of Far East suppliers compared with Italian ones

14 Dec 2018

Organization redesign

We believe in a systematic approach for organization redesign

Data gathering & analysis

Organization principles definition

Organization sizing

Organization naming

Gap analysis

Transition plan

definition

• “As is”

organization

mapping

• Current

Organization

cost

• Resources

Time allocation

• Internal best

practices

• Resources

background,

attitude and

skills

• Keywords

• Roles

• Reporting lines

• External clients

• Modus

operandi

• Driver analysis

• Best practice

application

• Category and

SG analysis

• Cost variations

• Payback

• Resources

assessment

• Job & role

description

• Evolution

scenarios

• Resources

future time

allocation

• Hiring and

firing plan

• Resources

training and

coaching

needs

• Overall

transformation

program

• Internal

communication

plan

• Consensus

generation

• Training and

coaching plan

• Responsibility

handover plan

• Resources

adjustment

plan

14 Dec 2018

Detailed processes tools and

methodologies review and upgrade

Resources adjustment

support

Activity transition

plan management

Resources training and

coaching

Ongoing review

• Strategic, tactical

and operational

processes and

methodologies

• KPI’s

• Management

system

• Vendor rating

• Vendor

management

• Sourcing toolbox

• Internal resources

identification and

transfer

• External resources

search support

• New resources

introduction and

support program

• Resources

outplacement

• Activities listing

• Target team

member

identification

• Activity Transfer

plan definition

• Plan execution

follow-up

• Formal class

training delivery

• On-the-job coaching

• Guided tour

• Assisted

driving

• Ongoing support

• Long term coaching

• Regular program

reviews and

program adjustment

• Gap closure

monitoring

Organization development

During organization development we work together with client’s resources to adapt and implement methodologies,

processes and tools

14 Dec 2018

Operational Sourcing

The Operational Sourcing stream of work lasts approximately 5 months and leverages our methodologies and tools

proven over a number of projects

- In depth understanding of

Client’s requirements

(product, quality, logistics,

service level, ...)

- Data collection about

potential suppliers

- Definition of a potential

suppliers long list and first

contact

- RFI

- Suppliers visits and

subsequent short list

- Preparation of RFQ

documentation

- Evaluation/ranking of

quotations

- Logistics solution

development

- Preliminary negotiation

- Interviews with all the

category managers to

confirm hypothesis

formulated in this proposal

- Confirm preliminary data

integration and analysis

- Final selection of

categories

Main

activities

* Timing will heavily depends on data availability

** Timing will heavily depends on Client’s decision process

4-5 weeks* 4 months **

- Potential suppliers’

database (long list)

- Suppliers short list

- Evaluation of quotations

- Logistics solution

- Quotation (before final

negotiation)

- Final selection of

categories

Main

Deliverables

Diagnostic Suppliers’

selection

RFQ and

preliminary

negotiation

Phase 1 Phase 2 Phase 3

Project

Phase

14 Dec 2018

Sourcing roll-out & Interim management

- New supplier qualification

- P/# transfer program definition

- Tool preparation

- Sample production and validation

- First batch production and validation

- New supplier procurement ramp-up

- Old supplier phase-out

- Set-up of quality assessment and vendor rating

- Definition and management of supplier improvement programs

- On-going supplier contract compliancy

- Daily activities management

- Multifunctional Interactions

- Manage organizational change

- Resources management and long term development

- Drive best practice processes, tools and methodologies implementation

- Function performance measurement

- Function improvement plan implementation

Sourcing roll out

Interim

Management

14 Dec 2018

Situation Project Objectives

Results

- Mid-size electronics player

- 3 Sourcing offices in Asia

- Recently merged 2 divisions, each of

them with its Asia Sourcing office

- Rapidly realize savings on selected

categories

- Improve / accelerate integration of

the 3 Asia sourcing offices

- Acquire in-depth technological

knowledge on key categories

- Develop a complete program based

on 3 streams of work :

- Operational Sourcing led by BAS

on 4 commodities. This stream of

work alone involved a team of 6 full

time resources

- Organizational development

impacting Strategy development,

Processes, Methodologies, KPI’s

development

- Preliminary technology scouting

on 2 main technologies (LCD’s and

Touch screens)

- Realized tangible savings on each of the 4 commodities sourced. Savings ranged from 12% to 38%

- Developed and communicated new strategy for 6 categories; all category managers developed a strategy review plan

- Customized and deployed across the entire sourcing organization a set of methodologies and tools

- Changed the way Sourcing is interacting with the rest of the organization

Project example: Electronics

Accelerating savings through Asia Sourcing

14 Dec 2018

Situation Project Objectives

Results

- Italian mid size industrial client (~500

Mil Euro turnover) in the chemical

sector

- Part of a diversified group (public

company)

- Provide to the company an

“advanced” purchasing office to

avoid the disadvantage of scale

economies

- Complete diagnostic and design of a

trasformation plan

- Setup of the central purchasing

organization

- On-the job training of the newly

formed organization through a

complete Sourcing program on 6

categories

- The new office has been implenented with the change of 50% of the personnel

- New processes and procedures have been implemented, generating savings of >10%

- A new IT system for Supplier Relationship management with innovative B2B features has been implemented to support the

purchasing function

Project example: Chemicals

Complete set-up of the purchasing function

14 Dec 2018

Objectives

- A toy creation division of well-known

worldwide FMCG company, with half

of the items produced in Guangdong,

China

- Total cost from their Chinese

suppliers increased by 70% in last

five years, mainly for the increase of

labor cost

- To decrease the cost, their Chinese

suppliers have delocalized their

facilities to Guangxi. However, finally

they found that the total cost in

Guangxi is same as in Guangdong

- Analysis of current manufacturing

footprint

- Analysis of the real situation of total

cost and general labor environment

in Guangxi

- Identification and comparison of

alternative scenarios for future

manufacturing locations (in China

and in other Asian countries)

- Preparing interview guides

- Analyzing other places in China on

their meteorological conditions,

inter-provincial migration, minimum

salary, micro factors, labor supply

and logistics situations

- Organizing and conducting

interviews with entrepreneurs,

workers, HR companies

- Comparing other Asian countries

(political stability, transparency,

economy, labor force supply and

other economic factors

- Identification and prioritization of alternative places in China with lower total cost and available painting workers

- In depth understanding of total cost, workers attitude and availability of painting workers in selected areas in China

- Understanding situation in other Asian countries

Project example: Toys

Benchmarking China production competitiveness

Situation Project Objectives

Results

14 Dec 2018

Contents of the document

Sourcing: Approach and selected cases

Logistics: Approach and selected cases

14 Dec 2018

Logistics and shareholder value

Main goals the logistics function shall be aligned with Value Creation objectives

K1 * SALES

K2 * EBITDA

K3 * EBIT

Main company goals Main logistic goals

Reduction of financial

requirements

Raise market shares

Enter new markets

Reduction of operative

costs

Reduction of

amortizations

Reduction of circulating

capital

Raise service quality

Increase “Degree of

coverage” of the system

Reduce the “ Cost to

serve ”

Optimization of assets

and their utilization

(warehouse rotation)

Shareholder Value

P.F.N.

14 Dec 2018

Supply Chain reference model

Return

Source* Make* Deliver

Plan

Return

*

• Demand/Supply Planning and Management

- Balance resources with requirements and establish/communicate plans for

the whole supply chain

- Management of business rules, supply chain performance, data collection,

inventory, capital assets, transportation, planning configuration, and

regulatory requirements and compliance

- Align the supply chain unit plan with the financial plan • Order, Warehouse, Transportation, and

Installation Management for Stocked, Make-to-

Order, Engineer-to-Order, and Retail Product

- All order management steps from processing

customer inquiries and quotes to routing

shipments and selecting carriers

- Warehouse management from receiving and

picking product to load and ship product

- Receive and verify product at customer site and

install

- Invoicing customer

- Manage Deliver business rules, performance,

information, finished product inventories, capital

assets, transportation, product life cycle, and

import/export requirements

• Return of Raw Materials (to Supplier) and receipt of returns of Finished

Goods (from Customer)

- All return defective product steps from authorizing return; scheduling

product return; receiving, verifying, and disposition of defective product;

and return replacement or credit

- Manage Return business rules, performance, data collection, return

inventory, capital assets, transportation, network configuration, and

regulatory requirements and compliance

14 Dec 2018

• Service level requirements

• Target volumes (including

geographical distribution and

seasonality)

• Production plants

• N. of points to be served (WHS

and POS)

• Delivery frequency

• Distances covered/timing

Main input

Logistics model

Depot

POS POS

WHS

Logistic

parameters

Total

logistics

costs

Unit logistic

tariffs

Our approach to develop the logistic models

14 Dec 2018

Local distribution

(to POS)

C&C management

Secondary distribution

(DC-C&C/TP)

Depot management

Primary distribution

(factory-depot)

TP management

C&C

DC

POS POS

TP

-

-

Number of depots

Transportation means

- Stock and space

allocation (depot sizing)

- Depot coverage

- C&C network sizing

- Deliveries split

.

.

.

DC-POS

TP-POS POS-

C&C

Main decisions on logistic

indicators

- TP network sizing

Primary

Warehousing

To-door

delivery

Main decisions for each logistic layer

14 Dec 2018

Situation Project Objectives

Results

- European leader for Automotive AM

and Agricultural OEM wire cables

- Reduction of order response time

to improve service level to

European customers

- Optimization of the production

planning, management and control

of the Turkish plants

- Optimization of the Italian logistic

hub

- Reduction of order response time by 50%

- Service level improved from 65% to 90%

Project example: Automotive components

Supply chain optimization in Italy and Turkey

14 Dec 2018

Situation Project Objectives

Results

- Italian industrial client in the luxury

sector.

- More than 2.000 employees all over

the world.

- 600 mn euros turnover in 2011.

- Provide to the company optimized

processes in order to implement

the supply chain.

- Improve the productivity

redesigning processes and

systems.

- Improve the organizational

structure.

- Redesign of processes for the

operative production (raw material to

contractors).

- Redesign of the distribution (finished

goods and merchandising delivered

to direct and indirect shops located

all over the world).

- Planning and development of the

new supply chain (warehouse layout

and implementation of the new

management system).

- Automation of operations.

- The productivity has been increased of 25% thanks to the introduction of new processes, systems and instruments.

- Delivery inaccuracy reduced by 90%

- Incresed manageable volumes of 50% compared with the previous structure.

Project example: Luxury apparel brand

Logistics optimization

14 Dec 2018

Situation Project Objectives

Results

- Industrial client in the fashion sector

(Public company).

- Reduction of the delivery time.

- Reduction of total costs of the

process.

- Re-definition of import process and

distribution strategies in the US

market for products manufactured in

Italy and China.

- Renegotiation of relationships with

logistic partners to reduce costs and

delivery times.

- A new procedure has been designed to reduced by 50% (from 4 to 2 weeks) the standard delivery time.

- Furthermore, 25% of transportation costs have been reduced.

Project example: Fashion brand

Time-to-market reduction for distribution in the USA

14 Dec 2018

Situation Project Objectives

Results

- Client: pharmaceutical distributor

leader in the Italian market

- Provide to the company an

advanced and high efficiency

logistic hub able to sustain the

planned geographical expansion.

- Plan and development of the new

logistic hub starting from the

definition of specifications and

requirements.

- Selection of the best localization for

structures.

- Definition of systems and processes

to evaluate the financial

sustainability of the initiative.

- Construction of a new advanced logistic hub with double throughput capacity

- With the new hub, unitary handling costs has been reduced by 40%.

Project example: Pharmaceutical distribution

Design and implementation of new logistic hub

14 Dec 2018

Situation Project Objectives

Results

- Italian leader in the

commercialization of jewelries.

- Maximize the efficiency of the

company liabilities to support the

ambitious development

commercial plan.

- Provide to the company optimized

processes in order to implement at

best the new logistic hub.

- Plan, design, build and start-up of

the new highly automated logistic

hub

- Evaluation of requirements.

- Blueprint design

- Design of the processes

- Definition of client service

strategies.

- Manage the construction

- Support the migration from

the old to the new hub.

- Support the start-up of the

new hub.

- Realization of a new logistic hub with performance, efficiency, reliability and precision significatively higher than previous

structure.

- Costs and problems related to the implementation of the new logistic hub have been minimized.

Project example: Jewelry retailer

Development of new high-tech logistic pole